by Christiane Bode, Jasjit Singh and Michelle Rogan
The essence of capitalism is that companies create value for society by focusing on their own profits. However, this narrative has increasingly come under pressure taking the form of protests and boycotts. In response to societal backlash and due to the emerging belief of managers that firms do have societal responsibilities beyond those that naturally emerge from their profit motives, companies are in turn launching initiatives with explicitly stated social impact objectives.
Indeed, current popular wisdom suggests that such explicit corporate social engagement could ultimately benefit not only society but also firms. If corporate employees want to “have their cake and eat it too” – in other words, to have a corporate career and be directly involved in making a visible contribution to society – then social engagement could benefit firms while benefiting society.
To test this argument, in an article recently published in Organization Science, we examine whether participation by corporate employees in an initiative with an explicit social impact objective is positively correlated employee retention, a key performance outcome for many firms.
While weekend volunteer activities or sabbaticals are popular amongst professionals, these rarely build upon the unique skills of the employees. In contrast, in recent years corporations have begun to experiment with a new form of social engagement, temporary assignments of employees to assist non-profit or development organizations. This form of social engagement is built upon the key insight that harnessing the existing and collective professional skills of a group of employees within a corporate context has a larger societal impact than employees individually engaging in privately organized volunteer activities.
Having the opportunity to give back to society, while maintaining the privileges of a corporate job, ought to be something that employees value both personally and professionally. It is natural to expect this to improve retention of top talent. However, existing academic literature offers few empirical studies that test this proposition in a rigorous fashion.
To fill this gap, we analyzed more than six years of individual-level employee records from a leading global management consulting firm. We found a strong link between retention rates and participation in a corporate social initiative (CSI). This initiative provided consulting services to not-for-profit and development organizations and was run as a business integrated with the rest of the organization, not a separate volunteer program.
Through this initiative, employees have the option to put their well-honed skills to use for an organization that explicitly prioritizes social impact. Importantly, these projects are not pro bono; as such an approach would be neither scalable nor sustainable. Instead, clients are asked to pay, albeit at lower than commercial rates in order to ensure affordability.
The most novel aspect of the model is that consultants are asked to accept a salary reduction and forgo customary consulting perks for the duration of the project. Despite this requirement, there is a long waiting list of employees keen on being staffed on a CSI project.
Overall, we studied a database of 10,634 employees, including participants and non-participants. Our analysis found that consultants who participated in CSI were up to 32 percent less likely to leave the firm relative to their non-participating counterparts. It also emerged that a reduction voluntary departures amongst former CSI participants was driving that difference and that those retained were indeed high-performing individuals worth retaining.
To make sure that the kinds of individuals who chose to participate into CSI were not naturally inclined to stay longer with the firm even without CSI participation, we employed stringent criteria to ensure that our sample of participants and non-participants was closely comparable at least on dimensions we can observe (e.g. age, gender, tenure in the company).
Furthermore, using survey data collected in the same company, we also found that the employees most keen to work on CSI were more – not less – likely to consider leaving their current role. In other words, innate, pre-existing differences between participants and non-participants are unlikely to fully explain the retention findings. Instead the actual participation in CSI seems to transform individuals in such a way that they are more likely to stay with the firm longer than they would have otherwise. The transformative effect of the experience also came up in our numerous interviews with participants.
Because employee turnover is often cited as the top challenge facing HR departments, our findings hold major significance for companies, especially for would-be “social intrapreneurs” looking to buttress the business case for proactive social engagement. However, there are important limits to this effect worth noting.
The retention effect was significantly stronger for participants who took part in projects that lasted less than six months than for those whose CSI projects lasted six months or more. Moreover, the increase in retention rate disappeared entirely when we considered only employees who served in far-afield emerging markets.
A likely explanation for the latter outcome is that by exposing employees to a context that is very different from their normal day- to-day life (e.g. cultural differences, level of economic development) an employee’s connection to the company might become too weak – something that participants also mentioned in interviews we conducted. Thus, in particular for CSI participants in low income emerging markets, the transition back into normal work routine after CSI can be a challenge, especially when participants feel that they have lost touch and the ability to relate to their commercial peers.
In order for firms to be able to derive the most benefit from initiatives like the one we studied, companies would have to carefully design the processes around the transition into and out of projects and maintain active communication with participants during such projects. While there would likely always be some employees that leave the firm following an experience like CSI, perhaps because their career goals no longer align with what the company offers, overall companies would still benefit from offering such a program.
Our paper does not argue that mandatory participation for employees in social initiatives would increase retention. The benefit, instead, comes from giving employees with an inherent interest in social impact the chance to participate – allowing them to pursue an integrated career track involving a business career and engagement with societal issues, rather than having to make a stark choice between one and the other.
At a minimum, companies should explore whether initiatives like CSI might provide a better way of spending the “CSR dollars” that a company is already spending – often on projects unrelated to where their competitive advantage and unique value creation lie, in particular as employees seem to be willing to share the “burden” with the firm by accepting a temporarily reduced salary.
Christiane Bode is an Assistant Professor of Management at Bocconi University. Jasjit Singh is an Associate Professor of Strategy at INSEAD and The Shell Fellow in Business and the Environment. Michelle Rogan is an Associate Professor of Entrepreneurship and Family Enterprise at INSEAD.
This article is based on “Corporate Social Initiatives and Employee Retention” in Organization Science.