Broker talent: painful breakups

Breaking up is never pleasant. Sometimes the best you can do is bite your tongue, vacate the shared property and attempt to part ways with your dignity intact. But when your loved one leaves you for your best friend – with a bag full of your family heirlooms in tow – it can be difficult to take the moral high ground.   

Team moves are the professional equivalent of a breakup – messy, painful and leaving a bitter taste in the mouth. However, unlike the traditional break up, where getting drunk, standing outside your former lover’s house and bellowing Chicago’s If You Leave Me Now may be your only outlet, aggrieved businesses have other options at their disposal.

The legal wrangling between Arthur J Gallagher and its former international CEO David Ross and chief financial officer Mark Mugge – and the ongoing dispute between Willis and JLT over the departure of the former’s 22-man fine art and specie team – have shown an increasing willingness on the part of employers to seek recompense through the courts when they believe their business interests have been damaged.

Although litigation following team moves has always been a feature of the business climate, the past 12 months has seen a heightened amount of broker-specific wrangling, raising the question of what is behind this upturn.

Quest for scale
Many say the quest for scale is to blame, with a desire to grow quickly making the hiring of a ready-made team more attractive than growing or building your own. And evidence seems to bear this out.

“Our annual CEO survey showed 70% of CEOs see limited availability of talent as a threat to their business. When organisations are looking to grow, the easiest way to do that is often to take a talented team of individuals from a rival,” says Dean Farthing, partner in PWC’s financial services human resources division.

Chartered Insurance Institute president Ashwin Mistry says the limited pool of qualified professionals is also to blame.

“There is undoubtedly a dearth of talent in the industry. If you’re qualified to ACII level with a book of business then you are probably the most marketable individual in the industry at the moment,” he explains.

But while the offer on the table may be difficult to refuse, those departing often forget the contractual obligations they agreed to honour. There are undoubtedly situations where individuals knowingly breach their contractual obligations, but discord often stems from a misunderstanding of how far-reaching such obligations are according to Claire Dawson, employment lawyer at Slater and Gordon.

“Employees are often not aware they have implied legal duties over and above the express written obligations set out in their employment contract. For example, in most contracts it would be implied that an employee should not compete with their current employer or engage in conduct where there is a conflict of interest,” explains Dawson.

“The more senior you are the more likely you are to have more onerous duties implied in your contract of employment. For example, if a senior member of staff discovers there is a team move planned, or has been asked to be part of a team move, they may have a duty to report that to their employer,” she says.

For this reason, individuals can find themselves in a situation where, even if they don’t have any post-termination restrictions, an employer will allege that prior to leaving they breached aspects of their contractual duties while in employment, she warns.

As indicated by the Ross and JLT specie team situations, team moves can often be more trouble than they are worth.

“There’s no doubt that scale is rewarded in our industry, both through financial terms and more strategic support from insurers. But team moves are not a quick fix,” says Barton.

“If you’re going to abide by covenants then there’s a very long lead-in time. You have a lot of sunk costs before that opportunity will make profit and generate payback. We would rather grow our own or buy a business.”

As for the aggrieved party, wronged employers increasingly have judges on their side if they can produce evidence of wrongdoing, says Tony Wilson, partner at Hill Dickinson: “The courts are showing huge willingness to grant springboard injunctions [such as that seen in the case of QBE Market Services Limited vs Dykmore & Others] if the evidence is there, but you need to act very quickly. You need to prove the former employers are using confidential information acquired during your time with them. If you leave it too long you lose the right to relief – you’ve got to try and stop the defection and limit the damage.”

“Gardening leave is a very powerful tool because once [the member of staff] is out of the building they can’t access that information,” he adds.

Implications of data protection
One aspect often overlooked by those tempted to take client details with them when leaving a firm is the implications from a data protection perspective. In an increasingly regulated environment, the digital equivalent of stuffing a few business cards in your pocket could now land you in hot water with the Information Commissioner.

Wilson cites the case of paralegal James Pickles, age 29, of Kinglsey Crescents, Bradford, who was prosecuted and fined £300, with a £30 victim surcharge and £438.63 in prosecution costs, for illegally taking information about more than 100 people from Jordan’s Solicitors in Dewsbury, Yorkshire before leaving for a rival firm in April 2013. He says: “Employees don’t realise they could be prosecuted under the Data Protection Act.”

There are, however, two sides to every story – and sometimes the legal action stemming from a high-profile individual or team departing can be the business equivalent of a spurned lover lashing out.

“In some sectors the big employers don’t want to be seen as a soft touch on team moves and they think if they allow one to go through unchallenged then others will think it is easy to follow suit. Also, sometimes there can be very big personalities involved and they don’t want to lose face to their counterparts at a competitor so there’s personal motivation behind it,” says Dawson.

Greater sense of loyalty
Even in cases where firms are bang to rights when it comes to pursuing their former [or technically still under contract] employees, giving them reasons to stay in the first place is a far better and much less costly route than chasing them through the courts once the relationship has soured, according to Farthing.

One obstacle to this can be the fact that brokers – and wider insurance professionals – often have more allegiance to their team and immediate managers than the wider organisation. But there are things that can be done to engender a greater sense of loyalty, he says.

“A number of organisations have done work around culture. Culture used to be seen as a soft option but when you get it right it can generate additional reasons to stay beyond pay. Millennials, in particular, are looking for more than money. Career development, work/life balance and the brand are really important. What does the organisation stand for and what values do they associate with it?”

Jelf Insurance CEO Phil Barton agrees: “The immediate manager has a huge influence on people but the organisation is not powerless. The reason good people leave is because they can’t see their future. You retain good people by communicating effectively internally. By which I mean listening to and receiving feedback from them as much as transmitting a message you want to convey.

“The challenge of retaining talent in a people business is ever present and there’s no easy way of doing it, except listening hard and helping staff see the journey they can travel within your organisation.”

Wider issues
While Barton agrees companies should work to develop talent, Mistry says he believes the team move phenomenon is symptomatic of a wider issue of professionalism and ethics. He comments: “I’ve been pushing the argument for moral compass in the industry via the CII.

“We’ve fallen into the trap whereby people sell their businesses because they think they can come back whenever they want, which is creating volatility at the leadership level. People now think a job is not for life, it’s just a stepping stone to something else. The industry is like a family. If children see their parents behaving badly then they will emulate them.”