The Social Network Benefit

Losing an employee doesn't have to mean losing knowledge

By No Analyst or Consultant

October 17, 2006 — CSO —

It has always been assumed that one company's loss is another's gain when an employee jumps ship. Just think of the knowledge, experience and connections that go out the door along with a person's boxes and office belongings.

But a new study suggests that losing an employee, at least in a high-tech field, is not necessarily as bad as it seems. "Firms can wind up learning when employees leave their firm, which is contrary to the conventional wisdomthat firms learn by hiring away employees," says Wharton management professor Lori Rosenkopf. She and Wharton doctoral student Rafael Corredoira present their conclusions in a paper titled "Learning from Those Who Left: The Reverse Transfer of Knowledge through Mobility Ties."

The two researchers came up with their silver-lining finding by studying the effects of "outbound mobility" on semiconductor firms in the United States and abroad. By analyzing patent citations, they were able to show that companies can benefit from a reverse flow of knowledge that results when an engineer or other technical expert moves on. Why? Because, according to Rosenkopf, there are social networks that transcend companies and allow the employees left behind to gain access to the knowledge being generated at their colleague's new place of business. She is not talking about corporate spying, but rather the flow of ideas and information among professionals who work in the same field. Their findings, she concludes, "call into question the conventional wisdom that losing employees means losing knowledge."

Other studies have looked at the opposite phenomenon"inbound mobility"documenting the transfer of knowledge that comes with hiring. When people are viewed strictly as "human capital," the departure of an employee results in the former employer's loss of that person's intellect and talent, and the corresponding gain of those same valuable attributes for the company doing the hiring. "The belief has been that if you lose an employee, that's a bad thing for you," Rosenkopf says. Even common lingothat a company is losing a worker to another firmimplies that there is nothing good that could possibly result.

But Rosenkopf says the picture is different when employees are viewed in terms of "social capital." Workers aren't just silos of knowledge and skill unto themselves, but rather are part of social networks of workers from various firms who talk about what's going on in their field. Those networks may involve formal arrangements, such as strategic alliances, but they may also be informal, involving professional conferences, e-mail exchanges, common blog sites or even after-hours socializing.

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