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Faculty Insights

Increase Your Work Productivity and Stick Around: Refer a Friend

By Wisconsin School of Business

August 17, 2018

Cartoon of People Talking
We’ve all heard the saying, “Find a job you love and you’ll never work a day in your life.” But here’s another, lesser-known piece of professional advice: Refer a friend to your workplace and both your productivity and retention likelihood will increase.
Referral hiring programs—where employees can recommend contacts for a position within their workplace—are not a new phenomenon among firms. They’re popular for good reason: they work. The likelihood of a good fit is much greater thanks to the free exchange of information on both sides. As a current employee (the referrer), if I refer you to my organization and you are subsequently hired (the referral hire), it becomes a more socially enriched environment for both of us. Drawing on social enrichment theory, the notion that “the people make the place,” (Schneider, 1987), it’s natural that we would prefer to work where we have strong social ties with others.

Charlie Trevor
Charlie Trevor is the Pyle Bascom Professor in Business Leadership and the chair of the Department of Management and Human Resources.

Despite the fact that referral hiring programs are extremely common with firms, and that those hired under such programs tend to do well, we have known relatively little about how these programs impact the employee referrer. In my research with Jenna Pieper and Dennis Duchon of the University of Nebraska–Lincoln and Ingo Weller of Ludwig-Maximilians-Universität München in Munich, Germany, we wanted to address this knowledge gap by examining the relationship between the referrer and the referral hire. Specifically, is the referrer’s behavior impacted by the referral hire? We examined this question in the context of what we defined as referral hire presence (RHP), the period of overlap where the referrer and referral hire are working together at the same organization. To the best of our knowledge, our research is the first to quantify the referrer impact empirically.
The study
Our research consisted of one main study and a second supplementary study. Study one was a field study for which we collected data on referral hiring, performance, and turnover from 2,039 employees at a U.S. call center over a two-year period. The center offered services to clients from various industries and employee performance was calculated by the number of calls an employee handled each week.
In study two we used an experimental framework to look at the notion of social enrichment in relation to RHP. Two separate pools of participants were used—one consisting of 169 undergraduate students and another of 329 employed individuals. Participants were asked to respond to one of 12 hypothetical scenarios designed to reveal relationships between referral hiring and social enrichment (which had been relied upon but never measured in prior referral research), as well as between referral hiring and additional predictors of performance and turnover, such as job engagement and turnover intention.
The results: Referrers were 27 percent less apt to leave than employees who did not have a referral hire on site, and they also handled 5.1 percent more calls each week when the referral hire was present. That is, in response to RHP, referrer performance actually increases and the likelihood of the referrer quitting decreases. Evidence from the second supplemental study helps to explain how this occurs, showing that referring leads to a greater degree of the social enrichment that is believed to result in enhanced job performance and reduced turnover.
Where everybody knows your name
Our findings bolster the conventional wisdom of strong social ties as a positive, but the referrer-referral relationship is more than just having someone to go for a beer with after work. If I’m the referral hire, the referrer is a mentor who can help socialize me in the norms and the culture of the organization and the onboarding process. I feel more embedded in my new workplace knowing where I can go for help or to blow off steam without fear of recrimination. Ideally, I received some honest information about the company in my earliest conversations with the referrer, and I’m aware of opportunities for promotion and advancement. On the referrer side, I’m comfortable because I’ve screened you just by the fact of knowing you—I’m not limited to the application process and a half-hour interview. I benefit by having a strong social tie join the organization, and I likely feel more engaged in my work and committed to the organization by virtue of this tie, the mentorship I provide, and the knowledge that I am responsible for bringing the referral hire into the fold.
Like most things, referral hiring is not without some constraints and nuances. Our study found that the likelihood of the referrer leaving the firm drops when the referral hire comes on board. If the referral hire leaves while the referrer is still employed (i.e., leaves before the referrer does), that increases the risk of the referrer’s departure. However, this negative is balanced by the fact that the referrer’s job performance is enhanced during the time the referral is with the firm. We also found that the boost in referrer productivity was less when the referrer and referral hire held similar positions, something that attuned employers can manage for.
Even after factoring in these trade-offs, firms using referral hiring receive significant payoffs in the form of efficiency, cost savings, and staff recruitment and retention. Referral hiring was already seen as an extremely valuable approach for organizations to take, but now even more so. With the referrer benefiting as well as the referral hire, what’s good for the goose is good for the gander.
Read the paper “Referral Hire Presence Implications for Referrer Turnover and Job Performance” [PDF] published by Journal of Management.
Charlie Trevor is the Pyle Bascom Professor in Business Leadership and the chair of the Department of Management and Human Resources at the Wisconsin School of Business.