The pros and cons of poaching employees from competitors

By Robert Half on 23 August 2016

Poaching an employee from a competitor can strike a killer blow, simultaneously boosting your prospects while crippling the other business.

It might be good for the bottom line today, but is it a sustainable strategy?

On the plus side, there’s potentially a boost to revenue, sales, customers and leads when one of your competitor’s employees joins your team bringing their experience, client list and reputation. At least that’s what you’re thinking when you make the bold move to buy your opposition’s trade secrets and expertise.

Is poaching staff ethical? Is it legal?

Many believe that, at best, the practice is unethical. At worst, you’ll find yourself entangled in restraint of trade clauses that restrict who the employee can work for and how much of their knowledge they can share.

The good news for those determined to poach is if you’re prepared to go to court, restraint of trade clauses are not always binding. In some cases, the courts have found them overly restrictive of an employee’s work opportunities and struck them out. The bad news is that it doesn’t happen often. It’s more likely that your new employee will find themselves in court, and if you help fund the case, you might come in for judicial attention as well.

Damages awarded to former employer

In another case, a man who allegedly took his clients when he left an accounting firm was required to pay damages to his former employer.

And there’s more bad news waiting for the firm that poaches. A new employee parachuted into a position doesn’t perform as well as someone promoted from within. Management professor Matthew Bidwell also found that ‘external hires’ are paid up to 20 per cent more than internal candidates, and they’re more likely to resign.

Avoiding the pitfalls of poaching employees

Despite the many negatives associated with poaching your competitors’ employees, you may be faced with no alternative – perhaps a key employee has left or there’s been a boom in sales.

You can avoid some of the pitfalls by carefully checking the potential employee’s contract and obtaining legal advice. It may also be a good idea to prepare your existing staff by explaining your decision and being sensitive to any concerns they may have.

But for the future, a useful exercise could be to identify roles and skill sets within the organisation that are vulnerable if you lose key staff. Based on that information, a succession plan that includes training existing staff and planning other risk-management activities may help to keep you prepared.

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