Podcast: What Happens When Employees Are Poached?

Kellogg School professors Gad Allon and Achal Bassamboo join Kellogg School PhD student Evan Barlow to discuss their recent research on poaching. They explain why some companies are open to having their employees poached.

Then we hear from Adnan Rukieh, director of career services for executive and part-time MBA students at the Kellogg School and a former executive search consultant, about how employees looking to change jobs may best position themselves for success.

Podcast transcript

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Jessica LOVE: It’s rough to lose a talented employee. Smart companies work hard to keep their best workers from ever visiting a job board. But sometimes that isn’t enough. Sometimes the jobs come straight to them. Sometimes they are poached—and it’s happening more than ever.

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LOVE: You’re listening to Insight In Person, a podcast produced by the Kellogg School of Management at Northwestern University. I’m your host, Jessica Love. This month we’ll hear from Kellogg School researchers about how poaching affects individual companies—and entire industries. Then, we’ll hear from a former recruiter—one of those people who does the actual poaching. He’ll give us the inside scoop into what recruiters are looking for and how you can make yourself as poachable as possible. So stay with us.

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Evan BARLOW: Employee poaching is really, really prevalent. There was a study done a little while ago that found that 80 percent of all the people who go from one job to another are poached.

LOVE: That’s Evan Barlow. He’s a PhD candidate at the Kellogg School, where he researches poaching, along with Gad Allon and Achal Bassamboo, both professors of managerial economics and decision sciences.

An employee is poached anytime he or she is lured from one company to another with more desirable compensation. Poaching doesn’t just happen in the C-suite or only among white-collar workers. It can also occur with mechanics, machinists, operators, or production-line supervisors.

Why is poaching so popular? It’s actually a great way to find the best employee for a given position. Here is Gad Allon.

Gad ALLON: Why look only for people that are looking currently for a job? That means that you may not look for the best candidates. By poaching, it allows you to go and identify people that are really the best fit.

LOVE: Here’s how poaching usually works: more productive companies—ones that get more value out of their employees, and can thus give them more —poach from less productive companies. The same trend also plays out between industries, with those that are more productive poaching from the less productive.

Not surprisingly, this predator–prey ecosystem is usually much harder on the prey. Here’s Barlow again.

BARLOW: I was talking with somebody from a consumer-appliance manufacturer, and he was the head of their operations. He said they just can’t retain anyone. They hire somebody to be a mechanic and to service their production lines, and as soon as they do, the auto industry takes them away. There is this kind of practice where some industries suffer at the expense of others. So, this guy was very, very happy when GM was suffering and needed the bailout, because, then, he was on the upper side and he was actually poaching their mechanics and their machinists.

LOVE: For obvious reasons, if poaching gets too rampant, there are costs. Consider the call-center industry in India, where all the poaching had the unintended consequence of boosting wages a little too much. Here’s Gad Allon.

ALLON: People would wake up one day working for one, just to switch the next week. The result was that there are more people nowadays working in the Philippines in call centers than in India. The industry pretty much priced itself out of being competitive enough for many firms to outsource to.

LOVE: Poaching also has some upsides for companies, though they tend to be indirect. Poaching can spread ideas. This is the benefit that you probably hear about the most: if tech companies were to poach one another’s workers more often, they would all learn each other’s best practices, spurring an increase in productivity that would offset some of the costs.

Though Achal Bassamboo cautions that a lot of this “spreading of ideas” would happen anyway.

Achal BASSAMBOO: There will still be people who were working at Google who moved to Apple actively looking for a job. They will carry, still, that information. That’s why you will see a feature on iPhone shows up at Android within six months, or even three, or the other way around. It’s not like the innovation will not evolve. It will be slower, definitely, because they’re not as actively mixing the workforce together, but it will still happen at a reasonable pace, I would say.

LOVE: Poaching can also act as a relief valve of sorts—particularly when companies who poach from one another are all located in the same geographic area. In these hubs, some companies may be experiencing a boom, while others are experiencing a bust. Here’s Barlow.

BARLOW: For the companies that are experiencing a bust, it costs a lot of money for them to lay off their workforce. There are severance packages, all these different laws that have to be satisfied, and it costs money for the booming companies to try to go out and find workers. When all of these companies are located closely in the same labor market, they can poach workers, and actually both companies benefit from it, because one company doesn’t have to lay off its workers, and another company doesn’t have to go out and find them.

LOVE: Finally, poaching can relieve bottlenecks in a supply chain. It’s this last finding that the researchers recently uncovered. And their study came about because they noticed something unusual. Sometimes less productive companies and industries actually poach workers from more productive ones. Which means that, rather than throwing raises at these workers to retain them, the highly productive firms and fields are essentially letting their workers be poached.

Why would they do this?

For answers, we turn now to the shale, oil, and gas industry. Here’s Barlow to explain.

BARLOW: It was growing very quickly. It was a very rapidly expanding industry, and they were having to resort to very aggressive recruiting tactics to satisfy all of their human resource needs. They needed people with the necessary skills.

LOVE: Not only was a lack of workers limiting the output of the shale, oil, and gas industry—it was also limiting the output of its partners further up the supply chain, like the chemical and plastic industries that relied on the extraction of these raw materials.

So what happened next? The extraction industry started poaching workers from the industries higher in the supply chain—and those industries let it happen.

BARLOW: By alleviating the bottleneck a little bit, all of the customer industries were able to improve their performance as well. That just came at a slight cost to them. That illustrates the cost. They experienced this cost of losing their workers, having to replace their workers, having worker shortages, but at the same time, they benefited from the higher output of their raw materials.

LOVE: According to Allon, the companies further up the supply chain probably didn’t deliberately shed workers.

