What Do Employee Referral Programs Do? Measuring the Direct and Overall Effects of a Management Practice

47 Pages Posted: 11 Jun 2019 Last revised: 29 Apr 2021

See all articles by Guido Friebel

Guido Friebel

Goethe University Frankfurt; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Matthias Heinz

University of Cologne; Centre for Economic Policy Research (CEPR)

Mitchell Hoffman

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Nick Zubanov

University of Konstanz

Multiple version iconThere are 2 versions of this paper

Date Written: June 2019

Abstract

Employee referral programs (ERPs) are randomly introduced in a grocery chain. Larger referral bonuses increase referrals and decrease referral quality, though the increase in referrals from having an ERP is modest. However, the overall effect of having an ERP is substantial, reducing attrition by roughly 15% and decreasing firm labor costs by up to almost 3%. This occurs, partly, because referrals stay longer than nonreferrals, but, mainly, because all workers stay longer in treated than control stores, even among stores where no referrals are made. The most-supported mechanism for these indirect effects is that workers value being involved in hiring.

Suggested Citation

Friebel, Guido and Heinz, Matthias and Hoffman, Mitchell and Zubanov, Nick, What Do Employee Referral Programs Do? Measuring the Direct and Overall Effects of a Management Practice (June 2019). NBER Working Paper No. w25920, Available at SSRN: https://ssrn.com/abstract=3401626

Guido Friebel (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Matthias Heinz

University of Cologne ( email )

Albertus-Magnus-Platz
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Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Mitchell Hoffman

University of Toronto - Rotman School of Management ( email )

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Canada

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Nick Zubanov

University of Konstanz ( email )

Fach D-144
Universitätsstraße 10
Konstanz, D-78457
Germany

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