Approximate reading time: 5.7 minutes

Shock horror! You have a terrific team that works well together, producing outstanding results. You take care of them, you nurture them and then it happens. One fine day they announce they are leaving en bloc to join another organisation. What did you do wrong?

As the pain of recession recedes, in certain industries the potential of having your top stars, and even your best teams poached by rivals grows. Retention is likely to be a growing issue for companies.

Even the largest can seldom justify attrition rates costing them dearly in terms of both loss of talent and high replacement costs.

While the departure of an entire team can cause significant damage to a business, unless you can show that the poachers’ tactics were unlawful, there is probably little you can do about it by turning to the law.

Relying on the law to stop the actual or potential loss of talent or an entire team will usually be a last and certainly expensive resort. Traditionally, the main UK legal route relied on establishing a loss of confidential information.

However, recently the courts have been more willing to take a more interventionist approach.

The murky world of interdealing broking was laid bare earlier this year, when Tullett Prebon won a court case against rivals BGC Partners for illegally poaching its key staff via a series of text messages. Tullett alleged that BGC offered millions in upfront payments as part of a poaching raid.

Team “lift outs” in which an entire team moves from one employer to another remain relatively rare. But they seem common in such industries such as financial services and law.

Poaching an entire team is open to question not merely on ethical grounds, but also in terms of actual effectiveness.

The ethical argument though has become increasingly open to challenge as the demand for talent has escalated. Most companies would not think twice about stealing a customer from a competitor so why worry about stealing an employee?

However in terms of effectiveness, poaching other people’s talent may be far less effective than it might seem. For example, an in-depth study  [1] of over 1000 star stock analysts who worked for 78 investment banks in the US found that when a company hires a star, the star’s performance plunges.

There is also a sharp decline in the functioning of the group or team the person works with.

The study explained that stars are usually successful because of specific features of their employers such as the employer’s resources and capabilities, its systems and processes, the quality of leadership, internal networks, training, and the quality of internal teams.

These features may be absent or not of the same calibre in the new employer.

The conclusion from this insightful study is simply that it pays to nurture and grow your existing talent rather than resort to poaching.  Only three of 24 investment banks for example, managed to successfully integrate stars into their organisations. 

Another strong argument for not actively poaching talent from competitors is that the sort of people who respond to overt lures to jump ship are precisely the ones who will leave your own organisation at the drop of a bonus.

Hanging onto your top talent is almost certainly a more sensible long term strategy than simply stealing other people’s. Sometimes, despite its success though, a top team, can become a liability and the best way forward may be to let it go completely.

For example, after new pay curbs were introduced at Citigroup in mid 2009, the company found itself at odds with one of its “stars” and others on his team. They threatened to leave if their pay was cut by the rules.

The bank decided to cut its losses and sold the entire operation and the top team along with it.

What can you do to prevent your top talent and best teams from being lured away en bloc?  

Broadly you can try two approaches that in summary amount to adopting outstanding people practices and installing protective mechanisms.

OUTSTANDING PEOPLE PRACTICES

Build the relationship: people leave people, not jobs. Make sure your managers build a strong relationship with their direct reports and check these exist.

Be approachable, having an environment where employees can readily talk to you about their situation is likely to deter poaching

Early investigation: the bigger the team the easier it should be to protect a raid on your talent. If you suspect rivals are deliberately tempting specific teams, or individuals, fully explore what is going on so you can plan counter measures.

Speak to those who have not yet resigned.  A team poaching exercise will only usually work if all the resignations occur simultaneously.

Watch for signs: changes in behaviour, offsite group meetings, unusual absences, unexpected travel plans, new e-mail groups, and so on.

The loss of junior team members may be an early warning that something is being orchestrated.

Excessive client dependency on a particular team may be sign of vulnerability to poaching. Vary the individuals which a specific client or customer deals with

Keep close to your employees—have high quality communication so that poaching does not come as a surprise; have regular reviews, both formal and informal.

Maintain a positive culture—make sure your workplace is truly a place where people want to be and where being part of the organisation is a matter of pride

Inspire your people: top talent will soon be poachable if they do not feel inspired and have high levels of engagement. Use the VIDI framework to review the situation: are people valued, involved, developed and inspired.

Remuneration: start with a simple question: “what would it cost to replace this person or team?” Once you factor in the true costs of attrition you will almost certainly come up with a revised pay deal! Do this sooner, rather than later.

Deliver on your promises: it is easy for competitors to poach your best people if you do not follow through on the promises you make, whether about type of work, promotion, pay or other benefits.

PROTECTIVE MECHANISMS

Retention bonus: if you suspect a raid on your talent is imminent or in progress consider offering a retention bonus to key staff members. These could be repayable if the employees leave with a certain period.

Seek injunctive orders:  you could be proactive by seeking application the court for pre-action disclosure from those likely to be named in any claim.

Check contracts: well drafted contracts will have several provisions to protect against team poaching–have these been signed by employees. Do they include terms relating to confidentiality, competing during and after employment, a duty to act in the best interests of the employer, a duty to fidelity (or loyalty) a duty to avoid conflict of interest, a duty to report approaches from competitors?

Reminders: write to employees to remind them of their responsibilities and about any restrictive covenants in their contracts

Stagger hirings: if employees are hired on a succession of minimum term contracts and these are staggered, this makes it much harder for a poacher to lawfully lift a fully functioning team. They will have to wait for a period months, even years before the full notice periods all expire

Fiduciary duties: in some situations employees have a duty to act in the utmost good faith. This is hard to establish but it means you can expect people not to make secret profits from their conduct, disclose their own misconduct and reveal circumstances in which their own personal interests conflict with the interests of the employer

Gather evidence: you may need evidence for later court action. Even a small piece of evidence showing that the poacher has encouraged senior employees to persuade staff to come with them may allow you bring or threaten to bring a claim against the new employer

Write to the poacher: threatening legal action for inducement of breach of contract may pay dividends and send the poacher running for cover

Review confidentiality restrictions: check that these specifically protect the types of confidential information that are key to your business

Disclosure requirements: consider whether to include within the contracts of your top talent a duty to disclose anything that is adverse to your own organisation’s interests.

Build in Garden Leave provisions: your standard contract of employment should have a provision that allows you put an employee on notice of termination on garden leave and prevent him or her attending premises, contacting clients or undertaking any comparable business activity.

Get legal help: don’t wait for the poachers to strike; instead get proper legal advice to strengthen your claim on top talent; if you think a team raid is underway don’t hesitate to ask for legal help.

 

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[1] The Risky Business of Hiring Stars, by Boris Groysberg, Ashish Nanda, and Nitin Nohria, Harvard Business Review, May 2004

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