How Charitable Work Gives Insight to Worker Talent and Ability

A company’s workers don’t have to care about corporate social responsibility (CSR) for the company to benefit from it.

That’s the counterintuitive new finding from Vanessa Burbano, an assistant professor of management, based on her analysis of a decade’s worth of data from the top 200 US law firms. CSR is typically considered a way for employers to generate goodwill amongst employees and increase worker motivation and retention, but Burbano’s research finds that engaging in such activities also can benefit employers even if no goodwill is generated. Working on pro bono projects improves employees’ productivity through learning, and improves the company’s assessment of their employees’ likelihood of being successful in more senior roles.

The research adds a twist to CSR ahead of Thanksgiving and the winter holidays, when organizations typically ramp up their charity initiatives. Walt Disney conducts an annual “Share the Joy” campaign that supports food banks, while Wal-Mart supports a housing program for military families, and a number of companies band together on December 2 for “Giving Tuesday,” which last year raised more than $300 million for nonprofits and charities.

That firms benefit from such CSR initiatives is well-established, with studies finding a boost to brand recognition, worker motivation, and customer loyalty. Burbano’s research adds a new benefit: CSR as a valuable way to gain insights into worker talent and ability, which has implications for promotions and advancement within a firm. Her new paper, “Pro bono as a human capital learning and screening mechanism: Evidence from law firms,” was published in August in the Strategic Management Journal and written with John Mamer of UCLA and Jason Snyder of the University of Utah.

“Looking at the different mechanisms through which the firm can benefit or perhaps not benefit from different types of CSR activity is related to a stream of research that I’m really excited about,” says Burbano, who also has research showing that employees are willing to accept lower salaries at socially responsible firms, that employees put in more effort at firms that do CSR, and even (in joint work with Assistant Professor Bennett Chiles) that employees are less likely to lie or cheat employers who are doing good through CSR.

Pro Bono Benefits

Burbano’s new research focused on the CSR activity of pro bono, defined as legal services to those who can’t afford it, which is widespread across US law firms. Junior associates often take on stretch roles in pro bono work, gaining the type of hearing and trial experience that is normally reserved for more senior lawyers on for-profit cases. Columbia Law School requires its students to do 40 hours of pro bono legal work to graduate, describing it as “among the most satisfying experiences they have at law school.”

“Pro bono cases, thus, provide a setting for the firm to observe how junior lawyers would perform in these partner-like roles without the risk of disappointing or losing a paying client if expectations are not met,” according to Burbano’s research paper.

Burbano and her colleagues built a mathematical model that predicts firms promote junior lawyers based in part on pro bono activity, which increases the productivity of employees and improves the quality of the signal sent to employers about employee talent. The model also predicts that pro bono activity is greater at firms where the ratio of partners to junior lawyers is higher, which is an indication of higher likelihood of employee promotion.

“Our proposition that pro bono can act as an informational signal to the firm about an aspect of employee quality is contrary to the common explanation that CSR acts as an informational signal to the employees about an aspect of firm quality,” according to the paper. “This suggests that firms can benefit from pro bono projects even if these projects are not necessarily high (social) impact, and even if their employees find no meaning per se in the engagements.”

Their model was backed up with 13 years of data from the top 200 US law firms by revenue. Lawyers averaged 44 pro bono hours per year, but a 1 percent increase in the partner‐to‐junior ratio was associated with an increase of 0.50 pro bono hours per lawyer per year. The researchers also found that firms doing well financially are more likely to do pro bono, except during times when it’s especially profitable to do for-profit work.

For those outside the legal industry, Burbano’s study implies that CSR is being used by managers as a screening and training mechanism for junior employees. Of the world’s 250 largest companies, 93 percent report their CSR activities, up from 35 percent two decades ago, according to auditor KPMG.

“The takeaways are applicable to many other settings that are also very human capital intensive, and where pro bono takes on the feature of allowing junior employees to take on stretch roles that are more typical of those of senior employees,” says Burbano, citing the medical, consulting, and banking industries as also characteristic of that dynamic.

Read the original piece on Columbia Business School’s Ideas and Insights blog.