Forced retention
Encyclopedia
Forced retention refers to the act of applying pressure to employees
to deter them from leaving a company. The most common way to do this is through legal means, such as non-compete and non-disclosure agreement
s. Given an adequately broad agreement, a company may threaten employees who try to leave for competitors (or in some cases, non-competitors) with legal action. In some countries, the government may implement similar laws or policies to prevent or discourage employees from leaving certain companies or government organizations. It has also been applied to companies which offers significant financial benefits to employees to encourage them to stay, in particular after a merger (for example, a minimum period to qualify for stock options), but this usage is commonly considered incorrect.
Forced retention is most commonly used by companies on the decline, or at least with limited growth prospects. Top employees will often join a small or mid-size company, with significant growth potentials. They will also often join financially-stable companies, which can afford to provide employees with very good remuneration packages, and large amounts of freedom (for instance, in pure R & D departments). Once the company begins to decline, many of the top employees will want to leave for greener pastures, while the poor-performing employees (who may have a difficult time finding employment) will cling to their jobs, radically speeding the decline. Companies will occasionally implement forced retention policies to try to stem the brain drain
.
A recent example of forced retention involves Microsoft Corporation, when its stock price
levelled off, limiting the value of its stock options and stock grants. Microsoft began scaling back on its employee benefits, resulting in a number of key Microsoft employees, leaving for Google
, Yahoo!
, and a number of startups. Eventually, Microsoft began to threaten, and in some cases, filed lawsuits against departing employees. While the actual number of lawsuits filed was fairly small, they were chosen to serve as examples. Due to Microsoft's broad scope (virtually all technology companies compete with Microsoft in one form or another), Microsoft was able to threaten lawsuits even for departing employees whose new jobs did not substantially overlap with their work at Microsoft. This had a chilling effect on the culture of the remaining employees, who were uncertain if similar lawsuits would be filed against them, if they leave. The most publicized example was the case of former vice-president Kai-Fu Lee, who left Microsoft for Google. As Microsoft had, at this point, been engaging in forced retention policies for some time, Kai-Fu Lee negotiated to have Google cover all legal costs, should Microsoft file a lawsuit to prevent his defection.
Another example involves the US military in Iraq
. After invading Afghanistan
and Iraq, U.S. military resources were stretched. As a result, the military implemented a stop-loss policy
, under which it could unilaterally extend a soldier's contract.
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...
to deter them from leaving a company. The most common way to do this is through legal means, such as non-compete and non-disclosure agreement
Non-disclosure agreement
A non-disclosure agreement , also known as a confidentiality agreement , confidential disclosure agreement , proprietary information agreement , or secrecy agreement, is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties...
s. Given an adequately broad agreement, a company may threaten employees who try to leave for competitors (or in some cases, non-competitors) with legal action. In some countries, the government may implement similar laws or policies to prevent or discourage employees from leaving certain companies or government organizations. It has also been applied to companies which offers significant financial benefits to employees to encourage them to stay, in particular after a merger (for example, a minimum period to qualify for stock options), but this usage is commonly considered incorrect.
Forced retention is most commonly used by companies on the decline, or at least with limited growth prospects. Top employees will often join a small or mid-size company, with significant growth potentials. They will also often join financially-stable companies, which can afford to provide employees with very good remuneration packages, and large amounts of freedom (for instance, in pure R & D departments). Once the company begins to decline, many of the top employees will want to leave for greener pastures, while the poor-performing employees (who may have a difficult time finding employment) will cling to their jobs, radically speeding the decline. Companies will occasionally implement forced retention policies to try to stem the brain drain
Brain drain
Human capital flight, more commonly referred to as "brain drain", is the large-scale emigration of a large group of individuals with technical skills or knowledge. The reasons usually include two aspects which respectively come from countries and individuals...
.
A recent example of forced retention involves Microsoft Corporation, when its stock price
Bid price
A bid price is the highest price that a buyer is willing to pay for a good. It is usually referred to simply as the "bid."In bid and ask, the bid price stands in contrast to the ask price or "offer", and the difference between the two is called the bid/ask spread.An unsolicited bid or purchase...
levelled off, limiting the value of its stock options and stock grants. Microsoft began scaling back on its employee benefits, resulting in a number of key Microsoft employees, leaving for Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
, Yahoo!
Yahoo!
Yahoo! Inc. is an American multinational internet corporation headquartered in Sunnyvale, California, United States. The company is perhaps best known for its web portal, search engine , Yahoo! Directory, Yahoo! Mail, Yahoo! News, Yahoo! Groups, Yahoo! Answers, advertising, online mapping ,...
, and a number of startups. Eventually, Microsoft began to threaten, and in some cases, filed lawsuits against departing employees. While the actual number of lawsuits filed was fairly small, they were chosen to serve as examples. Due to Microsoft's broad scope (virtually all technology companies compete with Microsoft in one form or another), Microsoft was able to threaten lawsuits even for departing employees whose new jobs did not substantially overlap with their work at Microsoft. This had a chilling effect on the culture of the remaining employees, who were uncertain if similar lawsuits would be filed against them, if they leave. The most publicized example was the case of former vice-president Kai-Fu Lee, who left Microsoft for Google. As Microsoft had, at this point, been engaging in forced retention policies for some time, Kai-Fu Lee negotiated to have Google cover all legal costs, should Microsoft file a lawsuit to prevent his defection.
Another example involves the US military in Iraq
Iraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
. After invading Afghanistan
Afghanistan
Afghanistan , officially the Islamic Republic of Afghanistan, is a landlocked country located in the centre of Asia, forming South Asia, Central Asia and the Middle East. With a population of about 29 million, it has an area of , making it the 42nd most populous and 41st largest nation in the world...
and Iraq, U.S. military resources were stretched. As a result, the military implemented a stop-loss policy
Stop-loss policy
Stop-loss is a term primarily used in the United States military. In the U.S. military, it is the involuntary extension of a service member's active duty service under the enlistment contract in order to retain them beyond their initial end of term of service date and up to their contractually...
, under which it could unilaterally extend a soldier's contract.