Complexities in Professional Mobility
Just as humans are complex, so are their decisions for where to work. In this particular post I will discuss determinants of employee mobility and how it impacts firms, individuals, industries, and policies. We will review the differences between firm-to-firm mobility and entrepreneurial spin-out mobility, and study a new approach to understanding employee mobility and retention.
First, let’s look at two forms of mobility—mobility among high-performing employees from firm-to-firm, and mobility of high-performing employees who choose to create spin-out startups from the original firm in which they were employed.
Firm to Firm Mobility (Non-Entrepreneurial Mobility)
In a recent presentation to the Research & Policy team at the Kauffman Foundation, Benjamin Campbell overviewed his research written with Rajshree Agarwal and Seth Carnahan. Their research on employee mobility is focused on the U.S. legal services industry and was funded by the Kauffman Foundation and the National Science Foundation.[i]
According to the researchers’ findings, those high-performing employees who work at a firm with high compensation dispersion, a more scattered salary range across the firm, are less likely to leave a firm than competitors.
The research also finds that those extreme high-performing employees that do leave are more likely to engage in entrepreneurship. For these employees, it is not the compensation package that determines their mobility; the fact that they want to start a spin-out will motivate them beyond the lure of the pecuniary rewards.
Advice for existing firms
Advice for spin-outs
Cost of Mobility (Legal-Industry)
If the employee earns between $300,000 and $1M, and moves to a spin-out, the firm faces a $1M loss in revenues.
Professional mobility is a decision that varies from person to person. Once we determine whether the person would consider mobility to a competing firm, or to an entrepreneurial spin-out, we must look at the differing market forces, and the policy implications involved. In her visit, Rajshree Agarwal stated “more stars stay, but the brightest ones still leave,” a reference to a paper she co-authored on the subject of employee mobility. Research shows that investment in an employee’s professional development and above-average compensation will help retain the best employees. However, those employees drawn to entrepreneurial spin-outs may do so regardless of their compensation. While developing an employee’s knowledge may create a threat to the employee starting a competing spin-out, the firm is ultimately benefited by those employees who choose to stay.
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