Friday, September 21, 2012
Thursday, March 15, 2012
Is losing employees bad for your firm? An intuitive answer would be a straight “yes” because by losing employees, your organisation seemingly loses not only its human capital (i.e. their skills and tacit knowledge accumulated over the years) but also its social capital (i.e. all the internal and external connections your employees have made over their career inside your firm). In other words, conventional wisdom suggests that by losing employees, companies lose both brains and address books. This idea is out of date.
The late 1980s spawned the War for Talent mantra: in essence, firms have to make sacrifices and be very creative to retain talent. Hence management should attract the best, make sure they grow, keep them as long as possible and make sure they do not leave. Twenty years ago, these were considered insightful and thought-provoking ideas. Talent was seen as a scarce resource in an increasingly competitive and globalised world. We think that the rules of the game have changed. Fighting to get the best talent is still important, but having the courage to let them go is also crucial because there are benefits in letting people go, whether in good or in bad economic times.
My research at INSEAD, together with Frederic Godart and Kim Claes focusing on the antecedents and consequences of performance in creative industries, shows that firms can actually benefit from losing employees. To back our claims, we conducted an intensive study of the global fashion industry, including dozens of interviews with senior industry executives, and collected information on the careers of thousands of fashion professionals. Using this wealth of data, we analysed the impact that losing designers to competitors has on the performance of fashion houses.
Surprisingly, we found that designer departures can actually lead to greater performance of fashion houses that lose them. This can be attributed to the ability of source fashion houses to benefit from the social capital of departed designers. First, gaining information about what competitors are doing is critical, because this is how houses can gain insights into the newest and hottest trends. When designers go to work for another fashion house, they maintain contacts with their former employers, while creating new connections in the new place of employment. These contacts result in an informal communication bridge between the two houses and through this bridge the ‘source’ house can learn what is going on at competitors. The insights collected from different competitors can enable source houses to generate new ideas and produce more creative and critically-acclaimed fashion collections. In the fashion industry, famous designers pay a lot of attention to where their assistants and apprentices go and maintain close relationships with them. This holds also true in many other industries where alumni maintain close relations with their former employees: both the international consulting firm McKinsey & Company and global consumer products manufacturer Procter & Gamble (both unequivocal leaders in their respective fields) maintain strong networks of departed employees that feed their former organisations on the whereabouts of clients or competitors.
Second, departed employees can be a basis of a source house’s influence in the industry. This is because departed employees expose competitors to the house’s operating philosophy and principles, which increases the industry’s perception of the house’s creative thought leadership. Thus, fashion houses such as Prada or Marc Jacobs have become ‘platforms’ of recognised creativity. Designers join these houses for a while, learn the trade of fashion there – generally with a clear focus, for example, on knitwear or leather – and move on to work for the other fashion houses spreading the positive buzz about their prior employers. Other top fashion houses such as Lanvin are generally well known to expand their influence in the fashion industry by letting designers work at other places: for example in the case of their recent collaboration with H&M, a way for the company to grow its market. In other industries, companies like GE also rely on their past employees to showcase their thought leadership and spread their management methods, such as renowned quality management methodology Six Sigma, which leads to new business for these companies.
Third, designer departures enable organisational turnover. When designers leave, they provide room for new designers to come into the fashion house and bring their unique experiences from the outside. This brings in fresh ideas, positively impacting creative performance. Moreover, some fashion houses purposefully let some of their people go to work for competition in order to help them develop their careers and not feel upset from the lack of personal development opportunities. As one of the fashion executives interviewed for this article put it: “If our company cannot provide room for a designer to grow, we would prefer that he or she goes work for the competition as opposed to staying with us and feeling unhappy.” As it turns out, unhappy designers are also not very good contributors to organisational performance, but a designer who left to work for a competitor might return at some point to the source fashion house with newly-acquired expertise. Top consulting companies know this and do not hesitate to ask their young analysts to leave for a while, before coming back as associates. This is also the raison d’être of MBA programmes: provide high-potential employees with new horizons. Let them come back if they wish; some degree of turnover is good for employers and for employees.
