What Do Employee Referral Programs Do?

80 Pages Posted: 11 Jun 2019

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: May 2019

Abstract

Employee referral programs (ERPs) are randomly introduced in a grocery chain. Larger bonuses increase referrals and decrease referral quality, though the increase in referrals is modest. Still, ERPs are highly profitable, partly, because referrals stay longer than non-referrals, but, mainly, because non-referrals stay longer in treated stores than in control stores. In a post-RCT firmwide ERP rollout, referral rates remain low for grocery jobs, but are high for non-grocery jobs, which are perceived as more attractive. Our results (1) are consistent with referral-making being driven by money and altruism toward friends; (2) show that ERPs can have substantial benefits beyond generating referrals. The most-supported mechanism for (2) is that workers value being involved in hiring.

Keywords: altruism, employee referral programs, Hiring, referrals, respect, Turnover

JEL Classification: D90, J24, J30, J63, M51

Suggested Citation

Friebel, Guido and Heinz, Matthias and Hoffman, Mitchell and Zubanov, Nick, What Do Employee Referral Programs Do? (May 2019). CEPR Discussion Paper No. DP13770, Available at SSRN: https://ssrn.com/abstract=3401857

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
Cologne, 50923
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Mitchell Hoffman

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Nick Zubanov

University of Konstanz ( email )

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

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