Working Paper: CEPR ID: DP13770
Authors: Guido Friebel; Matthias Heinz; Mitchell Hoffman; Nick Zubanov
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: referrals; employee referral programs; hiring; respect; turnover; altruism
JEL Codes: J24; M51; J30; J63; D90
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| having an ERP (M41) | worker turnover (J63) |
| having an ERP (M41) | perception of respect among employees (M54) |
| perception of respect among employees (M54) | worker turnover (J63) |
| having an ERP (M41) | retention rates for nonreferrals (I21) |
| referrals (L84) | attrition (J63) |
| larger referral bonuses (M52) | number of referrals (C35) |
| larger referral bonuses (M52) | quality of referrals (L15) |