Employee Poaching, Churn and External Data Privacy – How to Mount an Innovative Poaching Defense

For some industries like High Tech/IT and Medical/Nursing, a talent shortage existed long before COVID.  For these fields, employee poaching and HR churn have long been a challenge.  Today though, widespread, aggressive poaching and elevated levels of HR churn are problems vexing nearly every industry in North America.  Every organization’s productivity and profitability are being impacted.  The conventional wisdom among industry groups and experts completely overlooks the root causes of poaching and excessive churn and turnover. 

Unsecured external data is the leading means by which aggressive staffing suppliers and corporate HR recruiters gain visibility and access to your precious talent.   Yet, none of the experts seem aware of the most promising solutions for preventing HR churn and poaching. 

This paper examines the dynamics driving the explosion of employee poaching and shortcomings of the regularly suggested remedies.  It also reveals an innovative “Poach Defense” strategy any organization can deploy today to protect their most valuable resource – their workforce!

To understand why staffing companies, SOWs (statement of work/project contractors), payrollers and other HR services have been ramping up their efforts to aggressively entice candidates away from their existing employers, one must understand what’s driving overwhelming demand for labor. Why does the post-pandemic economy boast the lowest levels of unemployment in the United States in fifty years?

Why Churn and Poaching is on the Rise

The end of the COVID-19 pandemic, set off an earthquake in human capital and human resources management.  COVID upended the multi-generational dynamic between capital and labor.  Workers, having survived extended periods of time idled by lockdowns, were surprised to rediscover their wage-negotiating power. They grew far less inclined to return to the low-wage, dead-end jobs they suffered with before lock down. 

At the same time, the Baby Boom generation – many of whom had continued to work well into their retirement years – decided the time was right to finally retire.  The result is what HR industry watchers and media dubbed “the Great Resignation”.  Workers post-COVID are more inclined to change jobs seeking better wages, greater work/life balance, flexible schedules, advancement opportunities and more.  This shift has resulted in an incredibly tight labor market. This drives professional HR organizations to compete strenuously to attract and retain talent.  

The High Cost of Employee Turnover

In the HR field, the term “turnover” refers to the percentage of employees that leave the employ of an organization.  Turnover is a significant cost for any employer even in normal times.  The cost of employee turnover is often baked into the annual HR budget and is a regular cost of doing business.  However, in today’s environment, the volume of turnover is reaching unsustainable levels for many organizations.   Consider the following statistics culled from leading sources of data and information on Human Resource Management.

The Society of Human Resource Managers or “SHRM” reports, on average it costs a company 6 to 9 months of an employee’s salary to replace them. For an employee making $60,000 per year, that comes out to $30,000 – $45,000 in recruiting and training costs. According to Gallup, replacing a full-time employee can cost anywhere between half to two times the amount of that employee’s annual salary.   

Staffing budgets have been decimated in the last 18 months. The US Bureau of Labor Statistics (BLS) at the Department of Labor revealed data confirming 5.9 million separations in July 2022 alone!  Compared to December 2019 numbers where 3.5 million quits were registered, the numbers (and associated turnover costs) are eye popping.  The Retention Report, a study by the Work Institute, suggests a whopping 40% of workers hired today are leaving their jobs within the first year of employment.

In the last 12 months, Gallup estimates the financial and organizational costs of employee turnover has reached a trillion dollars.  U.S. businesses losing a trillion dollars every year due to voluntary turnover are certainly motivated to find ways to arrest the churn. 

U.S. businesses losing a trillion dollars every year due to voluntary turnover are certainly motivated to find ways to arrest the churn.”

Manufacturers gathered at the recent PMMI summit for the Association for Packaging and Processing. The PMMI serves the enormous consumer product group segment of the US economy.  Packaging World, a media outlet serving the packaging industry for manufacturing, reported on CPG companies in attendance at PMMI. Respondents to the poll in this report nearly unanimously identified workforce churn and turnover as their top challenge.  Manufacturers are characterized as literally “climbing over each other to poach workers to meet increases in production.”  Employers are acutely aware of the poaching of their employees.  But most don’t have any idea how to stop it. 

