Stabilising the talent battle

CEOs grappling with talent challenges could draw inspiration from the structured transfer window system used in European football leagues

Moonlighting policies, “boomerang employees”, no-poaching agreements, a tense exchange of accusatory letters between airline chiefs.... All these are symptoms that managing talent at the top-end of white collar jobs in this era of accelerated job hopping is no longer an organisational headache but a permanent migraine.

Low-cost airline newbie Akasa discovered this the hard way last month when 43 of its 450-odd pilots left abruptly for recent Tata group acquisition Air India Express without serving their full notice periods. Fearing a shutdown, Akasa’s CEO wrote a stiff letter to Air India Express accusing it of violating government policies that mandate a notice period of six to 12 months (the AI Express CEO replied in kind).

A month before, Akasa had approached the Delhi High Court seeking clarity on whether the regulator, the Directorate General of Civil Aviation (DGCA) can take coercive action against the departing pilots. The DGCA replied that it does not have the powers to interfere in a contract between employer and employee. This is odd if only because the regulator’s rules of 2017 stipulate that commanders serve a notice period of one year and first officers six months. Indeed, the courts later ruled that the DGCA was not restrained from taking action.

The fierce, litigious battle over airline pilots — CEOs trading icy barbs added gratifying drama to the proceedings — is a good indication of just how competitive domestic aviation has become. With massive aircraft orders, the competition is likely to become even more acute — and pilots will be the biggest beneficiaries. Compare this to the years when domestic aviation comprised a government-owned duopoly. Then, pilots went on strike to demand higher wages with variable results; now, they can simply fly off to the highest bidder.

Aviation is not the only industry that’s up against a talent problem but unlike the others it has limited leeway to address it. Other companies in India, helped by a degree of opacity in the statute books, have been pushing the boundaries of the talent hunt in other ways. No poaching agreements among competitors is one of them.

In the US, the Department of Justice (DoJ) unequivocally deemed no-poach and non-compete agreements (which prevent employees from joining a competitor) as anti-competitive. In 2010, for instance, Apple, Intel and Google faced a DoJ lawsuit for an agreement not to pinch each other’s high-end engineers, which they settled five years later, together with a follow-on class action suit, paying $400-odd million with some 60,000 employees. In 2017 Walt Disney, Dreamworks, Pixar, Sony and others had to make a settlement for similar reasons.

In India, a no-poaching agreement between Reliance Industries and the Adani Group has attracted only headlines but no legal ructions. Indeed, it’s a fair bet that the Reliance-Adani agreement is just one of thousands of less publicised ones in industries where talent comes at a premium.

The practice endures because the law here is open to interpretation. Section 27 of the Indian Contract Act treats as void an agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind. At the same time, there is nothing to legally stop employees in companies under no-poach pacts from applying for a position in a competing company.

Unless the Competition Commission of India issues a blanket ban, no-poach, no-compete agreements are here to stay in India — especially since employee class-action suits are unlikely to emerge in a country where justice is expensive and takes aeons to conclude. But there are myriad ways to get around these restrictions.

At one time, the concept of gardening leave — an extended paid cooling-off period after an employee leaves a company — was in vogue until companies discovered that their employees were utilising that time profitably by working for competitors unofficially.  Another ruse is for employees to cool their heels for a couple of months in a non-competing organisation before joining the competitor, fulfilling the letter if not the spirit of a no-poach agreement.

The Akasa-AI-Express saga demonstrated how organisations can be unexpectedly wrong-footed by a mass employee exodus to high-paying competitors, a predicament that is possible in almost any industry today (ask startups). Perhaps harried CEOs could consider a standard practice among European football leagues. Since the 2002-03 system, the major European leagues — all the biggies of global football — follow a biannual transfer window system that came about following discussions between football clubs and the European Commission.

Under the system, players across European leagues can transfer to new clubs during two windows — the summer one opens in June and closes just before the start of the season and the shorter winter one that stretches from January 1 to 31. Some arbitrage is possible between leagues that have different closing dates but on the whole, the system, now 20 years old, has worked well enough to endure. Since the process is entirely consensual, it attracts no anti-competition or anti-labour laws. 

How does this system help since clubs still seek to poach each talent from each other? Football clubs are also businesses and footballers (talent) their principal source of competitive advantage. A structured transfer window has brought contractual stability for both player and clubs in place of the disorienting random merry-go-round of continuous player transfers. It offers coaches and managers better team visibility to plan strategies and tactics. For Indian businesses that thrive on human capital, it’s an idea whose time may have come.