The world of business is highly competitive. Firms frequently introduce new products or run attack ads with the specific intention to hurt their direct competitors. It’s not unusual for managers to undertake deliberate actions to steal customers, force competitors to lower their prices, or even to capture prime retail locations. Some firms do it subtly, while others make no bones about the fact that they take actions to hurt competitors. Hurting the competitor isn’t illegal, unethical or even immoral; it’s just the way it is in a capitalist economy. In contrast, many HR professionals in general ó and recruiters in particular ó act as though they are isolated from this competitive battle. They certainly don’t act like fierce competitors ó all too often they act like socialists instead of capitalists. Fierce competitors, on the other hand, hire away a competitor’s talent:
- Because it’s a great source of trained, experienced talent
- To hurt the competitor!
Poaching Talent Is Capitalism Under capitalism, the strongest prosper and everyone that survives gets better. A competitive market actually strengthens firms; it does not weaken them. But many corporate recruiters purposely avoid “poaching” (a polite word for hiring talent from direct competitors) and instead focus on candidates from outside their industry or region. Some HR people resist poaching because they fear that their local talent competitors will retaliate and steal their people. This is an anti-capitalistic approach, which artificially attempts to restrict free competition. HR people often say they want to be a “business partner,” but when the opportunity arises to act just like a business person would, they feign away. A firm’s products compete on:
A firm’s jobs need to compete on the same features. Competition makes firms and their managers stronger. Not forcing them to compete insulates them, and this allows managers (and HR processes) to grow weak. In the short term that hurts productivity, and in the long term it eventually leads to a higher level of turnover than in a competitive job market. Healthcare vs. Executive Recruiting I have found, for example, that refusing to poach is one of the major contributing factors to the shortage of nurses. Companies’ refusal to poach makes all nursing jobs less attractive, having the net effect of driving nurses to other professions, where they get better treatment (yes, healthcare managers, whether they know it or not, all too often act like socialists). Free agency may have made baseball players more expensive, but it certainly eliminated any shortage of people willing to don the uniform. Executive recruiters on the other hand, are true capitalists. They don’t share this trepidation for competition. As a result, they are fierce combatants and are the most skilled recruiters. Unless they have a signed non-compete agreement, executive recruiters will take a candidate from any firm without hesitation. Yes, poaching is more difficult than searching job boards, but fighting for top talent is what makes recruiters better. If corporate recruiters actually want to have a major business impact, they have to do the difficult things that actually do have a business impact ó including hiring away talent to help their firm and to intentionally hurt their competitors. It’s Time for Recruiters To Become Fierce Competitors I’m different than most recruiters and recruiting consultants, in that I’m a businessperson first and a recruiter second. As a result, I recommend a businessperson’s approach to recruiting, which means becoming a fierce competitor. If you are a corporate recruiter who is attempting to build a competitive advantage for your company, you need to look both at the things you can do to help your own firm and also at the things you can do to hurt your direct competitors. Two basic recruiting goals are:
- Hire to help. Your first goal should be to hire the very best talent, wherever it might come from, to help your firm.
- Hire to hurt. Your second goal should be to hire directly from a competitor just to hurt them.
