Let them go? How losing employees to competitors can enhance firm status

Abstract

Research summary:Because employees can provide a firm with human capital advantages over competitors, firms invest considerably in employee recruiting and retention. Departing from the retention imperative of strategic human capital management, we propose that certain employee departures can enhance a firm's competitiveness in the labor market. Specifically, increased rates of career-advancing departures by a firm's employees can signal to potential future employees that the firm offers a prestigious employment experience that enhances external mobility opportunities. Characterizing advancement based on subsequent employers and positions, we analyze data on U.S. law firm hiring and industry surveys of perceived firm status between 2004 and 2013. We find that increased rates of employee departures lead to increases in a firm's prestige when these departures are for promotions with high-status competitors.Managerial summary: Firms often emphasize employee retention. Employee departures, especially as a result of being hired away by competitors, are often viewed as threats to a firm's competitive advantage. We propose, however, that employee retention need not be an unconditional strategic imperative. We argue that certain employee departures can enhance a firm's competitiveness in the market for human capital by signaling to potential employees that the firm offers a prestigious employment experience, which can help them obtain attractive positions with other employers. Analyzing data on U.S. law firm hiring and industry surveys of firm associates between 2004 and 2013, we find that increased rates of employee departures lead to increases in a firm's prestige when these departures are for promotions with high-status competitors.

Social Relationships and Turnover: A Multidisciplinary Review and Integration

“…Departures of employees who had relationship conflicts can better the quality of social relationships in the organization overall which increases social capital by reducing relational conflict. Moreover, Tan and Rider (2017) suggested that if firms help employees leave for high-status jobs at other organizations, they are likely to attract more high-potential employees, which ultimately builds social capital and creates new social relationships at work. Future research should model recursive turnover giving consideration to conditions that produce a net positive effect within the organization versus a net negative effect.…”

Role of HRM in Talent Retention With Evidence

“…Other aspects like limited opportunities for career growth versus the availability of better jobs that offer the desired opportunities for personal growth and non-appreciation of employees by the management can be strong push factors. However, Tan and Rider, (2017) embrace departure of employees to rival companies as prestigious saying it is an advancement for competitors and it serves the benefit of career growth. Additionally, the inability of the supervisors and the management to resolve employer-employee conflicts is another factor in this case (Pinnington, Macklin, & Campbell, 2007, p. 141).…”

Too Good to Hire? Capability and Inferences about Commitment in Labor Markets

“…Accordingly, we posit that high-capability workers may be perceived to be less motivated by an employer’s objectives. Second, previous work has suggested that candidates with higher-capability signals will be more mobile and thus have more alternative job opportunities (Coles et al, 2010; Bidwell et al, 2015; Tan and Rider, 2017), reducing the likelihood that such a high-capability candidate will stay with the firm (Johnson and Johnson, 1996, 2000). Thus, our theoretical argument is that signals that increase perceptions of capability above a threshold of sufficiency also decrease the level of perceived commitment, because they raise concerns about the potential for misalignment between organizational goals and a candidate’s effort on the job and about the candidate’s future desire to take advantage of outside employment opportunities associated with high-capability signals.…”