Using Analytics to Measure the Value of Employee Referral Programs

Citation: Hoffman M, Housman MG, Kuffel W. Using Analytics to Measure the Value of Employee Referral Programs, San Francisco, CA: Evolv, Inc., 2013.

Abstract: 65% of companies report having an employee referral program and 36% filled their last opening through an employee referral. Yet very little is known about the efficacy of these programs. Do referred applicants make better employees than their non-referred counterparts? If so, what’s the reason why? Using data from seven contact centers and a large firm in the trucking industry, we quantified the differences between referred and non-referred employees across measures of retention and productivity.

Through the use of advanced econometric techniques, we found that referred employees have 10% longer tenure than non-referred employees and demonstrate approximately equal performance. Taken together, the benefits of a referral program appear to outweigh the costs by a factor of 2 to 7.5.