Pre‐Exit Bundling, Turnover of Professionals, and Firm Performance

• Published date: 01 January 2018
• Date: 01 January 2018
• DOI: http://doi.org/10.1111/joms.12315

Pre-Exit Bundling, Turnover of Professionals,

and Firm Performance

Rhett A. Brymer and David G. Sirmon

Miami University; University of Washington

ABSTRACT Context-emergent turnover theory (CETT) focuses on the contextual factors that

influence the turnover-firm performance relationship, yet to date, has not investigated how

particular firms weather the detrimental effects of loss more effectively than others. We build

on the CETT literature by theorizing that different human resource bundling strategies are

central contextual factors that impact the effects of human resource exit. Specifically, we

argue that bundling human resources prior to exit in greater concentrations deflects some

harmful effects of turnover. Pre-exit bundling ensures that remaining professionals post-exit

retain both the capacity necessary to meet job demands and the critical tacit knowledge of

firm routines that maintain effectiveness. Our study examines the loss of professionals in a

panel of the largest U.S.-based law firms. We find general support for our theory . Results

show that losing professionals when the pre-exit bundling had produced greater service-,

hiring-, and geographic-concentration lessens the negative effects of loss.

Keywords: context-emergent turnover theory, human capital, interfirm mobility,

professionals, resource bundling

INTRODUCTION

Movement of valuable and talented employees between organizations is common in

developed economies (Cappelli, 2008). Of particular consequence to firms is the mobil-

ity of professionals because their specialized knowledge, skills, and experience influence

the creation and implementation of effective firm strategies (Lepak and Snell, 1999;

Mawdsley and Somaya, 2015, 2016). Losing professionals, who comprise a distinct

employee type due to their specialization and deep tacit knowledge that develops slowly,

can be particularly detrimental as professional attrition disrupts or even erodes firm

routines that influence the effectiveness of other employees and functional areas, thereby

magnifying the effect of loss (Aime et al., 2010; Phillips, 2002; Wezel et al., 2006).

Address for reprints: Rhett A. Brymer, Department of Management, Farmer School of Business, 800 East

High Street, Oxford, OH, 45056, USA (brymerra@miamioh.edu).

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C2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies

Journal of Management Studies 55:1 January 2018

doi: 10.1111/joms.12315

Context-emergent turnover theory (CETT) is helpful in understanding the firm-level

consequences of losing multiple employees (i.e., collective turnover) over time. Notably,

CETT not only attends to the amount of loss, but also the context of the turnover event

(Nyberg and Ployhart, 2013). Empirical testing of CETT to date has focused primarily

on the volume of workers lost along with contexts such as the timing of the turnover

events (Call et al., 2015), the job type of workers lost (Siebert and Zubanov, 2009), and

other variables related to the individuals who choose to move. However, characteristics

of the firm that the employees left have been largely overlooked. We suggest that CETT

should consider focal organizational contexts more fully, as they are the contexts most

securely under the firm’s control and thus represent avenues to actively mitigate losses.

Indeed, in a review of collective turnover research, Shaw (2011) observed that studies

exploring the organizational contexts of collective turnover are quite rare. Such an

omission is particularly curious since equivalent turnover volumes would differentially

affect firms with heterogeneous strategies, resources, structures, capabilities, and

markets.

Using the literature on resource orchestration as a guide, we theorize that the pre-

turnover configuration of professionals is essential to the post-turnover performance of

the exited firm. Following resource orchestration in general (Sirmon et al., 2007, 2011)

and work on human capital in particular (Chadwick, 2017; Ployhart and Moliterno,

2011), we argue that the way a firm bundles its professionals’ human capital – i.e., how

the firm organizes professionals’ skill, knowledge and experience in the support of partic-

ular capabilities – will differentially impact the effects of professional turnover on future

firm performance. Hypotheses explore how bundling professionals in greater concentra-

tions across dimensions of geography, goods/services offered, seasoned newcomers, and

management can combat the disruptive nature of professional turnover. Foreshadowing

our logic, we argue that bundling professionals in greater concentrations prior to exit

ensures that remaining professionals are able to meet the job demands left after the exit.

Additionally, bundling in high concentrations prevents the harmful erosion of tacit

knowledge that supports the routines that other employees at every level depend upon

to be effective (see Reilly et al., 2014). Thus, our research question is: How does firm

bundling of professionals’ human capital prior to turnover affect subsequent firm

performance?

Using a sample of partners in the largest US-based law firms from 2000–07, we inves-

tigate how professionals in this industry are bundled across dimensions of geography,

services offered, added newcomers (i.e., seasoned professionals hired externally of the

firm), and managerial structure prior to exit. These dimensions represent fundamental

ways professional services firms bundle their human resources and can be generalized to

most firms that make staffing and strategy decisions about product diversification, geo-

graphic diversification, hiring, and organizational structure. We submit that these deci-

sions can buffer or exacerbate the effects of losing valued employees. Since professional

services firms in general, and law firms specifically, are not R&D, physical capital, or

advertising intensive organizations, our sample offers a focused test of the fundamental

ways firms bundle specialized human resources, particularly in professional settings (see

Riley et al., 2017).

147Pre-Exit Bundling, Turnover, and Performance

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C2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies