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Lift-outs: Recruiting on Steroids for Those Seeking Strategic Business Impact

by Jan 3, 2011, 5:49 am ET

All new hires have the potential of bringing with them game-changing thoughts and ideas, but no matter how rare the talent found, seldom are major business successes ever attributed to recruiting, except in the case of “lift-outs.” While not for everyone (few recruiters have the cojones or the planning skills to attempt a “lift-out”), a lift-out is the pinnacle of recruiting because it has the potential to provide an organization with all of the capability of another organization but without the expense and hassle of a corporate acquisition. It’s a powerful approach.

One CEO characterized it by saying “our ship rises, while the competitor ship sinks.”

This Is the Best Time in Decades

The bursting of the housing bubble and credit crisis, which makes capital for acquisitions harder to come by, combined with the growth of social networking, which offers unprecedented visibility into the talent networks of competing organizations, make this an ideal time to grow your organizations through “lift-outs.” As more and more work inside modern enterprises has become project-oriented and mission-critical tasks have been consolidated, it’s easier than ever to recruit intact teams capable of dramatically increasing your organization’s capability in new areas or expanding your capacity in existing areas. The approach brings all of the positive aspects of an acquisition without all of the headaches that emerge post acquisition as the acquiring company seeks to identify synergies and pare down redundancies (layoffs). It’s also possible to conduct lift-offs where a team is recruited away from organizations exercising mass layoffs (one team recently put itself up for auction on eBay).

But That’s Stealing

If your initial thought is that this is large-scale “stealing,” you are simply out of touch. Salespeople don’t have ethical issues when they proactively “poach” away a large number of a competitor’s customers. In recruiting, is not illegal or even unethical to offer individuals new and more exciting employment opportunities. In fact, the U.S. Federal Trade Commission recently ruled that companies like Google and Apple that put together secret agreements restricting the free movement of employees between companies were unfairly restricting worker freedom. Since employees are not owned, you are free to make them offers and they are free to accept or reject them. It is also true that in a global marketplace, many countries (for example India) have no restrictions on the practice.

My Heroes Are Aggressive Recruiters

As I have said in previous articles, Michael Homula is the undisputed godfather of lift-outs. But some degree of recognition should also be given to the recent breathtaking results produced by PrivateBancorp. Using a lift-out strategy, PrivateBancorp proactively recruited away more than 160 employees from LaSalle Bank. In one of PrivateBancorp’s current teams, 23 of the 26 team members came from LaSalle. The benchmark effort successfully recruited away the competitor’s CEO, CFO, chief strategy and marketing officer, and chief risk officer. In order to know which LaSalle players to recruit, it also hired away a top HR executive from LaSalle.

Action Steps for Executing a Lift-out

If you are still reading at this point, you are an extremely aggressive recruiter or executive who is willing to undertake this ultimate challenge. Since there are no books written on how to conduct a lift-out, I have provided a list of the most important action steps that will at least get you started:

