Finding the perfect match

I was speaking to the leader of one of the best Australian law firms last week, a person whose leadership qualities I greatly admire.

We were talking about the problems law firms have with partners who seem unable to prevent a substantial number of the members of their teams jumping ship. Juniors regard them as toxic and refuse to work with them for any length of time. Some of these partners have an annual 100% staff turnover. What should a managing partner do, especially if the partners in question are high fee earners?

My question to him was: do these partners fit in with the values of the firm? If not, then they may be costing the firm more in morale than they bring in.

“You’re right,” he said after a pause. “When we’ve let go of high-flying but non-values-adhering partners in the past we haven’t noticed any appreciable drop in revenue.”

There is an eternal question when hiring: “Is this person really the right fit?” Even if a candidate has the skills for the job, does their personality fit the company culture? Do their goals align with those of the organization? In the very short span of a selection process, it is very difficult to get to know the person behind the mask and find the answers to these questions. A new paper published in Management Accounting Research, however, suggests there could be a simpler, more subtle way to find these answers, and proposes a means of filtering for candidates who identify with organizational goals and are willing to go the extra mile.

What the researchers say: “Our research shows that relying on managerial discretion to evaluate employees (compared to solely relying on objective performance measures) attracts employees who identify more strongly with the organization’s objectives,” commented the lead author of the study.

Put more simply, when an employee knows that their manager will discretionarily adjust their performance evaluation, and, consequently, their pay, they are more likely to choose organizations whose goals they identify with. This discretion would be based on observations of the employee’s daily behavior, willingness to share knowledge with colleagues, unsolicited suggestions to improve company performance, etc.

Study participants were subjected to three tasks. The first aimed at eliciting their identification (or not) with an organizational objective—in this case, the objective was carbon emission reduction. In the second, a portion of the participants were asked to role play employees and given the choice between a fixed-wage contract and a performance-based wage contract, with or without the possibility of a discretionary adjustment by the manager. In the final stage, employees indicated, on a scale of 1 to 10, how much extra effort beyond their regular job they were willing to put into meeting the organizational goal, that is, finding ways to reduce carbon emissions. This effort was factored directly into their wage calculations in the performance-based model, and all employee-participants had access to those calculations.

The researchers concluded that those who strongly identified with the organizational goal were indeed willing to expend significantly more effort towards finding ways to reduce carbon emissions. As expected, these employees were more likely to choose performance-based pay when given the possibility of discretionary adjustment. Conversely, those who weakly identified with the organizational goal were more likely to choose the fixed-pay model.

The bottom line is that the discretionary adjustment component is designed to reward employees for going above–and–beyond their roles to help the company meet its goals.

If an employee does not care for these goals, then a fixed-pay model pays better.

“Working for an organization with objectives that one identifies with has benefits for the organization, employee health, and society,” said the study’s co-author. “Our study shows that when employees expect managerial discretion to be used to evaluate them, they are more likely to sort themselves into organizations with objectives they identify with.”

So, what? Many past studies—some reported in TR—have shown that employees who identify with the organization’s goals do better and remain longer. But the organization must have goals that employees can relate to. The firm that my friend leads does, which is one of the reasons that it has less trouble than most in attracting talent—and clients, since the two go together.

For more on company missions click here.