The Business Case for Doing Good

High rates of employee turnover present a massive challenge for businesses, especially those that are already struggling.

“Employee turnover has been shown to disrupt productivity-related outcomes. It’s been shown to correlate with decreased financial performance and, in some studies, even threaten an organization’s survival,” says Vanessa Burbano, the Donald C. Waite III Associate Professor of Social Enterprise at Columbia Business School.

Almost half of employee turnover—a whopping 42 percent—is preventable, according to a recent report from Gallup. Still, self-reported employee turnover risk in 2024 is at its highest point in nearly a decade.

While the reasons that employees voluntarily leave a company vary greatly—from a lack of job satisfaction to a demand for higher compensation—new research from Burbano has found a breakthrough in increasing employee retention: short-term corporate social impact activities, or activities that address societal challenges in order to create positive change, implemented during the employee onboarding process.

The reasoning, simply put, is that these activities can increase an employee’s perception of organizational justice, or how they feel their employer will treat them in the future. With the potential for better treatment comes a better chance of an employee staying.

Burbano notes that while past findings reflect a correlation between corporate social responsibility initiatives and positive workforce outcomes, “what hadn’t really been well established in the past was the causal nature of these effects.” That is because isolating the impact of such initiatives from more endogenous variables, such as the quality of management, is a challenge.

Through a detailed field experiment at a large banking institution in Peru, Burbano found that employees who attended a daylong social impact activity were 50 percent less likely to leave the firm a year later, when compared to co-workers who did not participate in the activity.

Preventing Turnover from the Beginning

During the initial onboarding process, bank employees who had been with the firm for less than three months were required to participate in two collective, daylong onboarding activities. These activities were standard, consisting of a cultural induction and bank transaction training.

Participation in a third activity, focused on a corporate social impact activity, was assigned to a random subset of new employees, following a small pilot program. When the bank’s human resources department invited the employees to the activity, they were not informed of the nature of activities, and related email communications mirrored the language and formatting of the prior two onboarding activities.

Those who participated in the activity were transported to a local high school that served low-income students. Once there, employees were given directions, introduced to students, participated in an icebreaker activity, and split up into pairs with student beneficiaries.

In this pairing, employees were asked to take on a coaching role with their assigned student, helping them to envision an attainable future after graduating from high school in five months. At the end of the coaching session, employees and students ate lunch together and employees debriefed, self-reflecting on their experience in an interview.

A few weeks later, all new employees, including those who did not participate in the social impact activity, were surveyed about their perceptions of the organization. Employees were tracked for the year following onboarding to see who would leave the organization and who would stay.

Retention-Related Impact

Burbano and her co-researchers used survey data to measure the level of employees’ organizational identification with the bank, as well as employee perceptions of how fairly and well their employer treats them.

Their findings indicated that employees randomly assigned to the social impact activity were nearly 60 percent less likely to voluntarily leave the organization after a year. Also notable is the fact that women employees’ perception of the organization was less impacted by the activity than their male counterparts. This suggests that firms can especially improve the retention rate of their male employees through social impact activities.

The findings are rooted in the idea of organizational justice theory, which posits that employees’ overall perceptions of fairness in their workplace are greatly influenced by their perceptions of the level of social responsibility their firm demonstrates toward external stakeholders. These external stakeholders can include customers and suppliers but also local communities and society as a whole.

Previous research from Burbano has found that when employees participate in a social impact activity at work, they are likely to develop more positive perceptions of their employer’s social responsibility and their perceptions of organizational justice. They feel that employers who act fairly and responsibly toward greater society are more likely to respect and care for employees and treat them well.

Burbano explained that the impact of social impact activities is often more pronounced in large organizations than in small businesses, where employees are more likely to be more aware of their organization’s true qualities and what it stands for.

“For large organizations, the sense of what the employer values and how they’re going to treat you is just a little bit harder to have a pulse on,” Burbano says. “So signals like this would likely matter more.”

Starting Off Strong

While Burbano’s findings focus heavily on the effect of corporate social impact generally, she highlighted the importance of organizations making such connections with employees early on.

“It’s this initial point in their interactions with the firm that is very influential in terms of how employees will interpret the values of the firm and think about the firm going forward,” Burbano says.

In the bank’s case, this short interaction had a lasting impact.

Adapted from the paper “The Effects of a Short-term Corporate Social Impact Activity on Employee Turnover: Field Experimental Evidence.”

Key Takeaways for Business Leaders

1. Increase retention by involving employees in activities that tackle societal challenges.
2. Show your employees you care: Act fairly and responsibly toward the greater society to earn their trust, respect, and loyalty.