RESEARCH PAPER NO. 1805

Corporate Social Responsibility Reputation Effects on MBA Job Choice
David B. Montgomery Catherine A. Ramus May 2003

RESEARCH PAPER SERIES

CORPORATE SOCIAL RESPONSIBILITY REPUTATION EFFECTS ON MBA JOB CHOICE

David B.Montgomery1 Sebastian S. Kresge Professor of Marketing Strategy -Emeritus Graduate School of Business Stanford University Stanford, CA Tel: (650) 723 3029 Email: Montgomery_david@gsb.stanford.edu & Dean, School of Business Singapore Management University Catherine A. Ramus* Assistant Professor Donald Bren School of Environmental Science and Management University of California Santa Barbara, CA 93106- 5131 Email: Ramus@bren.ucsb.edu Tel: (805) 893 5057 Fax: (805) 893 7612 *Corresponding Author

1

The authors’ names are merely alphabetical.

2

CORPORATE SOCIAL RESPONSIBILITY REPUTATION EFFECTS ON MBA JOB CHOICE

ABSTRACT In a preliminary study with 279 MBA’s from two European and three North American business schools we find that reputation-related attributes of caring about employees, environmental sustainability, community/ stakeholder relations, and ethical products and services are important in job choice decisions. We use an adaptive conjoint analysis survey tool to discover the relative weighting of a new set of social responsibility job search criteria, including these attributes with traditional job search criteria like financial package, geographical location, etc. In addition, our results show that more than ninety percent of the MBAs in the sample were willing to forgo financial benefits in order to work for an organization with a better reputation for corporate social responsibility and ethics.

3

CORPORATE SOCIAL RESPONSIBILITY REPUTATION EFFECTS ON MBA JOB CHOICE Masters in Business Administration students (MBA’s) select employment in organizations based upon the relative utility they place on different attributes of the offer, and based upon the attributes of the organization giving the offer. We call these attributes (both of the job offer and of the organization) job factors. Researchers studied this issue of MBA job choice in the 1970’s and 80’s using conjoint analysis looking at the importance of financial package, geographical location of the work, business travel, opportunity for advancement, company growth, functional activity of job offer, advancement opportunity, and people in the company (Montgomery & Wittink, 1980; Krishnamurthi, 1983; Srinivasan, 1988)1. Missing from this list are attributes related to reputation and values congruence between the applicant and the organization, which recent research by Judge and Bretz (1992) and Scott (2000) showed to impact job choice. Reputation of an organization is a multidimensional construct, meaning that no single factor is responsible for influencing a person’s perception of an organization’s reputation. Indeed, Fombrun and Shanley (1990) show that factors such as accounting signals of profitability, market valuation, media visibility, dividend yield, size, advertising intensity, and social welfare contributions effect Fortune 500 firm reputations. They raise the question of whether firms have one reputation or many, noting that reputation can vary significantly based upon domain and audience. Our research is based upon the separation of reputation effects into different categories of attributes including economic performance, communication with societal stakeholders, environmental sustainability, caring about employees, and ethics of products andservices. We study the relative importance of MBA perceptions of reputation along these different dimensions, juxtaposing these reputation effects with traditional job attributes studied in earlier research (i.e., financial package, geographical location of the work, business travel, opportunity for advancement, company growth, functional activity of job offer, advancement opportunity, and people in the company). Why are we interested in reputations related to corporate social responsibility and their effects on MBA’s job choices? Zenisek (1979) argued that societal expectations of private enterprises change over time, placing increasing responsibility for social welfare on firms. He defined corporate social responsibility as “that set of demands and expectations, regarding the production of goods and services of both a physical and social nature, which society places on private enterprise” (Zenisek, 1979; p. 362). Just as expectations of the public with regards to corporate social responsibility are changing over time, so too might we expect MBAs’ expectations to evolve. Whereas the work of Judge and Breitz (1992) and Scott (2000) showed a relationship between organizational values and applicant choice, there is no empirical study that shows how important these additional reputation-related factors might be. Building on the conjoint analysis research of the 1970’s and 80’s (Montgomery & Wittink, 1980; Krishnamurthi, 1983; Srinivasan, 1988) our research presents a preliminary study of the relative importance of these reputation attributes for MBAs when deciding between organizations for which to work. The conjoint tool allows us to determine the relative weighting of values-driven search criteria with traditional search criteria like financial package, for example. In addition, we show that there is an economic dimension related to corporate social responsibility reputation effects on MBA job preferences. The results of our research demonstrate that a significant percentage of the MBAs in the sample were willing to forgo financial benefits in order to work for an organization with a better reputation for corporate social responsibility and ethics.

