Have you ever thought of taking your talents and striking out on your own to do what your current employer firm does, only better? Or perhaps you manage a few superstar entrepreneurial employees who really push the firm forward with their innovative ideas — but could also really set it back if they leave.
Along with fellow researchers Benjamin Campbell of Ohio State University, Martin Ganco of the University of Minnesota and April Franco of the University of Toronto, I studied the bargaining power of high-ability employees and the effect on firm performance when those people leave. What we found supports the argument for tailoring compensation packages to incentivize entrepreneurial employees to stay at your firm. We used U.S. Census data to look specifically at the legal services industry, but these findings apply to many industries.
As a manager, you want employees to be entrepreneurial, but you want their entrepreneurial initiative to be harnessed within the firm. So how do you hang onto the superstar employees (and in the process ward off the threat they pose as potential competitors)?
·Give entrepreneurial employees freedom. The two biggest reasons why employees leave to start their own firms: to make more money or to have more control. If you want to attract entrepreneurial-minded employees, give them freedom to be innovative and provide an organization that makes it easy to thrive. And . . .
•Pay well. Be willing to pay for performance. You also have to pay them very well to make sure they don’t leave.
·Forget blanket policies and one-size-fits-all. Don’t treat everyone the same. Not all employees are important to retain. Rather than thinking only about blanket policies and making sure that all employees are happy, it is critical to satisfy the high-ability people. Structure incentives, programs and opportunities for autonomy based on the individual.
If you are the entrepreneurial employee, you can increase your own value to the firm. Start, of course, by developing your skills and abilities. Also, focus on how you can create synergies with the resources the firm provides you. These resources are called complementary assets and include everything from a firm’s other employees to clients, operational support, intellectual property, etc. The most successful entrepreneurial employees are the best at utilizing these complementary assets — and therefore pose the biggest threat to the firm’s bottom line if they leave to start a competing venture.
Employees, leverage your entrepreneurial prowess as a bargaining chip:
·Pinpoint what makes you most successful. Determine how you can recreate that success, and what complementary assets you will need to transfer and replicate if you leave.
·Build your internal network. Figure out which people you work best with who complement your style and work well in teams.
·Negotiate the right way. Signal rather than tell the firm your ability to replicate and transfer all the things you need for success. What won’t work: telling your boss “pay me more, or I’m leaving and taking these people with me.” What does work: making sure your boss is aware that you are a key person keeping together a very valuable team, or are very connected both internally and externally.
·Focus on the value you add. Your best bargaining chip should be focused on the value your firm will ultimately lose if you leave and take clients, potential accounts, consumers and other current employees with you.
·Continuously improve. If you want to be a top-level employee, focus on continuously upping the value you add.
Rajshree Agarwal is a chaired professor in strategy and entrepreneurship at the University of Maryland’s Robert H. Smith School of Business. Her research focuses on the implications of entrepreneurship and innovation for industry and firm evolution and has been published in the top management academic journals.