Corporate social initiatives and employee retention

Abstract

Firms are increasingly launching initiatives with explicit social mandates. The business case for these often relies on one critical aspect of human capital management: employee retention. Although prior empirical studies have demonstrated a link between corporate social initiatives and intermediate employee-related outcomes such as motivation and identification with the firm, their relationship with final retention outcomes has not been investigated. Our study fills this gap. Using individual-level data for approximately 10,000 employees in a global management consulting firm, we present empirical evidence of a positive retention effect associated with employee participation in a corporate initiative with explicit social impact goals. In addition, we offer arguments for moderating conditions that weaken this relationship and present evidence consistent with our arguments. Further econometric analysis based on a stringent matching approach as well as additional analyses based on survey and interview data suggest that the retention effect can at least partly be attributed to treatment and is not all just a manifestation of sorting of certain types of employees into the social initiative. Overall, by demonstrating a positive association between social initiative participation and employee retention, this study highlights the need for further research into how corporate social engagement can serve as a tool for strategic human capital management.