07 May 2014

Headhunting: Unethical or a necessary part of a competitive job market?

Two very interesting and relevant US court cases were settled in the past two weeks involving anti-competitive behavior, namely no-headhunting agreements between large and high profile publicly listed companies.

In the most high profile case, four massive tech firms (Google, Apple, Adobe and Intel) who were the defendants in a class action suit, agreed to a settlement (subject to California court approval) of USD$324 million rather than have the case go to trial. Going to trial, set down for 27 May, would not only have risked a far larger payment, but an even greater cost in public humiliation as the details of such a high profile case were reported in the media each day.

The evidence uncovered in pre-trial proceedings proved to be extremely damning for the defendants with the Recruiter UK reporting:

The New York Times News Service reported one example of how, when Google was looking to employ a former Apple employee in Paris, the company sought permission from the late Steve Jobs, Apple's founder, and former chairman and chief executive officer.

And when Jobs found out that Google also wanted to hire other former Apple employees, Jobs wrote: "We'd strongly prefer that you not hire these guys." Google then allegedly backed off. 

Another email exchange cited in the lawsuit revealed Eric Schmidt, former CEO of Google, telling Jobs that a Google recruiter who approached an Apple employee would be fired.

Based on court files Reuters reported that another exchange of emails showed Google's HR directors asking Schmidt about sharing the ‘no cold call' pact with other competitors.

Schmidt responded that he preferred it be shared "verbally, since I don't want to create a paper trail over which we can be sued later".

As dailytech.com reported ‘ ... it's not the only win in the non-compete hiring scandal'. Two other firms, legendary animation studio Pixar (now owned by Walt Disney) and business software provider Intuit had coughed up a combined $20 million over similar claims.

To further demonstrate how widespread this behavior appears to be in the USA, only last week another case reached a settlement when online auction giant, eBay settled a case with the US Justice Department over its illegal no-headhunting agreements with other technology companies.

I am not aware of any similar cases brought by Australia's competition watchdog, the ACCC, suggesting that either the ACCC is not looking, or they have looked and, as far as they can discover, such agreements don't exist.  

My views on headhunting are very clear cut.

To headhunt is what any good recruiter will do, whether they call it headhunting is another matter. Our role as a valuable external resource is to access talent that companies are unable or unwilling to access themselves.

All we are doing is discussing a potential opportunity with a candidate - they are under no obligation to accept. If recruiters accept that headhunting is unethical then we are colluding in lessening competition for candidates, which is a practice not consistent with a fully competitive marketplace and is in breach of competition laws.

Frankly, I think it's also hypocritical - every company loves the benefit of headhunting when they need talent, but don't like it when their employees are headhunted.

Has any recruiter had a shortlisted candidates turned down by their client specifically because 'they were headhunted, and as a company we think that's unethical'?

I thought not.

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3 comments:

  1. You have said it all Ross.If there was no headhunting,I think it ought be invented.Not only because headhunting is a veritable and powerful weapon in any recruiters arsenal but because statistically speaking more than 70% of candidates pool are passive;they are simply not actively looking for any new job opportunities. And the majority of outstanding talents belong to this category-they are too deeply engaged-simply too busy doing what they love.They simply cannot be accessed by the other conventional recruitment methods like job adverts,job boards,job fairs,etc.Somebody,it does not matter the designation,call the person Headhunter if you like,has to identify and attract such suitable candidates from this pool and present them the new job opportunity.
    In my elementary Economics, we were taught that they are certain critical factors of production namely Land, Labour,and Capital.One of the hallmarks of a free and competitive market is ensuring free access to all these factors of production.Therefore, talent as a component of Labour,is one, if not the most critical factor in the success of any business and cannot be an exception. Any company collaborating in no-headhunting agreement is certainly anti-free and competitive market and is violating antitrust laws and ought to be severely sanctioned.

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  2. Thanks Law - I hope a USD$324 million (a mere drop in the ocean for the cash flows of Google, Apple etc) settlement sends a very strong message that anti-headhunting agreements are as serious as any other sort of breach of competition laws.

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  3. Yes Ross thanks-I feel terribly outraged by this practice as revealed not because I am a headhunter-and which I am proudly so,but because the culprits are huge beneficiaries of a free and competitive market in a capitalist economy.Moving from the sublime to the ridiculous:let's assume we operate in a bizarre marketplace.Now, in this marketplace, whenever these culprits-Google,Apple,and their cohorts want to buy land (include buildings,properties etc.),their competitors collude with the sellers urging them not to sell to them; they want Capital(loan/funding/equipment etc.,their competitors swiftly block their access to these critical resources and whenever they want to hire workers,they are denied this vital resource.What will they do? Immigrate to the moon to carry out their abhor-able business practice? Huh? Really,going by this revelation, I cant help but begin to imagine that these companies possibly may be indulging in other unethical business practices.Thankfully, by my background and training,I always resist the temptation to engage in any wild speculations.A word of advice for those who think they can be too smart to escape the long but painstaking arms of the law;every day for the thief, but certainly,ONE day for the owner!

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