Trapped by success

June 2, 2005
It's getting harder to find logistics talent, according to executive recruiter Don Jacobson, and companies are serious about keeping their supply chain

When a company has an executive vacancy in logistics or supply chain management, the hiring process can be long. Executive placement in logistics is most costly in time, says Jacobson, president of supply chain search consulting firm LogiPros LLC. That's because companies don't want to make a mistake. It's also a result of hiring by committee and focusing on a very exacting set of requirements.

Companies tend not to have a formal training process that allows them to hire someone with good general skills and train them for their supply chain. Despite a shortage of logistics talent, employers are holding out for an exact fit. On the other hand, a supply chain management professional who is offered another position is likely to receive a counter offer from his or her present firm.

There's nowhere to spread the extra work when someone leaves and the company has its back up against the wall on tight timeline projects, says Jacobson, and for a $100,000 position, it can be cheaper for a company to counter with another $20,000 than to go through the pain of a five-or six-month search. From the employee's point of view, though, taking a counter offer from your present company can often backfire on you down the road, Jacobson points out.

One way some companies attempt to limit their risk of losing key individuals is through non-compete agreements. Many employees who have signed these agreements mistakenly believe they are unenforceable, Jacobson notes. A judge may overturn an overreaching agreement, but it is important for employees who have signed (or are being asked to sign) a non-compete agreement to realize the degree of enforceability is governed by state law, not federal law.

There are three principal areas covered by non-compete agreements: time, territory and activity. The "Restriction Period" is often one or two years. A non-compete agreement may define a "Restricted Territory" that is geographically described in a radius of miles or by counties and states.

Perhaps most onerous for the employee is the "Restricted Activities" clause. A non-compete agreement may limit a former employee's ability to work for a competitor, in a specific industry segment, or even within a supply chain or logistics discipline. So, explains Jacobson, if you are working for a drug maker, you could be restricted from working in the pharmaceuticals industry.

These sector-specific or functionally specific restrictions are designed to prevent former employees from carrying trade secrets, business strategies, pricing strategies or other sensitive information to a competitor. If, for instance, a company's supply chain execution is a competitive advantage, it might try to exclude its logistics executives from working in other areas of its industry or market.

From the company's perspective, the negatives of asking employees to sign non-compete agreements fall into two categories: the effect on morale and the cost of enforcement. For a current employee or prospective hire, there are the risks of not being offered a job or promotion without the non-compete, and there is always the risk of having to defend one's self against a former employer's attempt to enforce an agreement you signed.