Gaining Talent While Damaging Reputation Among Clients? Antecedents and Consequences of Introducing Flexible Career Structures in Law Firms
41 Pages Posted: 1 Feb 2013
Date Written: January 16, 2013
In recent years, many professional service firms (PSFs) have moved away from the strict application of tournament principles in their career systems, while others have retained these classical structures. In this paper, we provide an assessment of the importance of two types of reputation of a PSF – the reputation as an employer and its reputation among clients – as antecedents of the introduction of flexible career systems, such as non-equity partnership and permanent positions. We argue that while flexible career systems may increase the attractiveness of a firm in the talent market, they can also negatively impact its reputation among clients. Hence, a firm with a high reputation as an employer and a high reputation among clients is less likely to introduce more flexible career structures. Furthermore, we propose that the effect of introducing more flexible career structures on financial performance depends on a firm’s initial reputation. We test our arguments using a sample of 159 firm-year observations of 43 large and medium-size PSFs active in Germany. The results provide support for the idea that reputation is an important determinant of the effectiveness of flexible career structures in PSFs.
Keywords: Tournament, professional service firms, law firms, reputation, employer attractiveness
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