Poaching employees hurts contractors and agencies alike

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.

Reader Comments

Mon, Jun 22, 2009 Doug DC

The Government gets to hand-pick the more desirable on-site contractor employees because they get to see them working - beats the alternative of picking employees simply from interviews. If they are going to poach, they should at least pay the contractor a "headhunter" fee for taking a good employee away from them. As a minimum, they should allow the contractor to back-fill the position instead of eliminating the position, and sometimes the entire contract, because they've scooped up the employees. This is especially true with classified contracts in which junior people cleared at the highest levels are at a premium.

Fri, Jun 19, 2009 LMG RAF Molesworth, UK

I don't see a hard CBA anywhere in this piece so where did the 220k/110k numbers come from? (Just asking)

There are other distortions to factor in when comparing long-term costs for an employee, such as how many employees actually stick around at the same job for 25-30 years and retire these days? I figure its like attending a Cub Scout meeting with 100 boys and you ask: "How many of you will be Eagle Scouts?" All of the boys will raise their hands and say they will. However reality is that usually only 7 out of 100 eventually earn the award.

In your article Stan you say that the Gov agency (GA) can progress/reward the contractor employee. That however is not true. The GA may negotiate the increase in responsibility of a job position with the contract company, but only the contract company can reward the employee.

Skilled employees are an asset to what ever organization they attach themselves to and trying to hinder their efforts to improve their position in society/life runs counter to the American ideal of free & fair competition.

Thu, Jun 18, 2009

Obviously written from a partial perspective.

Would like to see the hard nubmers that support the assertion that paying 220k for a contractor costs the government less than paying 110k for a quality direct hire. They are conspicuously glossed over in this argument.

Thu, Jun 18, 2009 KLM Silver Spring

If you let it, the fed will multiply personnel requirements like rabbits multiply themselves. That is what they have done in acquisition. Since when does every agency need it's own contracts, procedures, systems and acquisition personnel? Is that out of control proliferation sustainable? No. And that, not poaching, is the problem.

Thu, Jun 18, 2009 M Reston, VA

It’s time for a mutual nonaggression pact? Everyone should accept their current job and salary? Sounds like enforced mediocrity, comrade. The only downside to all this is the government is bloating and creating requirements for more people to sustain its bloating self. There is no other problem. A few good people at 50% premium in salary can do the work of three times their number and they will become more productive over time. Recruiting good employees is not a crime or even an ethical issue. Bloating government is both.

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