Not so long ago you got a job for life. Joining a firm or entering public service, you worked your way up the ranks, retiring after 40 or so years with a decent pension (and a shiny golden pocket watch). Perhaps this career path is more stereotype than truth, but one thing is certain: it hardly ever happens today. Today, most organizations place greatest value in soft skills and digital knowhow, letting employees change jobs with alarming alacrity. It is thus no surprise that retention, recruitment and talent management figure so prominently in business strategy.
The need for a bird’s eye view
There is plenty of academic research to help human resource (HR) managers develop evidence-based company policies and procedures, but it is spread across many disciplines. Each study focuses on different details and perspectives. Professor John Mawdsley says this fragmentation is a problem. “It’s virtually impossible to get the big picture,” he states. “There’s no coherent theory that holds everything together. If you find a research study that looks at your exact industry then great, but be cautious when trying to draw make generalizations about anyone else.”
Working with Professor Deepak Somaya from the University of Illinois at Urbana-Champaign, Mawdsley gathered all the available research on employee mobility published over the last few decades to see if he could build a model to help people understand what goes on when workers move between organizations. “We tried to corral everything together and make sense of it as a whole,” he explains. “We quickly discovered that you can’t just look at the employees or the businesses in isolation. Context is everything. It is only when you get the bird’s eye view that some of the counterintuitive aspects of recruitment start to make more sense.”
When an employee changes job, they transfer two types of capital: human and relational.
The transfer of two types of capital
The review concludes that when an employee changes job, they transfer two types of capital: human and relational. Human capital includes all the person’s knowledge and skills — everything from general industry expertise to their experience of specialist software. They may know trade secrets (that they usually cannot share) or bring ideas on how to improve business processes and workflows. This is what the old employer loses and what the new employer could gain. Mawdsley cautions that ‘could’ is the operative word. “Our review shows that the organizational environment plus the hire’s relational capital really affect how much of the human capital the new company gets to see.”
Relational capital refers to all the relationships that an employee has nurtured during their tenure. They could be internal (e.g. team dynamics) or external (e.g. interactions with customers and suppliers). “When an employee moves, sometimes these relationships break, sometimes they are transferred. There can be loss and gain for both the new and old organisations,” Mawdsley observes. He cites the example highlighted in a seminal study by Harvard Business School’s Boris Groysberg, who found that high-performing investment analysts often performed at no more than average levels when they moved to competitor firms. The study found that — since team dynamics are at the heart of star performance in this industry — their decrease in performance stemmed from a loss of relational capital.
The holistic view developed by Mawdsley also cautions against firms seeing the departure of employees as a loss. “It all depends on where they go,” he says. “If it is a competitor firm then yes, it probably is a loss, but only if the new firm can actually exploit the human and relational capital of the new hire and that isn’t always guaranteed. And if an employee moves to a partner company, say a customer, often relational capital is strengthened. The move could improve the performance of both sides.”
The importance of asking the right questions
The review also helps researchers to discover gaps in their knowledge and decide what to study next. “It has revealed some big questions we need to answer,” Mawdsley continues. “For example, in this era of remote working, what is the role of specialist knowledge like how to operate a particular machine? In the past, this played a key role in mobility, but now I’m not so sure? We also need to investigate what constrains mobility; conventional wisdom on recruitment and retention may be based on studies that are decades old.” In fact, Mawdsley and Somaya’s model suggests recruitment may not be the answer at all.
“Our findings show that organizations should consider alternatives before they go through the expense and effort of hiring new people. New people often don’t perform as you would expect. So ask what human and relational capital you are looking for and see if there are alternative ways to acquire it, perhaps through partnerships, collaboration or even informal networking in the local bar.”