‘Reserved’ not for sale

‘Reserved’ not for sale

In this race to success every one wants only the best no matter how. But retaining the best is also equally challenging. Is the Golden handcuff strong enough to retain employees or is the non paching agreement a possible solution. Suja Nair finds out

Recession has hit and this time it has hit pretty badly; unlike pervious time its here to stay a little longer and sustaining in such testing condition is no easy job. In order to soften down its impact, organisations across the globe are resorting to different tactics. In recent times we have seen a spate of lay offs and recruitment freeze within many corporates that is part of cost saving initiatives. However, of all, the most important issue that is keeping the human resource (HR) personnel on their toes is dealing with attrition. Economic slowdown or not, attrition had always been a problem in the pharmaceuticals sector. However, the impact is not as significant as is the case with industries such as IT and ITES. According to Ananth Iyer, Leader-Technical R&D, Pharmaceuticals, Healthcare & Life Sciences, ABC Consultants, “In the clinical research and contract research space, there is an impact of recession. Among the chemistry-based CROs, there are lay offs, but I would say the percentage is below three percent and in clinical research CROs, though there are no lay offs there is a freeze on hire except in cases where the organisations have to replace candidates and that too for critical positions.” However he is quick to add that even the CROs have become very aggressive and flexible. And in the pharma space, although there are no lay-offs reported so far the organisations are cautious.

Hiring v/s Poaching

“A non poaching agreement, under the given circumstances, will work only on a non-formal basis. So it is important that the companies undertaking it share a level of comfort and adhere to the policy on the non formal level”

– Dr Mary Francis Director International Center for Training in Clinincal Research (ICTCR)

and Jovis Clinical Research

“There are no legal implications of poaching unless and until there is a specific no-poach agreement signed
between two organisations. There are no-poach agreements in effect in many industries and a typical no-poach would be between the client and the vendor”

– Ananth Iyer Leader-Technical R&D

Pharmaceuticals, Healthcare & Life Sciences, ABC Consultants

Just because the pharma sector is not that badly hit as others, does not make it less palpable in future. Times have changed and unlike earlier days when employees used to stick to one organisation, the younger generation demands higher salary and looks for more job-enhancement and job-satisfaction, leading to a tendency where an employee changes multiple jobs in a short time span. But this trend is seriously affecting the industry as a whole. Loss of their talent to competitor results in loss of confidential information and loss of time spent in training the candidates. Talent crunch is also leading to a major problem of poaching of employees from one organisation to other. But how is hiring process different from poaching?

Differentiating between the two, Dr Mary Francis, Director, International Center for Training in Clinincal Research (ICTCR) and Jovis Clinical Research says, “Hiring involves a formal process whereby companies put out advertisements for vacancies, or source their personnel through placement agencies. This involves sifting through CVs, interviewing the person through various levels and then finalising the candidate. Poaching on the other hand is non-formal, and non-transparent, depending on informal levels of comfort, where a person uses his clout or influence or undertakes unethical measures to poach people from another company.” Another form of poaching is when exiting seniors take along other employees to the new company. This trend has become more common in the recent pasts.

Deliverance through no-poach agreement

To put it in simple words, poaching is a process of recognising a talent in another company and offering them more lucrative offers to join the organisation or taking people when leaving from the organisation. But why is there a need to poach people from other organisation when you could find one. Blame it on the ‘demand-supply gap’. There is certainly a high demand for talent in emerging markets like India in the CRO, pharma sector especially for the senior positions but unfortunately there is not enough talent suitable to match these demands. And this scarcity is the one that leads to poaching of talent. Lack of proper educated and experienced candidates is the main reason leading to poaching. Every company wants the best employee and if they do not have him, they will try buying him. This mantra is opted by companies in a short term strategy because it is very likely that the ‘poached’ employee will again leave for the same reason.

To control these activities there needs to be a system in place that will help control job hopping. A non poaching agreement in the industry seems to be a plausible solution for this problem.

