Working Paper: NBER ID: w25920
Authors: Guido Friebel; Matthias Heinz; Mitchell Hoffman; Nick Zubanov
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.
Keywords: Employee Referral Programs; Management Practices; Turnover; Attrition; Labor Costs
JEL Codes: D23; M51; M52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Introduction of ERPs (M50) | Increase in the quantity of employee referrals (M51) |
| Larger referral bonuses (M52) | More referrals made (J62) |
| Larger referral bonuses (M52) | Decrease in the quality of referrals (L15) |
| Referrals (L84) | Lower attrition than non-referrals (I21) |
| ERPs (M50) | Reduction in turnover (J63) |
| Non-referrals in stores with ERPs (L81) | Stay longer than in control stores (Y60) |
| Workers feeling respected and valued (J29) | Effects on retention (I21) |