  1. Get an executive committee member sponsor — find a senior manager who is part of the executive committee to champion and own the process.
  2. Show CEO support — make it clear to the small group that is involved that the CEO, the CFO, and the General Counsel are strongly behind the effort.
  3. Create a recruiting team — develop an ad-hoc recruiting team (put together more than one if the targets are from multiple functions) to focus on recruiting these individuals. Include an aggressive recruiter and a lawyer to advise the team and the potential recruits. Provide the team with a budget and an incentive if they meet or exceed your goals.
  4. Get outside help — although few corporate recruiters have any experience in this area, there are executive search professionals with lift-out experience who are more than willing to help guide you through the process.
  5. Conduct benchmark research — the highest number of lift-outs and thus the best opportunity to learn occur in financial and high-technology firms. Other notable lift-outs have occurred in advertising, law firms, real estate, and healthcare. Use your benchmark research to put together a list of factors that differentiate successful lift-outs from unsuccessful ones.
  6. Identify possible target firms — although you can target any firm, it’s much easier to succeed at firms that are currently having or are anticipating major problems. Develop your initial list of firms by putting together a list of “corporate negatives” that would drive even your own employees away. For example, look at firms that have recently lost their CEO, those that are rapidly losing market share, those with corporate scandals, and those that analysts note are in for a long decline.
  7. Determine your likely success rate — even though a potential target company is in trouble, you cannot assume that the best are ready to jump ship. Instead, you need to do some preliminary research to identify the actual probability that key individuals would leave. There are a variety of ways to assess the likelihood that top people would leave, including direct sourcing calls, running blind ads, hiring third-party recruiters to make an assessment, and searching job sites for an increase in resumes from the target company. As a general rule, if more than a third of the people you contact say they’re interested in further conversations, you should move forward.
  8. Secrecy — after you have identified your target firm keep the process and the goal as secret as possible so that your targeted firm doesn’t get wise prematurely. Set a deadline of no more than three to four weeks, because you probably will not be able to keep the process secret any longer.
  9. Identify potential problems — put together a list of potential problems that you should anticipate running into during the process, and have at least an outline of a solution for each one.
  10. Shrink the normal recruiting time — put together an expedited recruiting process (keep the same steps that you normally use but shrink the time between them).
  11. Recruit offsite — wherever possible, avoid contacting these employees directly at their firm. In addition, try to interview them outside of work hours and at a neutral site, where they are unlikely to be seen.
  12. Target an HR person first — consider recruiting a knowledgeable HR professional from the firm first, so that they can advise you on who is really good and who is only okay.
  13. Identify a leader — Use your contacts to identify the one employee who is most likely to be “looked up to” as an informal leader among the target group. Try to convince them first and then use their influence to convince others to accept.
  14. Prioritize your targets — rank order your targets (A+, A, B) so that you focus your resources on getting the most impactful individuals first. You might also consider bringing on some support people who could add tremendous value.
  15. Identify their “job-switch” criteria — during interviews or in conversations proactively identify the specific factors that would cause each individual to leave their current job and to accept a new one. If you can’t identify the factors for each individual, develop a list that covers the entire group. Also, put together a list of potential “deal breakers” and avoid each of these. Use these two groups of factors to craft your offers.
  16. Identify what you have to offer — identify the best things that your company has to offer as an employer and use that list to convince candidates. Put together a list of frequently asked questions with answers. Prepare a counterargument for each possible negative that others have offered about your firm. Make a list of the potential projects that each individual will likely be able to work on within the first year, because that is likely to be the most important decision factor after their manager.
  17. Involve key employees in the sales approach — no one is more effective in building relationships and selling an individual on a new job than a respected peer. As a result, supplement the efforts of your recruiting team with the periodic help of a few well-known employees who also have a passion for the firm and strong sales skills.
  18. Set a target closing date — rather than hiring individuals piecemeal over a period of time, instead you set a target closing date when you will ask most of your targets to formally accept your offer. Even though you have informal agreements, holding off any formal acceptances until a single closing date may help to keep your operation a secret and prevent any premature blocking strategies.
  19. Offer an exploding sign-on bonus — offer an exploding sign-on bonus that “expires” in order to provide an extra reward for those who agree to your offer right away.
  20. A group sign-on bonus — offer an added sign-on bonus to each individual if more than the targeted percentage of the entire group agree to come on board on a certain closing date. This will incent individuals who have decided to accept to actively recruit others to also come on board. You can also offer a “bring along your buddy” bonus for individuals who bring along a high-priority colleague within a set time period.
  21. Reward competitive intelligence – reward and recognize the individual who initially identified the lift opportunity after the hiring process has been completed.
  22. Develop counteroffer strategies — develop individualized counteroffer strategies in advance, because the very best are likely to be provided with one or more counteroffers from their current manager. Set reasonable limits to avoid “overpaying” for the talent, but keep in mind that an intact team may be more valuable than the sum of its parts.
  23. Avoid legal issues after hiring — work with Legal to develop a process to ensure that the employees you recruit away don’t directly “steal” and use company secrets (concepts are okay but there are some limits).
  24. Retention efforts — if there is a clear leader of the group, realize that if they are unhappy and leave the firm, many others will also. In order to prevent that unnecessary turnover, you must work closely with this individual to keep them excited after joining your firm. Also consider signing that individual to a multiyear contract or offering them a retention bonus if they stay with your firm for a reasonable period of time. Stay-on bonuses for others might also be considered, and don’t forget to include processes to smooth the transition and integration of the new team.
  25. Do it again — put together a “how-to” guide and then target other firms capitalizing on what you have learned.

Final Thoughts

Nothing affects the capability or capacity of an organization to succeed more than the talent it has access to and how it takes advantage of it. There are only two ways to augment an organization’s inventory of talent: acquire new KSAs or build them internally. It’s time for strategic talent functions to step up and demonstrate that highly targeted talent acquisition efforts can be more impactful than expensive, time-consuming, and potentially disastrous corporate acquisitions. Hiring intact teams can bring most, if not all, of the needed capability in a shorter period of time and at a lower cost. In addition, intact teams can come up to speed faster and face fewer cultural integration issues versus blending two larger organizations.

You may resist developing a lift-out methodology, and protest “that it is against the law” even though you have no law degree, but in the end it will be to your detriment. If you are striving to be strategic and to demonstrate major business impact as a recruiter, there is no higher calling than this. It is aptly described as … a recruiting effort on steroids.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • Bill Gallop

    Sign me up…
    This is all I do! I specialize in the IT and Intelligence Community for Beltway Bandits (government contractors) in the DC area. I don’t know of any other way of recruiting.

    All of my candidates have the HIGHEST level government clearances and are rarely out of a job. If I want the BEST, I have to steal from others.