ALLON: It’s not that they made a decision, but they could see the direct benefit of having their employees go somewhere—reduce and alleviate a bottleneck—which would allow them in turn to generate even more value.

LOVE: This phenomenon—where more productive firms allow their less productive partners to poach employees—is not unique to the energy industry.

ALLON: Apple is definitely limited, with their ability to launch, let’s say, a new phone, a new watch, because some of their suppliers are not keeping up with their ability to launch some of these products. We don’t think only about the supply chain; we think broadly about any time where your partner is limiting your ability to launch more products or better features that would in turn allow you to create even more value for your customers.

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LOVE: So we’ve heard about how poaching affects companies, even the broader economy. But what about the employees themselves? And what’s the best way for you to get yourself poached?

Adnan Rukieh is the Kellogg School’s Director of Career Services for executive and part-time MBA students. But before he came to Kellogg, Rukieh served as vice president of the O’Connell group, a boutique executive search firm. In other words, he was a recruiter, more popularly known as a headhunter.

We asked him to take us behind the scenes of an executive search firm. How do headhunters operate—and who are they most interested in poaching? Rukieh explains that—for a fee of about a quarter to a third of the winning candidate’s first-year salary—headhunters have a deceptively simple task.

Adnan RUKIEH: Think about it as almost a bit of a matchmaker. At the end of the day, we know the companies intimately, and we know the candidates we work with intimately. I use the word, we, as if I were still a recruiter. The goal is to find that right match between what the company is looking for and what the candidate brings from a skill-set standpoint.

LOVE: Some firms feel like they need a matchmaker, he says, because, if they simply posted an ad themselves, they might get hundreds or even thousands of applications in a very short period of time.

RUKIEH: How are you as an organization, as an HR company, going to sift through 10,000 applicants to figure out who’s actually qualified?

You essentially can outsource this to an expert who has a database of people, who can then begin to tap into that database in those contacts that they have and do a lot of the upfront work for you as an organization.

LOVE: So how do you get on a recruiter’s radar?

The first step is to talk to your friends and family. Who are they using and with what results? But you don’t need that personal connection—once you have compiled a list of headhunters in your industry, a cold call (or to be more precise, a cold email) works just fine.

RUKIEH: Send out an email to the recruiter; introduce yourself. Don’t expect a response. If you get a response, be ecstatic, but rest assured your resume will go into their database. Recruiters are really, really busy. They don’t have time to have coffee with you. They don’t have time to have a chat on the phone unless they’re actively searching on a role that your background fits what they’re looking for.

LOVE: Do this multiple times, to multiple headhunters. This gets you into multiple databases, increasing your chances of striking a match. It also helps you navigate conflicts of interest. If your current firm is working with an executive search firm to procure talent, you may be considered “off limits” to any recruiters from that firm.

And then, six to nine months later, reach out again.

RUKIEH: Send a revised resume, an updated note, just to make sure you’re staying top of mind with that individual. At some point, hopefully the connection exists, they have a role that fits your background, and you’re going to have a conversation about it. That’s why I say don’t wait until you’re looking for a job, because these relationships take time to build.

LOVE: So, what can you do to make that first impression as strong as possible?

For one, there’s LinkedIn. Rukieh says it has completely changed the industry. An executive search firm might turn to LinkedIn to find that third, fourth, or fifth strong candidate.

Rukieh advises that if you want to impress a recruiter and maybe make that short list yourself, it is critical to keep your LinkedIn profile updated. But that’s just table stakes. A smart candidate can use LinkedIn to do much more.

RUKIEH: Post articles. Make statements. Show yourself as a quote–unquote “thought leader” in whatever sphere of influence you have, whatever your expertise is. If you’re a recruiter, you want to know somebody is actually at the leading edge of what they’re doing. That’s one way to signal that to the marketplace.

LOVE: Another way to make a great impression is to be helpful. If you are tapped for a particular role that you aren’t interested in or aren’t a good fit for, is there anyone in your network you can recommend? If you can offer up a few smart suggestions, you’ll make yourself look good. And even if you can’t think of any good candidates offhand, be polite. Be professional. Every time you interact with a recruiter, you are being interviewed.

RUKIEH: You better believe it. Yep, I have a checklist of things I’m thinking about: What are your interpersonal skills, what are your competencies, how do you interact, how forthcoming are you? There’s a whole litany of things that I’m evaluating, because at the end of the day, if I present to you as part of a pool of candidates, it’s now my reputation that’s on the line.

LOVE: It is also a good bet to be honest and forthright. You don’t want a surprise W-2 verification or background check to lose you a new position.

Here’s something else to remember, though: reaching out to headhunters is passive. Recruiters aren’t working for you—so you are waiting for the stars to align. Rukieh recommends spending no more than 10 percent of your job-seeking hours corresponding with recruiters.

And if you are in marketing and want to move to general management, don’t count on being poached at all. Companies work with executive search firms to find employees who are ready to step into a new role immediately. If they were okay with training someone, they wouldn’t have hired a headhunter in the first place.

RUKIEH: My advice is always, if you’re looking to make a functional transition and move from marketing to finance or sales to operations, do that at your own organization. Now you have the experience, and now you’ve signaled to the external marketplace, that your own organization values you enough that they put enough confidence in you that you can make that transition.

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LOVE: This program was produced by Jessica Love, Fred Schmalz, Emily Stone, and Michael Spikes.

Special thanks to Kellogg School professors Gad Allon and Achal Bassamboo, to Kellogg School PhD student Evan Barlow, and to Director of Career Services, Adnan Rukieh.

You can stream or download our monthly podcast from iTunes, or from our website, where you can read more about poaching, hiring, and leadership. Visit us at insight.kellogg.northwestern.edu. We’ll be back next month with another episode of the Insight In Person podcast.