When Losing Employees Boosts Innovation
The benefits of losing
talent may often outweigh the costs.
The loss of a top
employee is commonly seen as a setback for companies. However, recent
research suggests it can be a blessing. Why? An employee lost is a potentially
vital network connection gained. Departees help bridge gaps between
organisations, giving former employers access to new employers’ ideas and
knowledge.
When your company
loses employees, some former colleagues are likely to stay in touch with them.
Even without actively staying in touch, former colleagues might pay more
attention to what departed employees are currently doing. Online platforms such
as LinkedIn make this easier than ever. By combining these discoveries with
in-house techniques and competencies, companies can ramp up their innovation
processes. Employee mobility, therefore, brings focus to competitive analysis
and the search for novel ideas from outside the firm’s boundaries.
Obviously, however,
parting with employees cannot always be a good thing on balance. If that were
true, there would be no good reason for trying to
retain talent. Our recent article in Strategic
Management Journal takes a closer look at how
employee mobility affects creative performance. We found that in fields such as
luxury or high-end fashion, it all depends on where departing
employees end up.
The talent carousel
Our research tracks
the mobility of top designers among world-famous fashion houses during the
period 2000-2010. Why this particular setting? Fashion is an economically
sizeable and culturally significant industry which operates as a global
creative community, with heavy traffic of ideas and talents between the various
houses. Also, the churn of seasonal fashion trends demands a consistently high
level of innovation. To stay on top, couture houses need to deliver
aesthetically satisfying surprises every season. Therefore, the industry
presents an unusually rich opportunity to draw links between designers’ career
paths and the creative fortunes of their brands.
We assessed creative
performance with reference to the French trade magazine Journal du
Textile, which rates the major houses’ creativity on a seasonal basis. The
ratings are assigned by industrial buyers assessing the novelty and saleability
of a given collection.
Geography
We were primarily
interested in the impact of geography. Would losing a designer to an overseas
house be more or less creatively beneficial than a domestic defection? We
hypothesised that it would be more beneficial, because cultural
cross-pollination is more likely to give good ideas to the former employer.
Ideas considered overly familiar in one cultural context often raise eyebrows
when exported abroad and combined with elements of a foreign aesthetic.
Our hypothesis turned
out to be truer than we had anticipated. We had thought that losing a few
employees to fashion houses abroad would be beneficial, but losing too many
would be disruptive. Surprisingly, the creative boost does not seem to become a
curse even when many designers are lost to foreign competitors. There was no
discernible downside to the international circulation of talent for firms which
lost this talent in the first place. Mobility of designers within national
borders, however, had no perceptible effect, either positive or negative, on
creativity.
Status
We also separated
houses as a function of their status in the fashion industry and tracked
employee mobility within vs. across status groups. We were surprised by what we
found. Houses that lost designers to same-status or higher-status competitors
seemed to suffer creatively, while those whose designers who stepped down in
status benefited. We had expected the opposite, as it is usually considered
desirable to have ties to high-status individuals and companies.
Here the double-sided
nature of employee mobility may come into play. A creative who switches
companies conveys ideas both away from and back to the former employer. Status
determines a company’s ability to capitalise on these creative currents.
Higher-status firms are more likely to receive credit for combining
pre-existing ideas in novel and interesting ways.
An example: After
French fashion designer Christophe Lemaire left Lacoste for Hermès in 2011,
fashion journalists noted how Lacoste (clearly the lower-status of the two
houses) appeared to emulate Hermès in certain aspects of its collections.
Because insiders spotted the borrowing straightaway, Lacoste’s attempt at
social climbing was arguably unsuccessful.
Engage with former
colleagues
High levels of
creativity and innovation are vital to success in many sectors, not all of them
as close-knit as high-end fashion. Organisations in less insular industries may
need to introduce systems – such as McKinsey’s well-known alumni network – to keep
ex-employees engaged. That way, they’d be better positioned to re-hire alums
once outside experience has made them more attractive on the labour market. In
the interim, companies could capitalise on network-building opportunities that
might compensate for the loss of those employees.
Further, innovative
companies might not need to worry so much about losing employees to foreign
competitors. Such losses may turn out to be blessings in disguise, if firms
stay abreast of what their overseas alums are doing. But our findings also
suggest that organisations should do everything they can to keep their
employees from being poached by competitors of higher industry standing.
A global talent pool
Despite oft-noted
worries about “brain drain”, the number of global
expatriates continues
to rise. Governments are understandably concerned
about repatriating income from citizens residing overseas, but our findings
show that expats’ ideas and unique experiences may be even more valuable. The
public sector should help connect local organisations with expats whose
contributions may be complementary. Unfortunately, most governments are too
detached from their diaspora to accomplish this at present.
Finally,
perhaps the very idea of “brain drain” should be questioned. If
cross-border talent mobility is good for everyone, as is the case for the
fashion brands we studied, then there’s no rational basis for discouraging it.
Why wouldn’t governments want to cultivate a robust talent pool that has been
enriched by overseas experience and that may return home someday?
Andrew Shipilov, INSEAD Professor of Strategy, Frédéric Godart, INSEAD Assistant Professor of Organisational Behaviour, and Julien Clément, INSEAD PhD Candidate |
Read more at
https://knowledge.insead.edu/leadership-organisations/when-losing-employees-boosts-innovation-6421?utm_source=INSEAD+Knowledge&utm_campaign=2270dd98af-
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