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  • http://www.techtrak.com Maureen Sharib

    I can’t WAIT to hear THIS discussion!

  • http://www.techtrak.com Maureen Sharib

    I just couldn’t wait. Many companies are flush with cash, Dr. Sullivan, after the slashing and dicing they’ve been able to do to their workforces w/ this recent economic meltdown – many of them have PLENTY of money to acquire other companies. They don’t NEED to put their houses up or even obtain bank financing – they’re good togo on t heir own resources. What I THINK you’re saying is they don’t have to buy other companies – that poaching aggressively into/from their workforces is the next best thing to acquiring additional market share (“our ship rises, while the competitor ship sinks”).

    This is brazen and bold advice.

    I hope the community can see the value in it for what it is – economics at work.

    Economies are a beautiful thing.

  • http://www.recruitinginferno.com Steve Levy

    Sully, I didn’t realize you were such an environmentalist – this is a recycled post from at least 10 years back!!!

    It’s high time that the anti-competitive recruiters begin to recognize that you can’t have your cake and eat it too: Oppressive tax policies, the new “crap and trade” laws, healthcare burdens, etc. all serve to hamper and hinder growth and hiring. Those who want to cry “unfair” when a stronger company hires to denude the influence of another company are “recruiting racists” who believe in indentured servitude over freedom of choice.

    If your crack marketing team is poached by one of your competitors then your managers have failed, your strategy has failed, your human resources organization has failed. It’s like a marriage: the ring itself isn’t the bond that keeps two people together – it takes work…every day…to make it last. There are no shortcuts.

    Tortious interference inherently makes me laugh because it punishes actions that are part of natural law: The strong survive. Poaching is entrepreneurism – and we value entrepreneurism in business because it creates new initiatives and new needs for people.

    For all the effort that a company – whose people have left for a competitor – makes on filing lawsuits, etc. they should be reviewing their internal business processes for what went wrong. Then fix them. They STFU, recruit new people, and create a culture where the best talent isn’t prone to poaching.

  • Bill Gallop

    I have personally been threatened with lawsuits for poaching candidates/departments from companies. I know of several companies in similar businesses in my industry who have “Do not poach” contracts with their competition. There is even a local company that lost 12 of 15 recruiters directly to ONE company in my industry.

    Finally something on ERE that I can directly relate too…

  • http://www.johnstonsearch.com/blog Brian Kevin Johnston

    Dr. Sullivan… Great post!

    Until one accepts that this is all out… “WAR for Talent”, you must then also accept mediocrity, low pay, and low impact in your recruitment/HR career…. Happy New Year to ALL, Brian-

  • Keith Halperin

    Thanks, Dr. Sullivan. ISTM that it may be relatively easy to get the best candidates from unstable/dysfunctional organizations, but increasingly difficult to get the same types of candidates from stable/functional firms. In such cases, Google may have helped set a new standard through granting 10% across-the-board retention raises. While all companies are certainly not Google, superior candidates at many companies may now think: “If ordinary Google employees are worth a 10% raise, I’m much better than ordinary and entitled to much more than 10%.” Consequently, while there are many non-monetary “buttons that can be pushed,” a company seriously interested in recruiting A-players from a functional, stable work environment (or retaining its own A-players) should seriously consider something like a 20% raise (or working from home, or something else very valuable to the employee), preferably with a 3-year “no-discharge without cause” contract (or you could pay a 3PR 30% on contingency to get someone who’ll do it for no more money and come out ahead). Most companies that want high quality on the cheap are foolish.

    “Secrecy — after you have identified your target firm keep the process and the goal as secret as possible so that your targeted firm doesn’t get wise prematurely. Set a deadline of no more than three to four weeks, because you probably will not be able to keep the process secret any longer.”
    IMHO, when you are going after large numbers of people in a fairly functional organization, this is what you DON’T do. Instead, you “accidentally” leak that you’re going after their best people, and you don’t do it. Then you wait a few weeks/months, and do the same thing- leak, and not recruit. You wait a few more/weeks/months, and now the target firm is demoralized and embarrassed, having cried “wolf” twice before. Then you go in, “guns a-blazing.” It’s even better when you leak that you’re going after people in Area A (which you really aren’t looking for), and then you go after folks in Area B, or DON’T GO AFTER ANYONE AT ALL- you’ve weakened your competitor without having “poached” a single person- some of the competitor’s best people will have left because of the rumors.

    Cheers,

    Keith

  • http://hrthebottomline.blogspot.com/ Nancy Robin Gillman, MBA, SPHR

    Yes, I definitely agree with the point you make regarding “stealing” vs. “employee/individual freedom”.

  • http://www.techtrak.com Maureen Sharib

    Keith, you didn’t sign yourself:
    “Insidious Keith Halperin”
    I’m surprised. And impressed.

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