Whole industries, beyond fashion, are based on the premise that letting people go is not necessarily bad. Think about how high-tech firms in Silicon Valley rely on personnel exchanges to grow and get new ideas. This is also true of the Hollywood and ‘Bollywood’ movie industries where temporary teams of actors, movie makers, producers, technicians and script writers assemble temporarily and move across projects. In banking, analysts and investment bankers do not hesitate to move around, to the benefit of their employers who can get them back later with better skills.
Letting some people go is healthy and the biggest beneficiaries of talent loss will be firms which recognise that departed employees and their networks are important drivers of competitive advantage. Except that, in this case, competitive advantage is obtained not from the physical assets possessed by the firms, but rather from the social networks of the departed employees. The bottom line is that in the 21st century the whole global economy should learn how to benefit from well-managed professional mobility.
Monday, February 20, 2012
This is the final installment of the presentation of our survey results on the impact of social media on the competitive advantage of organizations.
Wednesday, February 15, 2012
Monday, February 6, 2012
Sunday, January 29, 2012
Tuesday, January 24, 2012
Sunday, January 15, 2012
Wednesday, January 11, 2012
Tuesday, January 3, 2012
This blog is for people (and companies) who are interested in how to benefit from social networks. I will share results of research that examined how network positions can provide benefits to individuals and companies. I will also discuss what to do in order to build better networks[I1] .
I was studying, teaching and researching about social networks for the past 12 years. In this blog, I want to de-mystify the concept of social network as a source of competitive advantage for individuals and organizations. I also want to discuss how positions of social networks can be linked to good things for an individual (or for the individual’s company). For example, certain network positions are likely to make an individual more innovative, receive better performance evaluations or be promoted faster. Hence the title of this BLOG: Networks and Innovation.
What is a social network [and how it can be useful]?
Inter-personal social networks are links that connect individuals. Social networks doesn’t just mean virtual ties in Facebook, social networks mean your “physical” ties such as friendship, advice seeking or support. If you went to an organization and asked everyone “give me the names of people with whom you exchanged information”, you can use this information to build a picture of what social relationships look like in that organization.
Here is a picture of social connections in a hypothetical firm. There are nine individuals working in this firm. The links emerge as a result of them answering questions about information exchange. For example, individuals G and E said that they exchanged information, but no one exchanges information with A. If A were the CEO, I would be worried… No one talks to the guy.
You will note that there are solid and dashed lines. Solid lines represent “strong ties”—frequent relationships between individuals. Dashed lines represent “weak ties”—these are less frequent relationships.
Oftentimes people don’t exchange information across formal boundaries in their organizations. These boundaries are represented by ovals. You will see that there is only one “weak” tie between E and B across two departments.
Is this picture unrealistic? After all, how is it possible that there are so few connections between people and across departments in such a small company? Funny enough, this happens very frequently. People tend to specialize, they talk to others in their departments, but very often this means that they don’t talk to people across departments.
An individual’s position in an inter-personal network will affect this individual’s ability to innovate. What is innovation? It is often a novel [and useful] combination of elements that were not combined before. Imagine that individuals A, E, G, H and F are in the R&D department while individuals B, C, D and E are in the marketing. Because E talks to B, they can have ideas that combine what marketers know with what R&D people know. With all due respect, in many organizations I know of, R&D people mostly talk to R&D people and marketers talk to marketers. When you can combine information from R&D and marketing, you can generate good (and useful ideas). How can you do that? You need to have friends in R&D if you are a marketer and friends in marketing if you are working for R&D.
A useful test to find out about your network concentration in your functional unit, ask yourself:
a) How many people in my organization did I ask for work-related advice in the past three months?
b) Of these people, how many work in my own department?
c) Of these people, how many work outside of my department?
The more people you ask for advice in your department (in proportion to the total number of people you ask for advice), the more is your network concentrated on your department. If most of your contacts come from your department, you need to be worried because you are missing many different opportunities to innovate (or at least to come up with great ideas). If that is the case, make sure your next lunch (or “catch-up” meeting) is with someone from a different department.