More than half of the leaders plan on leaving their current organization in the next 2 years! But the important question is not if they leave but rather where they go. So, what happens when the leader of your company changes their job and goes to your competitor? They have sensitive strategic information that can shift the competitive advantage. This phenomenon when the employees go to the rival company is called destination rivalry. It is the degree of market and resource overlap between an executive’s old and new firms.
Demand Side: General management skills are always in demand but competition specific human capital brings executives closer towards their rivals. This includes experience in output functions like research & development, operations and marketing or even leadership roles. This type of specialized knowledge is desired by rivals as it gives offense through access to proven capabilities and defense by insight into the possible steps that the competitor might take next.
Supply Side: vertical pay disparity acts as a powerful motivator. So when there is a significant gap between the compensation of the employee with others, it often makes them feel relative deprivation and resentment. This psychological disconnect reduces the attachment to the organization which makes the executive more willing to join a direct competitor.
In addition to the demand and supply side, turnover is frequently caused by relational shocks like a change in the CEO or within the broader Top Management Team (TMT). External factors also play a role here, including local labor market density (the proximity of other public firms) and industry poaching norms which increase the visibility and accessibility of outside opportunities.
Moreover, as remote work and job mobility is increasing it has become a huge threat for businesses to retain their top talent. Earlier firms used to rely on contractual noncompete agreements to prevent their executives from joining their rivals but now these agreements are seen as ineffective because of growing legal challenges along with the lack of enforceability.
So what can be done to improve retention and prevent top talent from going to rivals? Harrison et al. (2026) suggested that organizations should focus on the following:
- Internal pay: Addressing the vertical pay gap may reduce the financial motivations of employees to join competitors.
- Social comparison: Employees compare their pay with their TMT colleagues and other executives from the industry so it is important to manage these horizontal comparisons.
- Relational Shocks: Turnover of the CEO or others from the TMT often results in more people leaving the organization so it is necessary for the firms to proactively manage the transition periods after a change in leadership to stabilize the remaining executive team.
Food for thought: If executives are leaving because they feel undervalued, is turnover really about opportunity or about perceived unfairness within the firm?
References
- Harrison, J. S., Krause, R., Bakker, R. M., & Wu, Z. (2026). Where do transitioning executives go? Exploring Demand-Side and Supply-Side drivers of destination rivalry. Journal of Management. https://doi.org/10.1177/01492063261428060