Business Today

Coping with Loss

How companies tackle the problem of prized professionals leaving for greener pastures in droves.
By Sonal Khetarpal   Delhi     Print Edition: December 18, 2016
Coping with Loss

It happens all the time, in every expanding sector. Whenever a new player enters the field - especially a well known brand - or an existing one scales up, the competition feels the pinch in terms of personnel. People in key positions simultaneously hop jobs in substantial numbers, often from a single company. In October this year, it was reported that global audit giant Deloitte will take away 300 executives from rival KPMG in India. (BT could not independently verify this news as both the companies declined to comment.) "Losing people hits companies in two ways," says Shailja Dutt, Founder and Chairperson of executive search company, Stellar Search. "First, there are the vacancies to fill. Second, losing people to the competition could lead to a dip in the company's market share and increased revenue for the competitor."

SHAILJA DUTT, Chairperson, Stellar Search

"Losing people to the competition could lead to a dip in the company's market share and increased revenue for the competitor"

After infrastructure finance company IDFC obtained Reserve Bank of India (RBI) permission to start a bank and began operations in 2015, for example, it reportedly recruited 1,500 bankers to man its numerous branches. "Obviously it hired from other banks," says a recruiting company head who prefers not to be named. Companies facing difficulties invariably confront a double whammy - as their problems mount, so do their vacancies. Tech Mahindra, for instance, discovered a crisis when it took over the scam-tainted Satyam Computer Services in 2009. "In the wake of the Satyam scandal, rivals like Wipro and Cognizant had taken away the best employees," says a senior executive, preferring anonymity. "Key customers had pulled out, too. It took us four years to recover and get the right people back."

Question of Ethics

The ethics of 'poaching' have been debated ad nauseum. Some HR experts believe it is plain wrong. "How a company competes with its rivals is important," says Pallavi Jha, Chairperson and Managing Director, Dale Carnegie Training India, which conducts courses on corporate leadership. "Means matter as much as ends." But others are dismissive of such niceties. "It is the company that loses people which talks of ethics," says Abhijit Bhaduri, former Chief Learning Officer at Wipro and leadership development expert. "For the companies that employ them, it is just business." Deepak Somaya, Stephen and Christy King Faculty Fellow, University of Illinois, is equally emphatic. "It is a free market and people should be free to choose," he says.

Some companies enter into non-poaching agreements with select rivals, most of them informal, to try and hold on to their employees, but here, too, the ethics of the practice have been questioned as one-sided contracts are never sufficient. "In the auto industry, the situation was so bad in 2010 that employees blatantly asked for 25 per cent increments, threatening to go elsewhere if they are denied," says Unmesh Rai, Group Head, Talent Acquisition at the Piramal Group, as he recounts his days as head of talent acquisition for a large automobile player. "To counter them, auto companies came together in an informal understanding that they would not poach from one another." Somaya points out why this is unfair. "It may be good for the stability of the industry, but it short-changes consumers," he says. "A new company which might have served consumers better will be denied talent in this situation and prevented from being successful."

Companies often also have non-compete clauses in their employee agreement stating that an employee can't join a competitor after leaving. Such agreements are rarely legally enforceable, even when they are in writing. Pallavi S. Shroff, Managing Partner at leading law firm Shardul Amarchand Mangaldas, recalls the case of PepsiCo India taking Coca-Cola India to court after three employees of the former joined the latter with which it had such an understanding. "The court ruled that employees are not slaves and despite the non-compete agreement, they could not be restrained from changing jobs," she says. "The law frowns upon restraint of trade. You can't stop anyone from earning a living. All a company can enforce is the notice period or a financial settlement in lieu of serving the notice period."

Some companies do indeed prepare contracts imposing financial penalties on employees quitting. But many HR experts dismiss such an approach as short-sighted. "Companies need to find out why people are leaving and how they can prevent attrition," says Amit Nandkeolyar, Assistant Professor of Organisational Behaviour at Indian School of Business, Hyderabad. However, it is perfectly legitimate for companies to include clauses in contracts with employees that ensure any confidential information the employees are privy to while at work remains confidential even after they leave.

Counter Offers

Sometimes companies try to retain employees by making them counter offers to the ones they have obtained from a rival, dangling improved emoluments and perks before them. But HR managers are convinced that this is a mistaken tactic. Companies need to catch on to an employee's dissatisfaction before she actually puts in her papers. "The period during which an employee updates her CV, starts applying and actually gets another job can be as long as six months," says Rajiv Krishnan, Partner-People Advisory Services, EY. Finding out why the employee wants a change is also crucial. "If the only reason is a desire for higher remuneration, a counter offer might work," he adds. "But trying to retain people for whom the money earned is such an important consideration is questionable since they might not stay long anyway. And if the reason for leaving is something else, the counter offer won't work, since the person has switched off from the company already."

