The Battle for Executive Talent in Supply Chain is Heating Up as Lawsuits Start Flying

April 18, 2016

 

 

Recently, the Wall Street Journal’s Loretta Chao reported that Amazon.com Inc. is suing Arthur Valdez, a former executive employee who moved to Target – one of Amazon’s biggest competitors in the eCommerce space. She reported that several major U.S. logistics carriers are also in the process of fighting lawsuits related to poaching of executive talent from one company to another.

As Chao says, Valdez and the other executives under fire have mostly started already working for their former employers’ competitors, unhindered by the legal challenges. But these lawsuits underscore the seriousness of the business of finding executive talent, especially in a high-impact field like Supply Chain (which includes Procurement, Logistics, Operations, and other subdisciplines).

In Chao’s words: “The legal battles underscore the growing importance of logistics know-how as running a tight supply chain is increasingly central to companies’ competitive advantages, from warehouse design to inventory management, distribution and the way they handle data, experts say.”

It’s no secret that top Supply Chain professionals are in high demand, especially at the executive level. And non-compete clauses stipulating stiff legal penalties for executives moving to competitors are common practice in executive contracts. But it’s a bit surprising to see companies resorting to lawsuits to try and retain the best talent – and to try and spook other workers away from shifting their allegiances.

As a recruitment agency specializing in hiring top talent for Supply Chain – often at the executive level – Argentus is quite interested in what these developments say both about the market for Supply Chain talent and about hiring and talent retention practices in general.

“Suing an executive over a non-compete clause leaves a bad taste in people’s mouths from a public perception standpoint,” says Argentus senior recruiter Sam Manna. “As long as the individual goes to the other company with the understanding that they won’t divulge confidential information, it isn’t really reasonable for a previous employer to prevent someone from earning an income.”

“Companies want the best talent,” he says, “especially at the executive level. Why wouldn’t you want the best talent from your competitors? So you can’t blame a company for poaching somebody. From a public perception standpoint, other prospective employees are going to ask why you’re suing someone because they went to another company.”

Lawsuits against other former employees might also have a chilling effect on current employees, and not in the way that organizations are hoping for. It’s worth it for companies to think about what message these lawsuits might send to people already working for them. 

As Sam Manna puts it: “[a lawsuit] might but the seed in someone’s head about wanting to look for something else themselves. You can’t prevent someone from earning a living as long as they live up to their other confidentiality agreements. All you can do is monitor the situation to make sure the former employee doesn’t breach confidentiality.”

While it’s reasonable to expect companies to play fair – to an extent – and not poach top talent from their competitors, it’s something that’s been business practice for decades. On the other hand, it’s understandable for Amazon to want to keep that top talent off the market in Supply Chain. One alternative practice that would help Amazon accomplish this goal would be to simply pay the departed executive to stay off the market for the duration of the non-compete, whether it’s 18 or 24 months – allowing the organization to shore up its next steps while avoiding the public perception fallout that might come from suing former executives. 

One thing that’s exceedingly clear is that the titans of the Supply Chain in particular are feuding over both talent and the wealth of knowledge that top contributors provide. And Target’s Supply Chain – as evidenced by their botched expansion into Canada – is a source of competitive disadvantage that they’re trying to rectify through hiring talent. “Amazon is suing Target because Target is trying to emulate Amazon’s success in eCommerce,” says Manna. “It’s tough, but it shows the true value of being an expert in Supply Chain and being specialized.”

That value is higher than ever before. Chao reports that the Amazon executive who left for Target after 16 years was already earning in excess of $1 million – indicating he must have received a significant boost in compensation from Target to entice him to jump ship. 

Let’s all take a moment here to sit back and dream. Let’s imagine that arguably two of the top Supply Chain organizations in the world are fighting over our expertise to the point where lawsuits and multimillion-dollar compensation enter the picture. Okay? Done. Not everyone is in such high demand that their ex-employer will sue them for moving to a competitor. Some Supply Chain professionals do have difficulty finding good jobs. But developments like this illustrate just how high demand is for the top-flight talent in Supply Chain, especially in thin-margin industries like retail and eCommerce.

The Supply Chain talent wars are heating up, and if you’re an organization looking to become more competitive, maybe it’s worth looking at where you stand.

So what’s your take on these lawsuits and feuds over executives in Supply Chain? Is this a trend, and if so, what do you think it says about the market for Supply Chain talent at the executive level? logo_icon

Thanks very much to Sam Manna for his input on this topic! 

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