Free DP Download 6 June 2019: Employee Referral Programmes: The benefits of lower staff turnover boosts profits

Thursday, June 6, 2019

What Do Employee Referral Programs Do? 

Guido Friebel, Matthias Heinz, Mitchell Hoffman and Nick Zubanov 

CEPR DP No. 13770 

An experimental employee referral programme (ERP) in a large European grocery chain shows the big potential benefits for employers from offering bonuses to staff who help to recruit new colleagues. The CEPR study shows that ERPs can have substantial benefits beyond simply generating referrals: most notably, workers value being involved in hiring and are therefore more likely to stay. 

The researchers find that larger bonuses increase referrals and decrease referral quality, though the increase in referrals is modest. Nevertheless, ERPs are highly profitable, partly because referrals stay longer than non-referrals, but mainly because non-referrals stay longer in ERP stores than in stores without the ERP. In a post-experiment firm-wide ERP rollout to all stores, referral rates remain low for grocery jobs, but they are high for non-grocery jobs, which are perceived as more attractive.

Figure: Posters Used during the 2017 Firmwide ERP Rollout 

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