Iyer informs, “There are no legal implications of poaching unless and until there is a specific no-poach agreement signed between two organisations. There are no-poach agreements in effect in many industries and a typical no-poach would be between the client and the vendor.”

Legally speaking, this agreement creates a firm arrangement between the parties to guarantee a non-poaching responsibility thereby not employing, partnering, contracting or engaging each other’s employees, agents, consultants, advisors, independent contractors, partners, officers, directors or anyone otherwise having an interest in operation or management of the other and provides for a comprehensive solution to confirm compliance of the conditions therein. This agreement can be used by anyone wanting to prevent engagement of key employees by a competitor or anyone else when it is necessary to protect/retain them for strategic reasons.

Francis extrapolates, “A non poaching agreement, under the given circumstances, will work only on a non-formal basis. So it is important that the companies undertaking it share a level of comfort and adhere to the policy on the non formal level.”

Option but not a solution

Non poaching agreement seems to be an ideal way to control the high attrition rate in this talent deficient condition. However non poaching agreement will also curb the freedom of employees who are looking out for change. Moreover binding an employee would also at times seem like tying down the employee to the whimp’s of the employer.

Francis opines that while a non poaching agreement might be welcomed in any industry where expertise and specialisation is very important, it is really difficult to know whether any such `non poaching’ agreements will stand the test of the labour laws in this country. So, if at all one can have a `non poaching’ agreement, it will have to be very informal level. “A non poaching agreement, I would think while desirous by the management, is unfair to the employee who in a free market is free to go to any company that offers better prospects for his/her talent,” Francis point outs.

It seems that non poaching agreement serves only as an option and not a solution for this brooding problem. But, if not by ‘non poaching agreement’ what are the possible resort available for restoring the employees within the organisation. Voicing his concerns over the same Iyer enjoins that no-poach agreements are not very common around the world as they are counterproductive in many ways. “It is not the best way to retain talent. Innovative compensation strategies such as retention bonus, laying down a structured growth path for employees, improving the working environment, empowering employees with higher responsibilities and providing learning and development opportunities are some of the more effective ways to retain and nurture talent,” corroborates Iyer.

‘Golden handcuffs’

It seems there are more options to resort to, that are less cumbersome and more effective in retaining employees compared to non poaching pacts, since these pacts are looked upon as more pro employer than employee. Agreeing on the same, Francis shares that though there may be a need for it to prevent high attrition rates, owing to the issues of legality and fairness in a free market it is always preferred to concentrate on better HR policies to retain people.

There are many ways by which existing employees can safeguard its interests. Have ‘cool-off periods’ before joining direct competitions, deferred compensation, long notice period, relieving letter or a no-objection letter from existing employers etc are other alternatives. Apart from these tactics a relatively recent mode adopted to retain employees, especially at top positions, is by giving the employee a lump sum payment every two-three years for staying with the company. These act like a ‘golden handcuffs’ for employees who are perceived to be critical to the organisation and therefore vulnerable to poaching moves.

What next?

These maneuvers by the HR certainly act as an ’employee stopper’ but provide only temporary solutions. With all these policies there is also a need to focus on developing talents and training them according to the needs. Francis observes, “A good company should invest in a strong HR department that is constantly striving to maintain strong management-employee relation. There should be policies to train employees, offer them strong and sure career prospects, reward them for their good work, and foster a fair and competitive atmosphere for the welfare and growth of both the company and the personnel. In fact, in countries abroad, there are budgetary allocations for training purposes; unfortunately no such thing exists in most companies in India.”

What is needed is a foolproof long term plan to deal with attrition. Understanding the problem can only help solve it; since the problem is paucity of quality talent, the solution would be to meet the challenges and develop these talents. There needs to be an initiative from the part of the companies and government to give more importance to training of employees and developing a strong talent base to deal with the problem of a skewed demand supply situation.

suja.nair@expressindia.com