Is losing employees bad for your company?
An obvious answer would be a straight “yes”, because by losing employees your organisation loses not only human capital but also social capital. In other words, conventional wisdom suggests that by losing employees a company loses brains and contacts. This idea is out of date.
The late 1980s spawned the “war for talent” mantra: companies have to make sacrifices and be creative to retain talent. Hence management should attract the best, make sure they grow and keep them as long as possible.
Twenty years ago, these were considered insightful ideas. Talent was seen as a scarce resource in an increasingly competitive and globalised world. We think, however, that the rules of the game have changed. Fighting to get the best talent is still important, but having the courage to let that talent leave is also crucial because there are benefits in letting people resign, in good or bad economic times.
Our new research project focusing on the antecedents and consequences of performance in creative industries shows that companies can benefit from losing employees.
We conducted an intensive study of the global fashion industry, including dozens of interviews with senior industry executives, and collected information on the careers of thousands of fashion professionals. We analysed the impact that losing designers to rivals had on the performance of fashion houses.
We found that designer departures could lead to improved performance by the fashion houses that lost them.
Gaining information on what competitors are doing is critical because houses can gain insights on the newest and hottest trends.
When a designer goes to work for another fashion house, he or she maintains contacts at his or her former employer while creating connections in the new place of employment.
These contacts result in an informal communication bridge between the two houses, and through this bridge the source house can learn what is going on at competitors.
The insights collected from different competitors can enable source houses to generate new ideas and produce more creative and critically acclaimed fashion collections.
In the fashion industry, famous designers pay attention to where their assistants and apprentices go and keep a close relationship with them. For example, the Japanese designer Rei Kawakubo, who created the brand Comme des Garcons, always kept a close relationship with her proteges such as Junya Watanabe, who in turn provided Kawakubo with further creative inspiration.
This holds true in many other industries, where alumni keep close relations with their former employers: the international consultancy McKinsey & Company and the global consumer products manufacturer Procter & Gamble maintain strong networks of departed employees that keep their former organisations updated on the whereabouts of clients or competitors.
Thus, fashion houses such as Prada and Marc Jacobs have become “platforms” of recognised creativity. Designers join these houses for a while, learn the trade there and move on to work for other fashion houses, spreading the positive buzz about their prior employers.
Other top fashion houses such as Lanvin are generally known to expand their influence on the fashion industry by letting their designers work at other places. In other industries, companies such as GE also rely on their past employees to showcase their thought leadership and spread their management methods, leading to new business for these companies.
This is why companies have to develop strategies for managing departed talent, in addition to strategies of keeping the existing talent.
Letting people leave does not mean companies should forget about caring for talentedemployees. On the contrary, they should pay extra attention to talented people long after they are gone, through developing and managing alumni networks as well as outplacement strategies. The bottom line is that the global economy should learn to benefit from well-managed professional mobility.
Frederic Godart is a post-doctoral fellow at Insead, Andrew Shipilov is assistant professor of strategy and the executive education programme director at Insead Blue Ocean Strategy, and Kim Claes is a PhD student in organisational behaviour