When your top performer resigns and discloses she is joining the competition, will you be gutted that a rockstar is leaving or feel betrayed that she is joining the competition? It’s likely to be the latter more often. But the opposite is true, as well: We also believe that the best place to hire from is the competition.
Just recently, Meta’s new division — with an eye on developing artificial general intelligence (AGI) — announced 11 key hires from arch rivals like OpenAI, Anthropic and Google. If reports are to be believed, Mark Zuckerberg has been personally leading the hiring campaign by hosting some of the potential hires at his home. This prompted OpenAI CEO Sam Altman to claim that Meta offered $100 million signing bonuses to some of his employees. And Meta isn’t alone. The move echoes industry-wide trends. This year alone, Microsoft spent $650 million acquiring much of Inflection AI’s team while Amazon hired the co-founders of Adept, a start-up developing AI-powered agents. Begs the question whether anti-compete contracts aren’t at play?
Anti-compete contract
In a recent case of a software engineer vs his former employer, the Delhi High Court ruled that the non-compete clauses blocking job switches are not enforceable. The court said that Section 27 of the Indian Contract Act, 1872, clearly says that any agreement that restrains anyone from exercising a lawful profession, trade or business shall be void. A research handbook published by the leading global law firm DLA Piper offers insights into anti-compete laws worldwide. Interestingly, among the 34 major countries they studied, only in five, including India, are the non-compete employment contracts non-enforceable. But, just in case you have forgotten the fine print of your employment contract and want to browse it again, you will find an anti-compete clause glaring at you. Did the MNCs bring their global template to India and were we only too happy to copy and paste it from entry-level jobs to senior leaders, making no distinction between the dictates of the roles and the laws of the land?
High stakes
Cognizant’s hiring of Wipro’s former CFO sparked a legal battle, which eventually got settled after nine months. The current legal proceedings between Cognizant and Infosys, involving allegations of anti-competitive practices in the US healthcare IT market, show that the stakes are high for these enterprises. When firms lose leaders who hold key customer relationships or techies who have the IP to build new-age products or platforms at the competition, the threat is real. This may prompt organisations to protect their interests, which explains the suits. In spite of these potential legal exposures, why do boards still hire CEOs from the competition? The mindset of large enterprises with deep pockets is to ‘buy’ talent, rather than ‘build’ it, since this takes time, and the risks of a potential anti-compete suit are outweighed by the benefits of the hiring.
The popular ask from hiring managers is “We want to recruit someone who hits the road running”.
When Zomato wanted to boost its live events business, it didn’t promote someone internally— it hired the live events head from BookMyShow and designated him as Founder. Ditto Starbucks — within 17 months of hiring a new CEO, Laxman Narasimhan, it replaced him with a leader from Chipotle, and immediately its stock price went up by 20 per cent and has remained steady since. Even the stock market cheers when you hire from the competition.
The cultural paradox
The hypocritical mindset of enterprise culture is hard to miss. We hire our top talent from rivals but internally we berate them on a regular basis to build the competitive spirit in our teams.
Whenever we chest-thump about our products, services or employers, we can’t help but reference them against our competitors, and hence it’s emotionally hard to accept anyone amongst us joining a rival. Hence, we resort to practices like ‘garden leave’, immediate relieving, legal threats, and/or holding on to financial dues as a mark of retaliation. All these also send a ‘message’ to colleagues of the consequences of joining the competition.
These over-the-top reactions breed a different set of behaviours among team members, who eventually start lying about their health and personal matters when they leave or join friendly employers briefly and eventually join competitors a couple of months later.
Sportive mindset
I agree it’s an uphill task to eliminate the anti-compete clauses we have included in all roles within our enterprises. But can we take a leaf out of Belgium, where non-competition clauses are valid only if the employee earns an annual gross remuneration of at least €78,706?
Day in and day out, our leaders talk about the strength of our brands, the legacy of the company, loyal customers, enviable culture, best financial rewards and, not to forget, the Best Employer certificates that we keep flashing. However, our employment contracts don’t reflect the same spirit that we find on our office posters.
Are enterprises built with such weak foundations that one leadership movement to the competition can bring them down?
What’s the fear? When sports clubs and premier leagues allow players to be bought and compete against the club where they were trained at, why not enterprises?
(Kamal Karanth is Co-founder of Xpheno, a specialist staffing firm)
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Published on July 6, 2025
