Very interesting discussion at LinkedIn on when it is or isn’t OK to pay referral fees. I don’t believe you have to be a member to see the discussion though you do if you want to make a comment (might have to join the group first, I don’t know).
Here’s my take.
When colleagues refer new business to me, I offer them a choice: commissions or “karma points” (good vibes and my thanks). As a copywriter, I get referrals from designers, complementary service providers, etc. I am comfortable with whichever they choose and see no ethical problem in my industry with paying a referral fee, any more than I do in paying a commission when someone sells a physical product.
However, there are industries where cash payments could easily be problematic if not disclosed, not just because of regulations but also because of ethics. The financial services field strikes me as a place to be particularly upfront, as with any companies providing services to elders, disabled people, or others in a position of vulnerability. And the issue of someone within a company referring to another part of the company is another place to be very upfront.
Hi Shel,
I guess transparency is the key determinant.
Provided people are up front and divulge their interests I see no problem either.
It’s the clandestine approach which is devoid of ethics for sure.
All the best,
Tom
Exactly right, Tom.
shelhorowitz (Shel Horowitz) // Mar 25, 2009 at 10:58 am
New blog post: Is it Ethical to Pay for Referrals? http://tinyurl.com/c7zsto
JointWinWin (Tom O'Brien) // Mar 25, 2009 at 11:07 am
RT: @shelhorowitz New blog post: Is it Ethical to Pay for Referrals? http://tinyurl.com/c7zsto
Shel,
I lead a Key Advisor Network of services professionals. This group includes a bank President, E&O Insurance firm partner, M&A attorney, CPA firm, and myself. We do not pay commissions. We prefer the karma points approach.
I do have referral agreements with other management consultants, however. Many have talents that I lack, and it keeps the flow of money circulating. I ALWAYS tell the client when I have a fiduciary relationship with someone. This is ethical to do.
Thanks for your provocative postings.
Lisa Nirell
“The Business Energizer”
http://blog.energizegrowth.com