Poaching employees hurts contractors and agencies alike
- By Stan Soloway
- Jun 04, 2009
With critical skills in short supply, the market value for today’s technology, knowledge and other skilled professionals has climbed at a precipitous rate. Companies compete furiously with one another — and sometimes with the government — for the same people and skills. There is more competition than ever among agencies themselves, and many of them are targeting contractor employees who already support an agency in an effort to get them to come into the government. Some agency officials are openly advocating the recruitment of contractor employees as central elements in their workforce rebuilding strategies.
Overall, that trend is unhealthy for all concerned because it creates unnecessary tensions and drives costs steadily upward. It’s time for a mutual nonaggression pact.
Many in government are concerned about contractors hiring federal employees and then billing them back to the agency under contracts at what appear to be substantially higher total costs. It is a fair concern, though it is tempered by the reality of the contemporary market for talent, which has established a value for those skills that often well exceeds government pay scales.
At first blush, the math seems clear: The cost to an agency of a contractor employee includes salary, benefits, overhead and company profit. Agencies believe they can offer those employees higher salaries and, because the agencies do not have the same overhead and profit pressures, save money in the process.
In truth, the savings might be illusory. Government’s significant overhead costs are rarely included in individual agencies’ budgets. To those operational offices, overhead is invisible and essentially free. Yet if the costs of the higher salaries were combined with the true costs to the taxpayer of that overhead — pay systems and offices, the Office of Personnel Management, headquarters operations, training, development, lifetime health care, retirement and more — the savings would almost certainly disappear.
It is also true that companies poach one another’s talent as they seek to improve market position and meet customer needs. As a result, many companies are now more broadly using noncompete and other agreements with their employees. And to prevent companies from poaching civil servants, some federal agencies are imposing contract clauses that prohibit or limit contractors from hiring the agency’s employees. Unfortunately, no such prohibitions are in effect in the other direction.
There is no simple solution to the problem. Each side has a legitimate self-interest in doing what is necessary to build its workforce capabilities. And it is both unwise and inappropriate to overly restrict the decisions individuals make about where they wish to work. But the time is right to take the first, simple step toward rebalancing the scales. It is time for bilateral limits on poaching talent.
Recruiting limits imposed by agencies on their contractors should work in both directions, and agencies should agree not to target their contractors’ employees as they seek to rebalance their workforces. Similarly, contractors should agree to limit the targeting of their customers’ employees, and when agencies offer grade increases to contractor employees, the contractor should have the opportunity to adjust its contract labor rates accordingly.
Balanced, reasonable, mutual limits could help reduce unnecessary cost growth and workforce churn. They would also help drive strategic workforce planning inside and outside the government — planning that accounts for and reflects the realities of the current market for skills. The talent challenges, even in a down economy, are tough enough. Let’s stop making them even tougher.
Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council.