Executives Are Being Lured to Greener Pastures

More than one-third of companies in finance, retail have seen companies poach their leaders

By Steve Bates Nov 23, 2016

Executive talent is being raided at an alarming rate, leaving many HR professionals unsure of how to stem the departures, according to a research report.

Twenty-seven percent of U.S. businesses surveyed said they have experienced an increase in poaching of C-suite talent, according to the report, The Prevalence of Talent Raids Among U.S. Corporations and the Implications for Talent Retention Strategies. Based on input from nearly 400 chief human resources officers (CHROs) and other HR executives as well as executive search professionals, the report was released Oct. 20 by Marlin Hawk, a leadership advisory and executive search firm, and Hunt Scanlon Media, a human capital information provider.

The financial/banking sector is being hit the hardest, with 35 percent of survey respondents claiming a rise in talent raids, followed closely by the retail/consumer industry, at 33 percent. The technology/telecommunications sector was third, with 28 percent of those surveyed seeing a rise in executive poaching.

"Top talent is in short supply," particularly with unemployment remaining relatively low, said Scott A. Scanlon, chief executive of Hunt Scanlon Media. "It's going to take a while for companies to come to grips with this."

"The research shows that companies are definitely not doing enough about poaching," said Patrick Pearson, Marlin Hawk's group marketing and communications director. The survey, which Pearson said was the first large-scale research study about talent raids, found that 54 percent of organizations are unprepared to identify executives who are vulnerable to being lured away.

"As Baby Boomers exit more and more, there's going to be a brain drain," said Anthony Papa, senior vice president, global human resources, of Federal-Mogul Motorparts, a supplier to the auto manufacturing industry based in Southfield, Mich. So, some poaching is to be expected. "You always have to be on your guard, even if you have a strong corporate culture," he stated.

The survey report found three primary reasons why organizations lose valued executives, which respondents weighted almost equally:

  • Career progression/opportunity.
  • Salary/compensation.
  • Company culture/internal factors.

Some of the most critical strategies for keeping valued executives from jumping ship are to keep them reasonably happy, engaged in the mission and optimistic about their opportunities.

"You can't poach happy people," said Mark Wayman, founder of The Foundation, an executive placement firm in Las Vegas.

[SHRM members-only Q&A: How Do I Calculate Retention?]

However, you can't hide talented employees, either. Because of the Internet and word of mouth, stars shine brightly. "People who are on your succession charts are probably on other people's succession charts, too," said Claudia Lacy Kelly, the North American leader of global search firm Spencer Stuart's HR practice.

The report offered tips for limiting the loss of C-suite talent:

  • Emphasize the fundamentals. Identify top talent, compensate them properly and give them a stake in the organization's success.
  • Focus on culture and values. Build a team of like-minded people with a strong culture and common values.
  • Track vulnerable employees. Keep an ear to the ground for indications of disaffected executives, and let them know you care about them.
  • Foster mentoring. Provide a regular forum for valued executives to allow them to vent frustrations. This helps identify problems.
  • Master succession planning. Build a pool of candidates for each senior position, plus an external slate of talent as a contingency plan.

Long-term incentives are important. However, having great incentives might not matter much if key executives don't realize what they are. "Communication is critical," said Papa. He recommends creating retention plans for top executives; these plans can include a variety of incentives and can help demonstrate the company's commitment to the leader.

"Shaping the path of talented people doesn't happen by happenstance," said Paul Rubenstein, a partner and leader for talent strategy, leadership and assessment services at consulting firm Aon Hewitt. He said that small companies that might lack the ability to provide attractive long-term incentives can emphasize development opportunities such as stretch assignments.

Organizations of all sizes need to engage with valued talent regularly. Asking about an executive's family and friends and assessing his or her well-being can provide important insight, said Rubenstein. "Are you asking the right questions and asking them with the right frequency?"

Still, said Kelly, employees' happiness "is an incredibly subjective concept. I can call them five times a day and show them more money. They have to be in a position to listen."

Wielding the Stick

In addition to displaying the carrot, some organizations use disincentives in the form of noncompete agreements to deter employees from taking other jobs within the same industry. Companies have a right to protect their intellectual property. But many noncompetes go beyond that principle, and courts have struck down some of them as unfair.

"I don't think there's going to be a huge swell in restrictive covenants being enforced by the courts. Then you become a slave to the company," said Kelly.

However, the existence of such agreements tends to dissuade some talented executives from taking a call from a recruiter. "It's like putting a big attack dog in the front yard," said Scanlon. In some markets—such as the casino industry in Las Vegas—noncompetes are vital, said Wayman. "It really depends on the industry."

Kelly pushes back at the terms "poach" and "talent raid," observing that executives are not being waylaid and stuffed into sedans in the dead of night. She said that it's unfair to apply such labels when professionals such as herself are helping executives and organizations find the best fit. "I think we have called it 'recruiting' for years. I don't want to go around for the rest of my career and consider myself a poacher."

Even when an executive needs to leave a company for personal or professional reasons, the organization on the losing end can leave the door open. Companies can keep in touch with such "planned boomerang" executives through monthly calls or lunches.

Not all talent raiding comes from direct competitors. Some companies are bringing in executives from different sectors. Said Rubenstein: "Real competitive advantage comes from borrowing from other industries, for example, tech and retail."

There is no clear consensus on whether HR should own or take a supporting role in the effort to minimize poaching of executives. Instead, "HR must shepherd the process," said Papa.

Pearson said there is hope for stemming the tide of executive poaching. "CHROs are definitely getting more sophisticated in their thinking about these things and creating an environment for getting people to stay," he said.

Steve Bates is a freelance writer in the Washington, D.C., area.

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