Where members of a referral system are mutually dependent on
each other for referrals, there is usually strong potential for recipro-
cation between them. Where the potential for a high degree of
mutual dependency exists, this can be managed by the use of a
‘balance sheet’ in which referrals received and referrals made are
documented. This serves two purposes. First, it enables the firm to
monitor how well it is doing in encouraging its referrals sources to
generate referrals for it. Second, it enables the firm to determine
how proactive it is in generating referrals back to its referrers.
It also provides a management tool to help ensure that mutuality
is preserved. If the number of referrals given compared with the
number of referrals received becomes significantly unbalanced, it
provides an opportunity to rectify this. For example, an accounting
firm could go to its bank and say: ‘Did you know we referred six
clients to your M&A section, four clients elsewhere in your corpo-
rate finance division and nine clients to your business banking divi-
sion? In the same period we received only three referrals back from
you. Two of these were not relevant to our expertise and type of
business. Could we sit down and talk about how we can work
together more closely in generating mutually beneficial referrals.’
Incentive-based referrals
There are a number of circumstances under which incentive-based
referrals are appropriate. First, where members of the referral
channel are mutually dependent they may find some advantage in
creating a formal arrangement that helps reinforce this dependence.
In certain circumstances financial incentives may be useful to
augment the goodwill and professional courtesy that act as the
source of referrals, especially where the referee seeks to gain exclu-
sive referrals or preferential referrals from the referrer. Second,
where the referral system is one such that the firm is receiving many
referrals but giving back relatively few and there is not the potential
to change this, it may seek to address this imbalance by providing
some incentive-based method of compensating its source of
referrals.
Incentive-based referral systems may be financially or non-finan-
cially based. Herriott^8 points to North American examples where
financial incentives are either banned or are part of normal business
marketing: estate agents are prohibited from taking finders’ fees
from banks and doctors are prohibited from taking a direct financial
pay-back from hospitals; on the other hand, accountants may
The referral and influence market domains 231