The Case for Letting Your Best People Go

A study finds a link between employees leaving for prestigious jobs and improved company status

 By Vanessa Fuhrmans

Companies loathe losing top performers to rivals, but recent research suggests letting them go on to better things has its benefits.

Young professionals are among today’s biggest job hoppers: A 2016 LinkedIn survey found millennials have worked at roughly four companies in their first decade after college, compared with about 2.5 companies for the generation before them. It takes time, training and money for businesses to replenish star talent, and executives who leave take institutional knowledge, and sometimes clients, with them.

Yet in the right circumstances, departures can create a competitive advantage for the company left behind, according to a study published by the Strategic Management Journal. Researchers at the University of Washington and Georgetown University analyzed industry data on U.S. law-firm hiring, and annual surveys by career website asking legal associates to rate the prestige of law firms.

The researchers found increased departure rates led to improvements in a firm’s status among survey respondents when the exits were for promotions at high-status law firms.

Christopher Rider, an associate professor at Georgetown’s McDonough School of Business and one of the study’s authors, said the results suggest it is plausible such departures—and subsequent boost in prestige—could help companies attract new, junior talent at lower wages, though more research is needed to show a link.

The competitive advantage applies to sectors beyond law, including technology, advertising and others that rely on human capital, said Sydney Finkelstein, faculty director of Dartmouth College’s Tuck Center for Leadership. In his book “Superbosses: How Exceptional Leaders Master the Flow of Talent,” he examined leaders who helped protégés move to other opportunities, often outside their companies.

Prof. Finkelstein points to Oracle Corp. co-founder Larry Ellison. Between 1994 and 2004, he said, nearly a dozen executives who had worked closely with Mr. Ellison at Oracle went on to become a chief executive, board chief or other high-ranking executive at another company—helping to seal Mr. Ellison’s reputation as a talent magnet.

More people are managing their careers as a series of steppingstones at different companies, Prof. Finkelstein said. “As a boss, are you going to accept that reality and do something about it, or are you going to fight it?” he said. “Those who fight it are going to have a more difficult time finding good people.”

 This article was supplied by The Wall Street Journal and was originally published on 19 April 2017.

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