The War for Talent Ends

While the 'war for talent' is still a key factor in businesses, it's time to look at whether the war is truly raging or has been put out.

Ask the world’s top executives about the greatest challenges to growth in the next 5 years and they will undoubtedly bring up the ‘war for talent.’ Across a wide range of industries, it is not the ability to get contracts that is keeping executives up at night, but finding workers to complete these contracts. Facing an IT talent shortage, the Indian IT provider HCL Technologies has adopted the radical philosophy of ‘putting the employee first and the customer second’ based on the belief that great employees have become scarcer than customers.

Despite the money and time firms have invested in talent retention programs there is little to suggest that the retention problem has improved. The ageing workforce in many developed economies, combined with a shortage of skilled employees in developing economies, continues to create severe labour shortages. As a result organisational mobility is quickly becoming the norm. A recent study estimates the average tenure of Chinese employees aged 25 to 35 – the age group most sought out by multinationals – fell from 3-5 years in 2004 to 1-2 years in 2005. And a recent ABS study found 22% of Australians aged 20-24 change employers each year. Based on these trends perhaps it is time to declare the ‘war for talent’ is over … talent has won! In this environment organisations need to fundamentally rethink what it means to retain talent.

“Organisations need to rethink what it means to retain talent”

An implicit assumption of the ‘war for talent’ perspective is that employee mobility is a win/lose scenario: a firm ‘wins’ if it keeps an employee and ‘loses’ if an employee joins another company. But recent research I conducted with Dr. Deepak Somaya and Natalia Lorinkova suggests all turnover is not equal. We examined the relationship between employee mobility and company performance in a group of law firms in the United States. As expected, law firm performance suffered when attorneys left to join competitor firms. However, if an attorney left the firm to join a prospective client, the likelihood that the law firm would receive business from that client in the future increased. Maintaining relationships with their former employees, rather than viewing them as deserters, facilitated law firms forming valuable new client relationships.

So what does this mean for talent retention? Organisations need to view talent retention not as a win/lose scenario but as relationship management. By maintaining formal relationships with ex-employees, organisations may still reap benefits from these individuals even after they have left. One way to do this is to form alumni programs. Multinational companies McKinsey & Company, Microsoft, and Shell Oil Company have alumni programs and Australian companies Clayton Utz and UrbisJHD have also recently adopted such programs.

Successful alumni programs attract participants by sponsoring sessions on industry trends, hosting social gatherings or providing benefits such as product discounts. These activities help organisations stay in touch with former employees and increase the potential for new business relationships. Further, a member of an alumni program may decide to rejoin his or her former employer, commonly referred to as a ‘boomerang hire’.

Instead of focusing only on ways to stop people leaving, organisational leaders need to recognise that employee mobility is a fact of life. Alumni programs are an effective way to leverage a potentially valuable resource - their networks of former employees.

Ian O. Williamson is Associate Professor of Human Resource Management at Melbourne Business School