What are the Conventional Remedies to the Poaching/Churn Epidemic?

Sadly, a cursory review of the strategies offered by the leading experts in the Human Resources industry reveals that most of this damage is self-inflicted.  That is, companies are doing lots to mitigate the rising tide of poaching and other causes of HR churn.  But they’re still losing the battle because they’re not addressing one of the leading avenues used by staffing companies and competing HR departments to peel away their top talent.  Let’s look at what the experts recommend.

SHRM publishes the following list of top reasons HR professionals suggest talent decides to leave their current employment:

1. Looking for better compensation
2. Seeking roles with greater career advancement opportunities
3. Wanting positions with greater schedule and location flexibility
4. Fleeing the unrealistic expectations of management
5. Poor leadership on the job

The Harvard Business Review sings the same song in an article titled, “What to Do if Your Employees Keep Getting Poached”.  They write:

“In a hot job market, especially in sectors where the number of jobs exceeds the number of skilled workers, there’s a high probability that other organizations are trying to poach your employees. Not just your superstars. Everyone.”

Then they offer the same list of strategies including examining the compensation structures, listening better to employee complaints, beefing up career development and advancement programs and improving training to ensure realistic performance expectations.  Want to know how this is working out for companies following this advice?

Despite rising wages, improved career advancement channels, remote work and flexible scheduling, and other improvements being made by employers seeking to attract and retain talent, the poaching continues unabated.

SHRM attempts to explain how technology can be leveraged to improve retention in their article, “10 Ways Technology Can Improve Employee Retention”.  This piece recommends using tech tools to source candidates more effectively aligned with company culture.  It suggests using tech to assess worker satisfaction and capture employee feedback.  Tech to support flexible work solutions like remote work to improve work/life balance.  Then of course, more/better compensation, more robust professional development; all the same tactics parroted by the media and experts.  Yet, all these technological strategies are doing very little to stop poaching! Yet again, none even consider the role of external data security in the poaching process.

Larger corporate players have attempted to clamp down on poaching by implementing “no-poach” agreements.  These contracts intend to curtail employee poaching by including legally enforceable “restraint of trade”, confidentiality and non-disclosure provisions in their employment contracts. The notion being that they can prevent employees from being enticed away by an offer from another employer by locking them in contractually.  These companies claim, together with higher compensation and the rest of the workplace improvements the HR experts recommend, these no-poach agreements make for more satisfied workers and less turnover. 

Using Contract Law to Criminalize Poaching?

This strategy has not been as effective as intended.  It has also been challenged by the US Department of Justice under antitrust and anti competitive practices law.  Restraint of trade clauses in employment contracts can indeed significantly curtail workers’ desire and ability to change employment.  The law firm of Wilson Ryan Grose explains these clauses and how they can include such legally enforceable restraints as:

• Preventing former employees from sharing confidential information following termination
• Prohibiting employees from working for competitors in a geographic location for a set term 
• Restricting an employee from poaching any other employee to work with your competitor in the future 

Yet, according to National Law Review, Department of Justice and its Anti-Trust division has been suing employers who have instituted these “no-poach” agreements.  In October 2016, the DOJ and Federal Trade Commission (FTC) jointly released new Antitrust Guidance for Human Resource Professionals. SHRM says, “This guidance set the tone of the DOJ’s and FTC’s intent to target agreements that either fix salaries for employees or preclude companies from hiring each other’s employees. The guidance highlighted that, going forward, the DOJ intends to proceed criminally against wage-fixing or no-poaching agreements, and that the DOJ may … bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies.”  In the ensuing years however, the DOJ has racked up a record of losses

Here is a collection of recent stories from SHRM and other media outlets illustrating the Justice Department’s struggle to stop this practice which supporters say is not extralegal, but which detractors say is anti-worker and unfair to labor. 

