Poaching Staff

Background

Trawler is a small securities firm which has a highly successful corporate finance team, which has been assembled over a number of years and the income from which represents a major share of the firm’s profits.

Two years ago the board of Trawler felt that the firm needed to broaden the scope of its activities, and decided that the best way of doing this was by way of a formal alliance with another firm from which there would flow additional mutually beneficial opportunities.

Twelve months ago, Trawler concluded an alliance with Sceptre which, although slightly bigger than Trawler, had only a small corporate finance team. Sceptre had developed a reputation for recognising up and coming businesses in bioscience, but had been less successful at helping them take the steps from developing business with potential, into actual success stories.

Consequently, Trawler’s board felt that their team had the skills necessary to maximise this potential and following discussions with Sceptre an alliance was formed, whereby business opportunities would be shared between the firms, according to where the expertise lay. Although there was no form of merger or joint venture and each firm retained its own staff, the arrangement is covered by a Memorandum of Understanding.

You are the Executive Chairman of Sceptre. Last month one of the highly regarded members of your small team of corporate financiers left and you have been searching, via headhunters and network contacts, for a replacement.

You have recently become aware that an unnamed suitable senior replacement has been identified and approached. You understand that she can also bring one or two junior colleagues with her. Your Director has now satisfactorily concluded negotiations and asked you to sign off the contract. He is particularly pleased at his coup but, just as you are about to sign off, you recognise the name of Gildenstern as that of a senior member of the Corporate Finance team in Trawler.

Given the alliance between Trawler and Sceptre but against a background of your firm’s need to strengthen the team, how would you respond?

Verdict

The dilemma you are faced with is whether and to what extent your decision should be based upon the immediate needs of your own firm, or whether you should take a more rounded view and consider the possible implications on your relationship with Trawler.

If you take the view that your firm’s needs are paramount and approve Gildenstern’s hiring, you will have to be prepared to deal with any consequences that may arise. Although you do not have a contractual agreement with Trawler, to take the view that your decision need take no account of the impact upon them, is likely to be viewed as a hostile act and a sign of bad faith. This may jeopardise not only your existing agreement, but any future cooperation and so the benefit of the hiring might be outweighed by the damage to Sceptre’s reputation.

On the other hand, you might take the view that you will not take any action at all that might call into question Sceptre’s commitment to the arrangement and so decline to authorise the requested hiring. Although this may be regarded as a highly principled approach, it does not help solve your firm’s needs and, since you do not know why Gildenstern wishes to leave Trawler, you may decline an opportunity to hire someone who will be lost to the arrangement, if they are determined to leave anyway.

There is also a potential middle way, which is to suggest that your Director contacts his opposite number at Trawler and says that you have been looking to hire a replacement in your Corporate Finance team and one of his members of staff has responded. You are intending to hire them, but are concerned that this should not be seen as a hostile act, since you did not poach the person, who had responded to a job advertisement.

However, this is quite a high risk option and you should consider what you would do if Trawler are insistent that Sceptre should not recruit Gildenstern, as it is unlikely that you would wish to be a part of an acrimonious legal dispute. You should also consider what might be the potential consequences for Gildenstern. Accordingly, it is probably only worth considering this option if you have agreed terms (although not entered into a contract) with Gildenstern and have her agreement that you can approach Trawler.

The key issue is your need for Gildenstern to accept that Sceptre’s relationship with Trawler is more important than a single hiring and that should Trawler be unhappy with the proposal, then Sceptre would feel unable to offer the position to Gildenstern.

If Gildenstern is not able to accept that and thus will not allow you to discuss the proposal with Trawler, her response will effectively give you an answer to the dilemma.

Finally, there is the question of whether you should facilitate the hiring of the junior staff who have also been mentioned. Since Trawler is a small firm, it is improbable that they would be relaxed about losing several members of staff at the same time and since they did not form part of your initial recruitment objective, it would be unwise to pursue them as well. Additionally, Gildenstern could also face legal action from Trawler for inducing her colleagues to leave Trawler.

Although each of the above courses of action has a demonstrable drawback, the key issue is that Sceptre’s relationship with Trawler is more important than one hiring and if this proposed hiring will jeopardise a valuable relationship, then the sensible course of action is to continue the search.