Research

When the boss leaves, should I stay, or should I go?

When good leaders leave for new opportunities, they might walk out the door with more than best wishes and the last slices of farewell cake. Some subordinates might follow the leader to his or her new venture. How can companies prevent one leader’s departure from turning into a full-fledged flight?

2016-08-24

When good leaders leave viable companies for new and better opportunities, they might walk out the door with more than best wishes and the last slices of farewell cake.

Some subordinates, concerned enough to re-examine their own careers, might follow the leader to his or her new venture. Other subordinates, uncertain of whether they will like the replacement, also might plan their exits.

How can companies prevent one leader’s departure from turning into a full-fledged flight?

New research by Peter Hom and Wei Shen, professors of management at the W. P. Carey School of Business, suggests that companies that create strong organizational-development climates also create strong relationships among the subordinates, their peers, lower-level employees and other leaders. Such 360-degree relationships, Hom and Shen say, help subordinates decide to keep their current jobs.

“By ignoring these other kinds of relationships, you’re ignoring factors that might counteract or moderate that leader departure effect,” Hom said. Employees who don’t follow a leader out the door, he said, might well identify themselves with the company or have formed strong attachments to co-workers who do so.

Hom’s research team builds on decades of work about what motivates people to leave or keep their jobs. Their latest project probes further by examining how companies and organizations can reduce the effect of leader departures.

From his graduate student work on why National Guard members chose to re-enlist or leave, to his latest work on what employees do when leaders move on, Hom has long been interested in what motivates people to leave or keep their jobs. After all, it costs companies plenty when they have to recruit replacements, and companies risk having rivals acquire the departing employees’ knowledge about corporate processes and strategies.

Some leader departures are legendary. Andy Grove following Gordon Moore from Fairchild Semiconductor to start what would become Intel Corp. is one famous example. Departures also have spawned new buzzwords, such as “turnover contagion” and “lift-outs” to describe the exit of entire teams for new opportunities.

Hom recently collaborated with Shen and with University of Maryland management professors Debra Shapiro and Rajshree Agarwal to understand how leaders’ departures affect subordinates and the subordinates’ attachment to their company or organization. More specifically, the team wondered how companies could reduce the odds that other employees will follow their leaders out the door.

It’s more than personal

Early research on turnover assumed that employees leave for individual, personal reasons, Hom said, such as being unhappy or having needs that they think another company will better meet. More recently, researchers have turned their attention to how external forces, including the depth of relationships with co-workers, might affect employees’ decisions to stay or leave.

“In the knowledge economy — the service economy — the greater focus is on the kinds of relationships you have with people (at work), which stabilize you,” Hom said. At the same time, researchers are paying attention to employees who defect when colleagues with whom they have relationships leave.

If a departing leader’s relationship with team members was a poor-quality one, the departure’s effect on turnover can be minimal, as employees expect they will like the leader’s successor better. On the other hand, in high-quality relationships, employees identify with their leaders and view them as agents of the company. Those employees also view the leader’s resources, such as rewards and promotions, as coming from the company.

When leaders in high-quality relationships leave, however, employees tend to feel a greater sense of loss and disruption. Prior research on the topic established that leader departures increase turnover and employees’ thoughts of quitting. Put another way, such departures decrease employees’ attachment to a company and decrease their desire to stay.

Factors that influence more departures

Hom and his colleagues also examine how a leader’s departure weakens employee attachment to companies. They suggest that these departures cause employees to become uncertain about their future and begin appraising their situations. Employees also become concerned that their next leader might distribute resources differently than the predecessor did.

“The leaving itself is a shocking event that makes them question what their fate might be like without the leader,” Hom said. “It creates a lot of doubt and uncertainty, so they judge the pros and cons of leaving.”

The researchers wanted to look at employees’ relationships with other employees and with other leaders, and at the anchoring effect that occurs when employees identify with a company. From that, the researchers wanted to suggest ways that companies can moderate employees’ detachment.

They suggest that the level of employee concern over a leader’s departure depends on two factors: the quality and strength of employees’ relationship with their leader, and the quality and strength of employees’ relationships with others in the company. The second factor, in particular, influences employees’ attachment to a company, Hom said.

Where other researchers looked mainly at the leader-employee relationship, Hom’s team saw three levels of relationships in the workplace. They range from the individual level (an employee’s identification with the leader and the company) to the group level (where turnover can be contagious), and up to the organizational level (where the organization-wide development climate is set.)

To account for the whole spectrum of relationship quality, Hom’s team suggests a 360-degree relational model that incorporates all three types of relationships underpinning employees’ attachment to their companies.

The greater the size of employees’ networks, the team says, the more the employees will identify with their companies and not just with their leaders. The size of employees’ networks, in turn, depends on the strength of the company’s organization-wide development climate.

Factors that make staying attractive

Mentoring is an important part of workplace relationships. Hom’s team recognized that mentoring is not limited to direct supervisors but can also be done by top executives, peers or affinity groups. Organization-wide mentoring includes career development, such as training programs, and psycho-social support offered by a climate of concern about employee welfare.

The team suggests that companies start addressing the turnover issue by assessing their development climate. They should uncover how employees perceive the mentoring that occurs, and identify the extent to which the company expects, supports and rewards mentoring among leaders and employees.

Companies should recognize that employees and mentors prize their relationships, so it helps to give employees access to mentors who are willing to mentor in all directions: peer, virtual, senior and subordinates. Organization-wide procedures, such as incentives for mentoring others at different levels, can support more mentoring. Hom notes that many companies already have developed mentoring relationships for minority and female employees and could broaden those programs to include more employees.

Creating employee networks and a development climate reinforce employees’ attachment to the company or organization, the researchers say. A strong network and supportive climate would help reduce thoughts of quitting, turnover contagion and lift-outs.

Persuading a good leader to stay might work in the short term. Long term, companies should look for ways to make managers into better leaders, and to build stronger employee ties across business units. If companies wait to assess the situation until after a good leader departs, it could be too late.

Hom next hopes to test the team’s propositions with data from a large organization so he can examine more closely at how leader departures trigger turnover, especially among good employees.

The team suggests that future research on leader departures should consider all types of employees’ identification — with their leaders, their groups and their organizations. They also could develop an assessment tool to measure a company’s organizational development climate and examine how attachments among employees can reduce the effect of leader departures.

The bottom line

To limit turnover and increase employees’ desire to stay, the Hom team’s research suggests:

• For companies and organizations: Look to create mentoring relationships among employees, and to create those relationships from multiple sources and at multiple levels. Be concerned about leader turnover because not only do you risk losing a valued leader’s talents and organizational capital, you risk the leader’s unit becoming destabilized. Some firms have sent in “SWAT teams” to evaluate and cope with a leader departure crisis.
• For leaders who are departing: To leave on good terms, think about the aftermath of your departure. Consider explaining to subordinates why you are leaving. Consider identifying a successor and honoring any special agreements you have made.
• For employees whose leader leaves: Appraise your situation and your relationships to your group and your organization. Ask higher-ups about the leader’s successor, and make a deliberate calculation of the pros and cons of leaving or staying.
• For rival companies: Some teams naturally go together, such as infielders in baseball or surgical teams in health care. Be aware that in certain industries, recruiting a leader is a common way to obtain the whole team.

Management