Bloomberg Law reports DaVita Company and its CEO Found Not Guilty.  “A jury found not guilty of claims that it violated federal antitrust law by engaging in “no-poach” agreements with competitors—a blow for regulators seeking to boost enforcement of anti-competitive hiring practices. The company’s former CEO, Kent Thiry, also was found not guilty of the same charges by a jury in the criminal trial in the U.S. District Court for the District of Colorado.”

Colorado Public Radio called this a “high stakes case” and characterized it as a test of the government’s ability to criminalize the solicitation of another organization’s employees.  With a maximum penalty of $100 million per count, the CEO of DaVita could have served a 10-year prison sentence had he been convicted!  Yet, the jury declined to convict. “The jury affirmed that this case should never have been brought,” the DaVita CEO said in a statement. He thanked the jury for its “thoroughness in performing its solemn duty.”

SHRM Online notes that the government’s legal challenges to no-poach statutes and contracts have not been discouraged by these losses.  SHRM legal experts say the Biden administration continues to expand action against no-poach agreements.  However, the legality of these agreements is largely beside the point. 

If employers are stretching to make themselves more attractive to scarce talent – through pay rate hikes, expanded advancement and training opportunities, better work/life balance and so forth – it seems counterintuitive that they should then use coercive legal practices to enforce worker loyalty. 

The Innovative Poach Defense Strategy Everyone is Missing

What employers, staffing industry experts, HR media outlets, HR professionals, and the legal community continue to overlook is this one, critical fact – your talent is ripe for poaching because their PII is readily searchable and findable on the internet.  And you’re doing nothing to mitigate this gaping hole!

Unsecured external data is the leading means by which aggressive staffing suppliers and corporate HR recruiters gain visibility and access to your precious talent.

Unsecured external data is the leading means by which aggressive staffing suppliers and corporate HR recruiters gain visibility and access to your precious talent.

[What is External Data Risk?  Read all about it in this paper.] 

There is a direct correlation between good external data hygiene practices and lower incidences of employee poaching.  As part of a comprehensive cyber risk management practice, Privacy Bee’s Poach Defense helps maintain the privacy of every member of your workforce.  Removing their PII from the hundreds of Data Brokerage Sites, People Search Sites and other pools of publicly accessible data online makes them nearly invisible to the staffing companies and corporate HR departments who spend all day, every day, scouring the web for talent to poach.  So, what can your organization do to tighten up privacy and protect your workforce from poaching?

Protect Your Organization’s Greatest Resource with HR Cybersecurity Solutions from Privacy Bee

Almost entirely managed online today and characterized by inclusion of the most sensitive PII, HR systems are a prime target not only for cyber criminals. Beyond the internal pools of data hackers can use for social engineering schemes to gain entry to protected information systems, HR departments routinely leverage staffing vendors and other external partners which increases risk.

HR must contend not only with cyber criminals, but they’re also confronted with competing organizations leveraging data accessibility to poach talent in tight labor market environments. The same data brokers serving bad actors also serve competing staffing suppliers and HR departments. Strong HR security controls can reduce poaching and churn by better than 90% driving significant cost savings through reduced on-boarding and training driven by employee churn.

Case Study

• Customer: Private Healthcare Services Company
• Challenge: High turnover rate due to constant barrage of targeted offers made to key employees
• Solution: Used Privacy Bee to set and enforce privacy risk score thresholds to weed out highest risk vendors and incentivize vendors to comply. Performed privacy risk assessments on all internal employees and external resources to lower aggregate employee risk scores.
• Results: Saved $15,000 in lost productivity, recruiting, on-boarding and training for each employee retained. Overall retention rose from 62% to 89% in one year.

Privacy Bee’s Poach Defense is also proven to decrease annual voluntary churn by 16.8% (median) across mid-market organizations.

The removal of all workforce PII from data brokers, People Search Sites and other sources on the internet also helps dramatically reduce the amount of unsolicited recruitment emails your employees will receive. This also helps protect productivity while reducing exposure to enticements from competing businesses.