b'DOES INTEGRITY MATTER?What is it with the media fantasizing about compe- were amplified for smaller and/or less diversified tent characters with questionable integrity? Amongfirms because the past capability claims are usuallyDRIVER TURNOVER IN THE TRUCKING INDUSTRY:the plethora of goodin all aspectsprotagonistsmore crucial in forming the overall impression of out there, those picaresque characters are oftenthese firms. WHATS THE COST OF REDUCING DRIVER QUIT RATES?the most memorable and even attractive. WouldWhat these findings suggest is that the signs of this hold true for firms in real life? That is, are peopleproblematic integrity trump existing positive capa-more forgiving to highly capable firms misconduct? bility perceptions. In other words, the belief thatSpotlight on Trucking in the Supply ChainSome Significant Findings: Jung-Hoon Hans research titled Salient Expecta- prior demonstrations of superior capability wouldIn an increasingly hyper-competitive global businessOn an annual basis, there is 40.7% decreasing tions? Incongruence Across Capability and Integrityprotect one from the backlashes from misconductenvironment, access to an efficient and affordabledriver quit rates for each year that driver remainsSignals and Investor Reactions to Organizationalis rather a myth. This should warn managers as firmstransport system is essential to the success of USwith the company. Misconductcoauthored with Srikanth Paru- often mistakenly prioritize the capability dimensionmanufacturing, the online retailing sector, and to theWhen controlling for variations in other turn- churi (Texas A&M University) and Puneet Prakashover the integrity dimension. Indeed, prior researchUS economy in general. The movement of cans, carsover determinants, drivers are significantly more (Missouri State University), and published by thehas found that the pressure to perform better isand construction materials (e.g. automotive, foodlikely to stay with their employer if those drivers Academy of Management Journalsuggests theamong the most significant drivers of corporateand beverage, packaging, construction materials,are white-nonHispanic, a US citizen, have attained answer is no. Among the firms that engaged inmisconduct. Then, should firms refrain from makingand aircraft components transportation) has been ahigher levels of formal education and reside in earnings manipulation, arguably serious miscon- any capability claims? The answer would of coursebellwether for the health of the economy. Shipmenturban regions.Jung-Hoon Han duct, those that had formed positive impressionsbe no. Itll be ineffective. What is really important,delivery represents the last mile of supply chains (toAnthony Rossof their capabilities were more fiercely punished byhowever, is that they should be aware that all ofend consumers or to the next customer in a valueDrivers employed during rising home construc- investors. Specifically, the stock market reactionthe capability claims they make are in fact receivedchain) in all industry sectors. tion market are more likely to leave their trucking to the misconduct significantly worsened to theunder the assumption that they are also ethical.Why it Matters:job for construction jobs when there is labor extent that a firm had received extremely positiveThat is, just because stakeholder audiences doShippers frequently rely on trucking transportshortage of construction workers.reactions to its past capability claims (i.e., extremitynot question the firms integrity every time, it doesservices to deliver their products nationally as wellOlder, part-time drivers who work for non-eco- of capability claims) and/or made such claims morenot mean that integrity does not matter: Rather,as delivering these loads to ocean ports and airportsnomic reasons, and hold multiple jobs are less frequently (i.e., frequency of capability claims). Toit is so important that people take it for granted.for international shipment. The aging labor pool oflikely to leave their trucking job.provide some numbers, for a hypothetical firm valu- Thus, when this taken-for-granted assumption ofqualified truck drivers as well as the highly compet- Drivers who are married, male, work more hours, ated at 100 billion dollars, a one standard deviationacceptable integrity comes into question, both theitive markets have led to high rates of driver churnor live in the suburbs are less likely to voluntarily increase in the extremity of the firms past capabilitycapability and integrity evaluations of firms becomeand increased operating costs for shippers. Unfor- leave their job compared other drivers.claims incurred 1.19 billion dollars additional loss fromtarnished, inviting fiercer punishments as my find- tunately, the COVID-19 Pandemic only worsened the disclosing misconduct. Similarly, a one standardings showed. Afterall, we like star players to shinesituation. Logistics services companies and thoseWe believe the trucking industry must address deviation increase in the frequency resulted in anwhile keeping the rules of the game. companies with in-house transportation fleets alikefactors(unhealthybusinessenvironment) additional loss of 1.58 billion dollars. Such lossesare struggling with driver retention. contributing to high quit rates among female drivers since women drivers are more likely to The Study:leave their job than males.Anthony Ross and his co-authors, James PeoplesNew in Our Findings and Steve Trick together examined the questionWhats new is the findings on married workers and of what can be done to reduce the costs associ- workers residing outside the suburbs and central ated with truck driver churn in companies. Usingcity. Given the turnover results for these two driver discrete choice methods, they empirically exam- groups, trucking companies can take advantage of ined the personal characteristics of truck driversa large pool of potential drivers to reduce replace-that are associated with a greater probability ofment cost due to high turnover. However, the cost driver turnover. Exploration of this phenomenon isof retaining married drivers and drivers in rural significant in part because knowing who is likely toareas is dependent in large part on the earnings leave a trucking company helps decision makers inrequired to keep them from leaving. We also esti-trucking firms identify effective measures needed tomate that paying a wage differential of at least 6% reduce driver turnover. Specifically, they examinedabove local market rates increases driver retention the marginal probability that a driver leaves theirand may decrease driver replacement. That is, for job due to the difference in that drivers personala limited increase in pay, the cost of reducing turn-characteristic, residency and year reported in theover compares favorably to the cost of managing survey files compared to a driver with differentturnover. This may lead to greater stability along personal characteristics. the last mile of the supply chain.28 MANAGEMENT MATTERSMANAGEMENT DEPARTMENT 2022 ANNUAL REPORT 29'