Referral program or a “refer-a-friend” program is a common marketing strategy used by businesses as a way to incentivise its network of customers, friends and business associates to drive sales of services or products. The incentive could be a reward in the form of discount, gifts or monetary pay-outs. It is common industry practice in driving direct sales to have a commission-based referral scheme for business associates, friends, employees or any third parties to help in getting new customers. In order for the referral scheme to be motivating for the referrer, the element of “skin-in-the-game” must be strong and therefore, this is usually reflected as a high commission pay-out for deal referrals.
It is very important that you as leader of the business, be aware of the potential pitfalls that may cause serious reputational damage and financial losses (in the form of penalties and loss of future potential customers) arising from any commission pay-outs at the back of corruption or bribery. A successful referral scheme is a happy outcome but one should never lose sight of the potential contentious behaviours that such a scheme may inadvertently drive. Any referral programme must be implemented with an awareness of what constitutes unacceptable behaviours of corruption or bribery. It is the effective education and the periodic reinforcement of ethical values in line with the corporate mission and values that would ensure a company would not run astray in the midst of aggressive revenue generation.
Mr L a director of FH funeral services has a referral scheme as part of its push to build its sales pipeline and agreed a 5% commission for services referred by a business associate, Mr T who is an employee of DFS, a company in the same industry. Mr L paid Mr T a commission of $3,520 which is a corruptly gained kickbacks. Mr T, the referrer was sentenced to four weeks’ jail and a penalty of $3,520. Mr L sentencing is pending at the time of writing. It is important that one do not accept any referrals from referrer who is an employee of the referred company, or any arrangement where there is a clear conflict of interest. It is pertinent that this awareness must be communicated to anyone whom is a party (or potential party) of any referral scheme specifically to employees of referrer and referee to ensure any unacceptable is prevented at the start.
Some of the real cases of corruption have also been discussed in our earlier article “Business Owner Guide to Corruption, 9 December 2020”, and as most corrupted behaviours may not be apparent from the start of any referral efforts, it is worthwhile to invest in some awareness training in your people so that everyone sing from the same hymn, as any diversion is devastating.