Executive Careers Blog

The Perils of No-Poaching Pacts

Alex Tuttle, Vault.com

Google. Apple. Intel. Adobe. Pixar. Intuit.

All names that many in the technology field would give their right hand to work for.

Each has garnered a reputation eliciting superlatives for innovation and leadership.

But as last week's settlement of a U.S. Department of Justiceinvestigation revealed, each has engaged in hiring practices that hindered advancement for both employees and the industry.

Last Friday, the aforementioned gang of six consented to cease a series of non-solicitation pacts, which the Justice Department alleges prevented necessary competition. Through much of the past decade, the parties are said to have compiled "Do Not Call Lists" that marked each other's employees as ineligible for receiving job offers via cold calling. Google and Apple were the most active culprits, with the latter even preventing solicitation from its own sister company, Pixar Animation Studios.

Anti-competition issues are nothing new to Silicon Valley, where cutthroat dealings are regarded as the price of doing business. Poaching would seem just one more contentious hazard to quash. Granted, companies of any stripe must regard it as a threat: In a fast-paced industry, making counter-offers to retain staff can dent budgets; but without putting up a fight, headcounts can drop just as quickly.

It is telling, however, that this is one of the first investigations into the industry's hiring practices. Tech execs and entrepreneurs largely adhere to a tradition of benevolent corporate cultures—a tradition that led entry-level professionals to overwhelm the tech job market in the early aughts, seeking the promise of top salaries and management that values its staff. That influx made Silicon Valley rife with talent, to the point where employers can endure turnover and poaching without lack for able bodies.

Poaching is a necessary extension of Silicon Valley's climate, one that thrives on migration. Competitive job offers allow workers to freely roam among tech giants and scrappy startups alike, spreading knowledge that spurs innovation. But employers can only lure, they cannot contain: Staff who are satisfied in their jobs should be trusted to resist solicitation, but managers have no use for any team member who has one eye on the door. Replacements can just as easily be snatched up from other rivals—thus the cycle continues.

For now, some implicated parties have wised up on their own: In its Public Policy Blog, Google notes that it already abandoned its "do-not-cold-call" lists in 2009—albeit in response to the D.O.J.'s investigation. In the meantime, they've fought off recent poaching efforts by Facebook with some success, reporting that 80 percent of those solicited have opted to stay. That strong retention rate comes as little surprise, given Google's famously generous employee perks.

But these practices may extend beyond just a few top companies.

In its settlement, the D.O.J. states the charges "arose out of a larger investigation by the Antitrust Division into employment practices by high tech firms. The division continues to investigate other similar no solicitation agreements." As the government cleans house, executives can no longer rely on restrictions to lock down staff. Instead, retaining employees comes down to fulfilling the promise of a positive, rewarding environment—as should be the practice of any good employer.