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A Better Partnership

Ahead of the Curve Auto Supplier Blog

February 23, 2017

Are You Paying Too Much for Your Talent?

Talent attraction and retention: it’s a concern that has kept auto execs up at night ever since the industry surged back from its crisis years. And with traditional automakers and new industry entrants from Silicon Valley battling for the cream of the crop in the technology and engineering spaces, the race to attract and retain talent has never been more important for the industry.  
 
Though it’s not everything, we all know that with highly sought-after talent being in the driver’s seat, offering candidates a competitive compensation package is a key piece of the talent attraction and retention puzzle. Without it, companies can not only expect to forgo top talent, but could also see current talent jump ship for better opportunities.

So, all other things equal, paying your candidates the most should help you win the competition for top talent, right? It seems simple enough. But, as Google learned last year, paying your key players too much too soon can backfire. Just after revealing its first “self-driving" car in 2010, Google created a compensation system that tied the compensation of certain executives to the value of the project, ultimately giving those executives hefty payouts several years into the project, even though the end goal was still years off. With those payments came freedom from financial dependence on their jobs at Google and an ability to leave Google if they wanted to – whether because of concerns regarding leadership or strategy, desires to join a self-driving technology competitor, or to pursue their own startup. And leave they did. Beginning in 2015 and at an increasingly rapid pace in 2016, several Google car execs left Google. One former Google car exec started Argo AI, an artificial intelligence company that just received a $1 billion investment from Ford to develop a virtual driving system for Ford’s autonomous vehicle. Others left to form Otto, a self-driving truck company that was purchased by Uber. Yet another is working on a startup.
 
Unless they want to find themselves losing some of their best and brightest, suppliers should learn from Google’s misfortune. Suppliers must structure compensation plans that, while fresh and creative, not only comply with legal requirements, which can be more complicated than you might think, but also in a way that allows them to reap the full benefits of their investment in key employees.
 
In addition, whenever possible, suppliers should also have appropriate covenants not to compete in place with all vital personnel. But before you have each employee sign the same agreement, you should know that covenants not to compete aren’t a one-size-fits-all. Each state interprets and enforces (or refuses to, in some cases) them differently. As such, a supplier should not only have its counsel tailor non-compete agreements with the relevant state’s policies in mind, but should also consult with counsel to determine to what extent the supplier can prevent critical recruits from leaving and competing with it before making the decision to hire.
 
Our Automotive Industry Group’s employee benefits and labor and employment attorneys have substantial experience assisting automotive suppliers navigate the talent challenges that they face. To learn more, please contact a member of our Automotive Industry Group.

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