Impending-Exit Period and Employee Performance: Rethinking Human Capital Disruption

Abstract

The well-established disruptive effects of employee turnover on firms have typically been attributed to post-exit dynamics, such as losses of human and social capital. Little is known, however, about leavers’ pre-exit job performance, which, if declining in sufficient magnitude as separation nears, may drive some of this disruption. Drawing on career concerns research, we argue that impending exit weakens incentives to improve future career prospects at the firm, thereby resulting in reduced performance. Our analysis reveals strikingly large negative relationships, as job performance during the impending-exit period declines by 53.9% and 79.8% across two performance measures. Additionally, we predict and find that these performance decrements are more pronounced for junior-level employees and partially mitigated for those anticipating a continuing relationship with the organization after exit. We test our predictions using longitudinal data on 4,104 patent examiners who left the United States Patent and Trademark Office from 2001 to 2018.