Counter offers also send a wrong message across the company. "It gives the impression that the only way to get paid well is to bargain, using an offer from another company," says Dutt of Stellar Search. It also disturbs pay parity, with employees who did not similarly shop around feeling they are being penalised for their fidelity. "People who want to leave should be allowed to go," says T.N. Hari, Head of HR at online grocery store, BigBasket. "Counter offers are not a sustainable means of getting people to stay."

The Way Out

To retain talent, the first imperative is to provide satisfactory emoluments. "Don't panic if you start losing people," says Hari of BigBasket. "What you need to worry about is whether you are paying your key people well. You have to understand their aspirations and meet them so as to bullet-proof them from being poached. Keep the lines of communication open, tell them they are good, and correct their salaries as per industry norms even before they ask."

But a fatter pay cheque elsewhere is not the only reason why employees leave, especially when an entire team departs together. "Companies need to look inwards and incorporate practices that make people proud to work for them," says Nandkeolyar. "Employees should be respected and treated fairly, they should be mentored and cared for and allowed to have a voice." This is also borne out by data from CEB, a best practice insight and technology company, whose surveys show that if employees are proud and optimistic about the companies they work for, their desire to remain in the same job goes up by up to 33 per cent.

A single discordant element can drive out a host of employees. "There was this IT company which lost an entire team of 12 people to a competitor within 15 days, even though the latter was a much smaller outfit," says Milind Mutalik, Vice President, HR, at food company Mothers Recipe. "After the employees had quit, the management made inquiries and discovered that the project head, who was based in the US, was making them work extra long hours, putting too much pressure on them. The company had to use a recruiting agency to hire talent for the same project at a higher price, thus pushing up its project costs." It is essential for companies to remain aligned with their employees and take immediate action on any signals of disillusionment from the employees.

DEEPAK SOMAYA, Stephen and Christy King Faculty Fellow, University of Illinois

"Non-poaching agreements may be good for the stability of the industry, but it short-changes consumers"

Future prospects are another vital area - CEB's Global Labour Market Survey of 20,000 employees across 40 countries shows that a strong motivation to move on is the absence of career growth in the company. Some employers take special pains to ensure this does not happen. "Our employees spend their first hour at work every morning, from 9 to 10 am, undergoing training," says Nishith Desai of legal firm, Nishith Desai Associates. "Each employee has one or two areas of specialisation, but is also encouraged to acquire lateral knowledge of other areas, so that she does not feel confined and can move from one specialisation to another if she wants to." Bhaduri adds other means of keeping employees motivated. "Get people to shadow their seniors like apprentices, continuously learning from them, or send them on short-term assignments and keep rotating jobs," he says. "It is also easier to fill a vacancy when a critical resource leaves if employees have varied skills."

Not All Gain

Is poaching beneficial for the company which gains employees thereby? The jury is still out on this. No doubt it brings in talent but it can also lead to factionalism and internal turmoil. When a team moves from one organisation to another, its culture may be in conflict with that already prevalent in the company. "Many company mergers have also failed because of this clash of cultures," says Nandkeolyar. Again, the new entrants often are blindly devoted to their leader, sparking resentment in the older employees. "It's like 'Mary and her little lamb' in the nursery rhyme," says EY's Krishnan. "The team leader is Mary and the other members are her lambs. Does a company want to be overly dependent on a single Mary? Does it want employees who are little lambs?"

Some HR specialists even characterise a mass exodus of employees from one company to another as 'backstabbing' of the former employer. "People who quit in a group once, simply for better opportunities, can do it again," says Jha of Dale Carnegie. "The company employing them will not be able to prevent it." Companies that hire en masse often see high churn two or three years later. "The employee life-cycle has shortened," says Anshul Lodha, Director at recruitment consultancy Michael Page India. Many realisations arise only after employees have joined a new organisation in a group. Companies themselves also weed out people they later realise don't fit their culture, especially at junior or mid-managerial levels."

Nor does such hiring speak well of the company's talent management strategy. "We were once involved in hiring for a global MNC whose CEO had worked with Coca-Cola," says Dutt of Stellar Search. "The CEO wanted to hire people from his previous company, especially those who had worked with him. But we got a clear directive to the opposite effect from the company's headquarters, which said they did not want to replicate the Coca-Cola legacy in the company."

Ultimately, if companies want to be leaders, they need to invest in employees and not regard them as revenue-generating machines.

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