Rethinking the 'War for Talent'

An implicit assumption of the "war for talent" perspective is that departing workers are lost to competitors. Yet employees also leave to join "cooperators," such as customer companies, suppliers and partners, and such movement can facilitate the creation and strengthening of business relationships with those organizations. Another important factor is whether the departing employees possess generic or valuable company-specific knowledge. Managers should consider these two criteria -- the destination and knowledge of departing employees -- when determining how best to handle worker turnover. There are four different scenarios.

In the first, employees with knowledge that is generic or of low strategic importance leave to join competitors. This type of turnover can hamper the productive capacity of an organization while increasing that of its competitors. Here the authors recommend the use of defensive maneuvers (such as improving employee benefits), which are designed to retain existing workers.

In the second scenario, employees possessing knowledge that has low strategic importance depart to join cooperators. This type of turnover leads to administrative and human-capital costs that must be weighed against the possible social-capital benefits -- the new business opportunities that can be generated by ex-employees in their new jobs. The recommendation is for companies to adopt relational actions, in which they take active steps to maintain positive relationships with former employees, such as through the formation of alumni programs.

The third scenario -- employees with strategically important, company-specific knowledge resign to take jobs with competitors -- is potentially the most damaging form of turnover. Consequently, companies might best be served by emphasizing retaliatory actions (such as the threat of lawsuits to enforce noncompete clauses in employment contracts) in addition to defensive maneuvers targeted toward the retention of specific employees who are crucial contributors.

In the fourth and final scenario, employees with strategically important, company-specific knowledge leave to work for cooperators. This type of turnover presents interesting challenges. Because the loss of key employees incurs high administrative and human-capital costs, companies have a strong incentive to adopt defensive strategies to reduce such turnover. But the movement of key employees to cooperators can also lead to substantial opportunities for businesses to expand their social capital with important clients and suppliers. Therefore, when defensive maneuvers fail, a company should consider adopting a relational approach, maintaining positive relationships with departing key employees as they make the transition into their new jobs at cooperators.