Talent poaching and job rotation

The value of a firm’s service lies both in its workers and its relationship with clients. In this paper, we study the interaction between client-specific experience accumulated by workers, poaching behaviour from clients and strategic rotation of workers by firms. Using detailed personnel data from a security-service firm, we show that an increase in client-specific experience increases both the productivity of workers and their probability of being poached. The firm reacts to this risk by rotating workers across multiple clients, and more frequently so to those workers more likely to be poached. Furthermore, we find that after a policy change that prohibited poaching, the firm sharply decreased the frequency of rotation which in turn increased workers’ productivity. We propose a theoretical model that guides the empirical patterns and allows us to argue their external validity beyond our specific empirical setting. Finally, we provide survey evidence from the security service sector, demonstrating the consistency between our findings and industry observations.