Lose a battle. Win the war. For Talent!
May, 2009
"Instead of the old war for talent mentality which frames turnover as a win-or-lose scenario, companies should adopt a more holistic perspective and consider the administrative, human-capital and social-capital implications of worker mobility."
Ian Williamson
MBS associate professor of Management
Employee mobility isn't all bad if organisations can learn to lose a battle or two in order to win the war for talent.
Research from Melbourne Business School reveals that although companies may lose the human capital of former employees, their relationship with these employees need not end there. There is still much to be gained by retaining access to this social capital.
MBS associate professor of Management Ian Williamson, co-leader of the research, believes a more complete understanding of employees' value to firms will help managers adopt strategies that not only minimize the damage caused by employee turnover, but also take advantage of situations where the loss of employees might lead to economically beneficial business relationships.
He says, "Traditionally companies have adopted two types of strategic responses to employee turnover-defensive and retaliatory."
A defensive approach takes steps, such as increasing salaries or improving work conditions, to reduce the motivation of current employees to leave. A retaliatory approach uses tactics, such as enforcing non-compete clauses or severing business ties, to make it harder for employees to find new positions and make it more costly for another organisation to poach them.
Williamson's research proves that firms can benefit from adopting a third ‘relational' approach that focuses on leveraging social capital.
He says that in a relational approach companies take active steps to maintain positive relationships with former employees and he cites examples of formal alumni programs, which have been adopted by organisations such as Procter & Gamble, Capital One, Microsoft, KPMG, BearingPoint, Accenture and McKinsey & Company.
Through such programs the companies sponsor forums that encourage former workers to interact with each other as well as with current employees.
When implemented properly, Williamson says that relational approaches can enhance access to potential clients, increase the pool of human capital and generate organisational goodwill.
For example, a technology consulting firm based in Germany wanted to expand internationally and was able to obtain references for work in Indonesia, Egypt and Brazil from just one former employee.
Deloitte & Touche, the accounting giant, has estimated that hiring former employees helped save $3.8 million in search firms in just one year.
While Shell Oil Company launched a web site called AlliancexShell that allows ex-employees living around the world to post their resumes, detailing their Shell and other work experience that the company can then search for boomerang hires.
Goodwill can also be an excellent source of references for new talent. One law firm provides candidates with access to its alumni directory and encourages them contact former employees to learn more about the organisation.
Williamson says that although relational practices provide several benefits, it is not a perfect solution. Companies also need to tailor their strategic approaches to individual situations.
"Executives should develop a portfolio of strategies including defensive, retaliatory and relational actions depending on firstly, the level of strategic knowledge the departing employee will take with them, and secondly, the type of organisation they are joining- a co-operator (e.g., potential client, supplier, strategic partner) or competitor.
If employees with a low level of strategic knowledge leave to join competitors, a top priority for business is to reduce the administrative cost associated with replacing employees. In this case Williamson recommends using defensive manoeuvres to retain existing workers.
If employees with a low level of strategic knowledge leave to join a co-operator, Williamson recommends using relational actions which support an individual's decision to join a co-operator and maintains a positive relationship with him. Partners in consulting and law firms for example, will sometimes assist junior employees-those who for whatever reason, will not become partners-find new jobs with current or potential clients.
If employees with strategically important knowledge take jobs with competitors, companies might best be served by emphasising retaliatory actions. For example, Microsoft will sue poaching organisations as well as the departing employees to restrict their use of proprietary knowledge or their ability to contact certain clients.
Williamson adds that a company could also match or exceed a job offer that a key employee has received, to prevent her from joining a competitor.
In the final scenario, if employees with strategically important knowledge leave to work for a co-operator, companies could adopt a mix of defensive and relational approaches. Defensive actions geared towards improving job satisfaction of employees can generate good will should those individuals decide to leave. And as they are most likely to assume high-level positions in their new jobs, they are more likely to have decision making authority regarding the choice of external partners, which could potentially be with their former employers.