4

METHODOLOGY The purpose of this study was to measure the utilities of MBA graduates for the full range of job factors that could affect their choices of employment. To develop a complete set of job attributes and measures, we reviewed the literature on job choice (Arnold, 1981; Feldman & Arnold, 1978; Montgomery & Wittink, 1980; Judge & Bretz, 1992; Krishnamurthi, 1983; Rynes & Lawler, 1983; Rynes, Schwab, & Heneman, 1983; Srinivasan, 1988; Zedeck, 1977) and interviewed career services professionals. We developed an exhaustive list of attributes, which we tested in a survey of sixty-six MBA’s to refine the list. Then we ran two focus groups with graduate students to further refine the attributes and to develop levels for each attribute. The seventeen job choice attributes used in this job preference study are defined in the Appendix, seven of which were not part of previous conjoint analysis studies: • Work Environment - non-financial benefits like childcare, office environment, restaurant/ food and other services, health club, etc. • People in the Organization - work attitude of boss, colleagues, and other members of the organization • Learning on the Job - opportunity for personal development/ training/ learning • Ethical Products, Services or Marketing - the ethical reputation of the organization's products, services, or marketing practices • Caring about Employees - organization's reputation for managing layoffs, ensuring worker’s health and safety, and providing HR benefits, especially insurance package • Relationship with Local Communities and Outside Stakeholders - organization's reputation for interacting with local communities and external stakeholders, such as governments, public interest groups, etc. • Environmental Sustainability and Socially Conscious Behavior - organization's reputation for commitment to environmentally and socially sustainable development Using the list of seventeen job choice attributes and levels as the starting point, we developed an Adaptive Conjoint Analysis (ACA) survey in Sawtooth Software. We asked respondents to choose between computer-generated sets of choices of job attributes (paired and triple comparisons). The software took the respondents previous answers into consideration when generating new choice sets. In addition to questions on job attribute weights, the survey also asked four questions regarding whether the respondent was willing to forgo financial benefits to work for an organization with a reputation for caring about employees, environmental sustainability, community/ stakeholder relations, and all three. The survey was conducted online using a server at the school of one of the authors. Results were confidential. We did not ask for respondent name or email information. Our sample included 279 MBA students graduating in 2002 from two business schools in Europe and three in North America. Note that since this study utilized Sawtooth Software’s Adaptive Conjoint Analysis, every respondent did not see the same combination of attributes and levels. Rather, the program selects those attribute levels and combinations for a given respondent that will enable it to construct the part worth utilities for that respondent without exhausting either his/her patience or stamina. It will be useful to refer to the definitions and levels in the Appendix while examining the results discussed in the next section. RESULTS Attribute Importances in MBA Job Choice The raw importance weight for a given attribute (e.g., Length of Commute) for a given respondent is measured by the total difference in utility between the level with the highest utility (e.g., commute takes less than five minutes) and the level with the lowest utility (e.g., commute

5

takes more than 30 minutes). These raw importance weights are then summed for all seventeen attributes for that respondent and the raw importance weight for each attribute is then divided by this sum to yield the Importance Score or weight for each attribute for that respondent. That is, the Importance Scores normalize across all seventeen attributes for a given respondent. Thus they reflect the relative importance of each attribute to a given respondent. The average Importance Scores and their associated standard deviations for each of the seventeen attributes across the 279 respondents are reported in the first two columns of Table 1 in descending order of Average Importance Score. Higher scores indicate a more important attribute. The final column of Table 1 reports the average rank of each attribute across the respondents, where the attributes are ranked by their importance scores for each individual respondent (1 = most important…17 = least important) and are then averaged across the 279 respondents. The ranking of the attribute importance scores implicit in columns 1 and 3 of Table 1, are highly correlated (Spearman rho rank order correlation = 0.991 and Kendall tau b = 0.948, both significant at p < 0.001). Since the ranking implications are so similar for both columns and since column 1 contains more information, further analysis will be reported on the column 1 Average Importance Scores only. The Average Importance Scores in Table 1 are combined into five groups in which the attribute(s) in each higher group in the table have statistically (p< 0.05) higher average importance scores than all attributes in lower groups. Within a group, the average importance score is not statistically (p 0) Mean WFFB as % of Mean Expected Financial Benefits ($ 115,000) 8.1 %

WFFB for companies which care about employees

$ 9300 ( 7200)

90.3 %

WFFB for companies which care about stakeholders

$ 3700 ( 4100)

70.8 %

3.2 %

WFFB for companies which commit to sustainability

$ 5500 ( 6000)

76.9 %

4.8 %

WFFB for companies exhibiting all three above characteristics

$ 13700 ( 9600)

94.2 %

11.9 %

Sample sizes vary slightly by row due to limited non-response. The sample sizes by row are 259, 257, 257, and 260, respectively.

14

TABLE 3 Aspects of Social Responsibility Correlation of Importance Weights

Attributes

Environmental Sustainability

Caring About Employees

Community/ Stakeholder Relations

Ethical Reputation

Economic Sustainability

Environmental Sustainability

1.00

Caring About Employees

0.07

1.00

Community/ Stakeholder Relations

0.30

0.17

1.00

Ethical Reputation

0.28

0.00

0.14

1.00

Economic Sustainability

-0.15

-0.07

-0.13

-0.12

1.00

Image of Organization

0.09

0.03

-0.05

-0.01

0.02

N = 279

r (0.05 ) = .118

r (0.01) = .155

15