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

51 Pages Posted: 11 Jun 2019 Last revised: 29 Apr 2023

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. On direct effects, larger referral bonuses increase referral quantity but decrease quality, though the increase in referrals from ERPs is modest. However, the overall effect of having an ERP is substantial, reducing attrition by 15% and significantly decreasing labor costs. This occurs, partly, because referrals stay longer than non-referrals, but, mainly, from indirect effects: non-referrals stay longer in treated than in control stores. The most-supported mechanism for these indirect effects is workers value being involved in hiring. Attrition impacts are larger in higher-performing stores and better local labor markets.

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 )

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Centre for Economic Policy Research (CEPR)

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IZA Institute of Labor Economics

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Matthias Heinz

University of Cologne ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Mitchell Hoffman

University of Toronto - Rotman School of Management ( email )

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National Bureau of Economic Research (NBER) ( email )

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Nick Zubanov

University of Konstanz ( email )

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Konstanz, D-78457
Germany

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