Okay, I can already hear the screams from the “social workers” in HR who are simultaneously reading this piece with you. These are the same people who say they want to be “business partners” and who claim to look for outside-the-box ideas. However, when they are actually presented with outside-the-box approaches that mirror real business practices, they scream silly phrases like, “But we might be sued!” or, “That’s unethical.” To that I say, hogwash! An Example of Hire To Hurt Perhaps an example can help to illustrate the point. Imagine you are the New Jersey Nets, and you’re about to play the San Antonio Spurs in the championship series. If after losing the first game (and the rules allowed you), wouldn’t you immediately hire Tim Duncan away from the Spurs? If you lost another game, wouldn’t you next hire away David Robinson? Even if they sat on the bench and never actually played for your team, you would still significantly improve the odds of winning the championship. That’s how “hire to hurt” works. Now, of course, the obvious bonus is that if they both actually did play for your team, the championship series would be an unmerciful slaughter. Yes, it might be expensive ó but the cost would be significantly lower than the added revenue that your team would receive from winning the championship. Sports is no different than business. There are a limited number of great players. The more you have and the fewer they have, the more likely you are to win big. Benefits of Hiring to Hurt: Show Me the Money! Most salespeople spend a majority of their time trying to steal customers away from their competitors. Great recruiters think like salespeople anyway, so they should automatically realize that the best hire a firm can make is to hire your direct competitor’s top talent. Sometimes however, a recruiter’s failure to “hire to hurt” comes from actions beyond their control. For example, some CEOs order their recruiters not to poach. In these cases, as a recruiter it’s essential that you make the business case for hiring to hurt. One method of proving the economic value of hiring to hurt is to look at your current turnover cost measurements. Many firms already calculate the standard cost of losing a single professional employee at three times their salary (if you include business impacts as well as recruiting costs). For some firms, that amount is automatically doubled if the employee went to a direct competitor. The same doubling calculation can be attributed to a “hiring to hurt” hire. If your competitor loses an engineer, it costs them say $240,000 (three times the $80,000 salary) in negative business impacts, and your firms gains their knowledge and expertise (valued at an additional $240,000). The net value of the transaction is almost a half of a million dollars. Unfortunately, some CEOs give the no-poaching order for another reason: they don’t want to get any grief from their CEO golfing buddies as a result of having poached away one of their key employees. In those cases, tell them that these misguided friendships cost the firm hundreds of thousands of dollars. Maybe that will spur them to become more fierce competitors. Another example will illustrate this point. While I was working with a large Wall Street investment bank, one executive loudly boasted that they had just hired away a key investment banker from a direct competitor. The package they gave the banker was worth $5 million. Another executive pondered out loud, what could they possible do for us that’s worth $5 million? The response was quick and to the point: “We aren’t sure yet what they will do for us yet. But they won’t be making the competitor $50 million, like they did the previous year.” Everyone in the room nodded their heads in understanding! If you still need further proof of the economic value of hiring to hurt, look to the NFL, where Tampa Bay paid more than $8 million for the right to hire away Oakland’s head coach. Within months the investment paid off with their first Superbowl appearance and a win (the team they beat was Oakland). The owner of Tampa Bay was elated at the ROI. In addition to the obvious value of depriving a competitor of some of their top talent, hiring to hurt also has some other additional benefits, including:
- Competitive intelligence. You can directly learn about the competitors management techniques and approaches (some technical areas can be legally protected, however).
- New customers. New hires may bring along a few customers with them.
- Management time. Having to protect their own top performers will drain away your competitors’ valuable management time ó time that could have been spent on product development or other worthwhile areas. It forces them to redirect resources toward identifying “at risk” employees and then developing programs for retaining them. Having to “replace” any poached employees will also drain resources and management time.
- Additional hires. If you use your new hires as referral sources and magnets, you might attract additional top talent from the competitor.
Hire to hurt means targeting high-impact and hard-to-replace individuals. But hiring to hurt does not automatically mean that you target all of your competitors’ top talent. This is because some individuals are easily replaceable, and therefore losing this talent doesn’t hurt the competitor. For example, if your competitor already has well-trained backfills (slotted replacements), they might be able to easily replace lost top talent with few if any negative impacts. Hiring to hurt instead targets individuals that fit these criteria:
- Hard to replace: Individuals who cannot be replaced immediately (internally or externally).
- Immediate negative impact: Individuals the loss of whom would have a direct and immediate negative impact on business results (sales, customer acquisition, stock price, or product development).
- Knowledge: Individuals who possess knowledge, skills, and experience that are difficult to replace (as well as being essential to the competitor’s success)
- Leadership: Individuals who provide direction and focus, and as a result, the loss of whom would cause the company to “wander.”
- Image: Individuals whose exit would send a negative message both internally and externally that the company is in trouble. This negative message could hurt your competitor’s retention rates, sales, supplier links, or even stock price.
- Path to other recruits: Popular individuals who, if they left, would open the door for you to recruit away more hire to hurt talent because their leaving alone would cause others to follow.
Next week, in the final part of this two-part article series, we’ll focus more on who to target when undertaking a “hire to hurt” recruiting program.