When footballers at the elite level move clubs, the club they move from receives a transfer fee from the club that the player is moving to. This is based on a number of factors including their market value (based on how much the club has developed the player as well as their performance to date), the time left on their contract and the future potential of the player. The selling club may also receive future income based on the players performance at his new club, for example financial incentives based on the number of league games he plays in, the number of goals scored and the number of international caps received.
A famous example of this is Cristiano Ronaldo. He joined Manchester United aged 18 as a relative unknown, and over the 6 years he spent at the club, the club invested time, coaching and money to turn him into a world class player. 6 years later Real Madrid wanted his services, and to do so required them to give £80m to Manchester United.
Now what if these rules applied to the world of business?
For example consider a young graduate who has just joined your business. As a business you will invest time, effort and training in the graduate to enable them to improve the performance of your business and teams which allows you both to achieve mutual goals. Your benefit from this relationship is improved business performance or realisation of goals, the graduates benefit comes in the form of improved skills, competency development and specific work experience. The level of dedication your managers will spend on this task will vary, but in time the graduate will become more attractive to other employers due to their achievements and having transferable skills with the experience to back this up.
If one day the graduate found their big money move to the Real Madrid of the corporate world they could do so for free. They would serve their notice period and then they would leave you. Your manager’s time, effort, and the investment the business has made in them would not be rewarded and the competitor would be reaping the benefits of the numerous years of development that you’ve given them in effect for free.
However if you consider the scenario where businesses operate in a transfer fee environment, the manager may operate in a different mindset. In this scenario they approach the relationship with the new graduate differently and think “I can turn him into a great employee”. So through providing the right level of training and essential skills, when the time comes for the new graduate to move, the manager knows that they can get a reward, not only at the point of transfer, but in the future as well. This could incentivise managers to become great coaches, knowing that the future performance of the graduate will help improve their team or business’ financial performance.
Sticking with the graduate example, there could also be a situation where the business becomes so good at attracting and developing graduates that it means that there is too much supply of highly skilled graduates relative to the demands of the business in question. Therefore managers could look to sell these employees to other companies where their talent/skill is required. This would incentivise managers to continually develop their employees knowing that their efforts would be rewarded. In this instance they may even decide to sell one of their superstar employees who is looking for a new challenge for a high fee to avoid losing any other future hot prospects who could have been earmarked to take their place one day. The benefit of this being that the superstar employee isn’t made redundant and could instead join a new business where both parties could hit the ground running, with the appropriate transfer fee banked of course.
The transfer fee scenario can be exploited and isn’t perfect, but as a proof of concept it gives us something to explore. If great managers were rewarded for their efforts with transfer fees would we have a better, more productive workforce? Or would this turn the labour market into a human cattle market where the primary focus is on developing employees as quickly as possible to then sell them on for profit? Would greed also then ruin the employment market? Feel free to post your comments and thoughts.