Alleviating managerial dilemmas in human‐capital‐intensive firms through incentives: Evidence from <scp>M&amp;A</scp> legal advisors

Research Summary: Inquiry into CSR as a human capital management tool has suggested that firms benefit from such activities because employees value the meaningfulness of these activities, which influences motivation and retention. We propose an alternate avenue through which firms can benefit from an important type of socially responsible activity—pro bono services—that does not require that employees derive utility from the meaningfulness of the activity. We propose that pro bono activities can benefit firms through human capital learning and screening mechanisms, given the stretch roles that pro bono engagements allow. We formalize this argument in the legal services industry, where we provide primary evidence, a formal model, and empirical results using a panel dataset of the top 200 law firms to support this argument. Managerial Summary: We examine a type of CSR activity, pro bono engagements, in the context of the top 200 law firms in the United States. We show that firms can benefit from these engagements through human capital learning and screening mechanisms, due to the stretch roles that pro bono engagements allow junior lawyers. Our findings suggest that firms in which pro bono engagements provide stretch roles for junior employees can benefit from pro bono activities regardless of whether their employees value the meaningfulness or social impact of the pro bono work.

Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Pro bono as a human capital learning and screening mechanism: Evidence from law firms

Burbano

Mamer

Snyder

2018

“…Alternatively, the costs can reflect the existence of binding capacity constraints in undertaking additional legal workload. However, due to the relative elasticity of supply of partner work (Chatain & Meyer‐Doyle, 2017), such constraints are not prevalent in the sample. Overall, on the supply side, we believe that the simplest explanation is the existence of costs of expanding due to learning about the client, even though other types of costs cannot be ruled out.…”

Section: Discussionmentioning

confidence: 99%

“…However, interviews with actors in the market never revealed capacity constraints as a reason for not serving a client. Instead, there is evidence that partners of law firms can go to great length to ensure that they can serve all the needs of their clients, either by stretching themselves thin or by redistributing work within their firm (Chatain & Meyer‐Doyle, Forthcoming).…”

Section: Discussionmentioning

confidence: 99%

Estimating Value Creation from Revealed Preferences: Application to Value‐based Strategies

Chatain

Mindruta

2017

Self Cite

Research summary: We develop and apply a new set of empirical tools consistent with the tenets of valuebased business strategies, leveraging the principle that "no good deal comes undone" and the methods of revealed preferences, to empirically estimate drivers of value creation. We demonstrate how to use these tools in an analysis of value creation in buyer-supplier relationships in the UK corporate legal market. We show that our approach can uncover evidence of subtle mechanisms that traditional methods cannot easily distinguish from each other. Furthermore, we show how the estimates can be used as parameters of biform games for outof-sample analyses of strategic decisions. With readily available data on relationships between firms, this approach can be applied to many other contexts of interest to strategy researchers.Managerial summary: Managers need to understand the drivers of value creation for customers in order to make competitive positioning decisions and understand when they can capture value under competition. However, estimates of the relative importance of each driver are typically difficult to obtain. In this article, we help remedy this problem by demonstrating a novel method that obtains estimates of the contribution of various drivers of value creation from commonly available data of buyer-supplier relationships. These estimates can then be used to inform the strategy-making process. Research abstractWe develop and apply a new set of empirical tools consistent with the tenets of value-based business strategies, leveraging the principle that "no good deal comes undone" and the methods of revealed preferences, to empirically estimate drivers of value creation. We demonstrate how to use these tools in an analysis of value creation in buyer-supplier relationships in the UK corporate legal market. We show that our approach can uncover evidence of subtle mechanisms that traditional methods cannot easily distinguish from each other. Furthermore, we show how the estimates can be used as parameters of biform games for out-of-sample analyses of strategic decisions. With readily available data on relationships between firms, this approach can be applied to many other contexts of interest to strategy researchers.Word count: 125 words.Keywords: value-based strategy, revealed preferences, cooperative game theory, buyer-supplier relationships, client-specific economies of scope Managerial abstractManagers need to understand the drivers of value creation for customers in order to make competitive positioning decisions and understand when they can capture value under competition. However, estimates of the relative importance of each driver are typically difficult to obtain. In this paper, we help remedy this problem by demonstrating a novel method that obtains estimates of the contribution of various drivers of value creation from commonly available data of buyer-supplier relationships. These estimates can then be used to inform the strategy-making process.Word count: 84 words.3

“…From a strategic human capital point of view, participating in corporate social initiatives might thus provide intangible rewards for employees, such as personal meaning (Glavas & Kelley, 2014). These types of initiatives are therefore increasingly seen as an important lever for talent management, especially in human capital-intensive settings like professional service firms-where reliance exclusively on financial rewards has its limits (Anand, Gardner, & Morris, 2007;Chatain & Meyer-Doyle, 2017).…”

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confidence: 99%

Taking a hit to save the world? Employee participation in a corporate social initiative

Bode

Singh

2018

Research Summary: Companies often justify their corporate social initiatives by citing talent management benefits. We examine the extent of, and the reasons for, employee interest in such an initiative in a global management consulting firm. We find a large fraction of employees to be interested in participation in the initiative even when participation requires a personal sacrifice in the form of a salary cut. However, this interest is driven not just by prosocial motivation: Expectations regarding private benefits, such as improved career prospects from new skills acquired, also play a role. Considerations of social impact and private benefits are equally salient when no salary cut is required, but private considerations become more prominent when participating employees are asked to accept a salary cut. Managerial Summary: Many companies are moving from stand‐alone corporate social responsibility (CSR) projects to social initiatives integrated into strategy. Providing employees with the opportunity to participate in such initiatives is said to help attract, motivate and retain talent. In this study, carried out in collaboration with a management consulting firm, we examine how much and why employees value participation in a corporate social initiative. Based on interviews and survey data, we find that employees are not only interested in, but often even willing to accept, a temporary salary cut for the opportunity. However, altruistic motivation is not the only driver of this interest: Employees also expect and value the possibility that the experience would lead to private benefits, such as developing skills likely to enhance their career prospects.