It looked as if the team had simply gone to lunch, as they had dozens of times before. The difference was that the team leader, a Melbourne-based partner in a major legal firm, was considering a job offer from another firm. She wanted to take her team with her, although they didn't know that yet. At lunch she told them about her plan to move, figuring that that would plant the seed. At roughly the same time, 1100 kilometres north in Sydney, a senior investment bank executive who wants to be known as Steven was sitting down with a headhunter in a quiet coffee shop located some blocks away from the financial heart of the city.
A few weeks earlier, Steven's firm, a global investment bank, had charged him with finding an equities team. Money was no object. Steven knew who he wanted and had hired an executive search agent to make the initial approach. Steven hoped to get the rest of the team on his own, once the leader had signed on.
On any given day, tens, if not hundreds, of similar meetings are taking place around the country. If you're cooking up a mass exit, the last thing you want to do is show your hand too early. The restaurants, bars and coffee shops that have always been used to sound out a potential candidate are now hatching complex recruitment manoeuvres focused on persuading high-performing teams to jump ship.
Recruiters dance delicately around confidentiality requirements while the team leaders they romance do what they have to do to orchestrate a breakout while bound, at least in theory, by fiduciary duties to their current employer.
This particular form of bodysnatching has run rife through financial, legal and consulting circles thanks to a buoyant economy, plenty of money, a shortage of talent, and the considerable benefits a high-performing team can deliver in both the short and long term.
"I am sure I am not alone among managing partners in law firms in wanting to get not just the team leader and the second in command," says Mark Chapple, managing partner at Baker & McKenzie. "If there are one, two, three or even five outstanding senior associates, we welcome them with open arms."
In financial services the rate of change has left onlookers dizzy, as managed fund portfolio managers, equity analysts and brokers take their friends with them when they leave.
In September, Standard and Poor's produced a report titled "Australian Equity Managers Caught in a Game of Musical Chairs" that detailed who had moved where and outlined the impact for investors. A month later, the report had to be updated. Three weeks after that, broking giant Goldman Sachs JBWere was left reeling when 11 of its Perth-based advisors defected to Citigroup just three days after 14 advisors in the GSJBW Adelaide office jumped to Macquarie Bank.
The financial implications can be substantial. In December last year, Suncorp Investment Management lost its biggest institutional Australian equities investment mandate after its asset management team of nine left to set up a boutique fund.
There are even serial jumpers. In July, Credit Suisse persuaded Issan Eid and Steven Ng to move over from ING Investment Management. Less than two years before that the two were running Macquarie Funds Management Small Companies Fund.
None of the investment banks approached by AFR BOSS would speak on the record about their preference for teams, or how they go about persuading a team to move. Industry insiders say many are having trouble not sliding off their wallets, such are the sizes of the remuneration packages used to lure people across. Organic growth is far too slow for global investment banks, whose pockets are bottomless when it comes to bankrolling their expansion, while smaller boutique outfits offer the chance to strike it really, really rich while doing it your own way.
The stars are remunerated by funds under management. Bring five people with you and you have a business straight away.
"Loyalty is there while you can promise growth and exciting times. But as soon as someone comes with bigger bucks, I'm gone,'' notes one recently appointed team leader. "And when I go, my team will come with me.
"The person who leads the business guarantees the wealth of those underneath him," the leader said. "It's like a team of ducklings. They need a daddy duck or else they all go squawking in different directions."
Jerome Lander is head of research at Van Eyk Research, a fund rating firm used by the majority of financial planning firms to pre-approve the funds they can recommend.
Part of his job is to understand what motivates those who are in charge of investing other people's money. He says a team that is likely to move usually has a certain smell about it.
"You have to put yourselves in their shoes and ask, 'if I were them, would I like to stay where I am?' So look at their incentive package to see if it is in line with performance, and I look to see if the organisation rewards performance in the right way and if it provides for career succession.
"I also look at how people work together," Lander says. "When it comes to looking at teams, people's body language often gives them away. Most people are not good liars. So if a team works together well, and is not remunerated well, I will know there is a risk they are going to move."
It's not hard for others to pick up on those signals as well; especially given that potential employers are already likely to be on nodding terms with the team they want.
''High performers in an industry tend to know other performers," says Tony Young, chief operating officer at KPMG.
KPMG has worked hard to bring down its attrition rate in recent years and it is relatively rare for a partner to walk and take a team with them. But recent moves in legal circles suggest no industry or professional breed is immune from the bodysnatching syndrome.
Cain Jackson was a partner at DLA Phillips Fox when he was tapped on the shoulder earlier this year to open a Melbourne office for a boutique firm, Wotton + Kearney, which is focused squarely on Jackson's practice area, insurance law.
Jackson knew the founding partners, Phil Wotton and Dave Kearney, who had set up the firm after leaving Phillips Fox with a team of 10 people five years earlier.
"They said to me 'Are you interested in setting up the office?' The obvious corollary to that is I needed to take my team." Jackson says. "Knowing I could do that helped give me the incentive required to make what was a pretty huge move."
The decision-making process was, Jackson says, "surprisingly quick", for him at least. He ended up resigning in tandem with senior associate Nick Lux. Second-year solicitor Jin Lee followed later.
"Nick and me had been talking about the changing nature of insurance law and the demands of clients that big firms struggle with. We had a lot of complaints about how slow the system was to react. Now we had a chance to change that.''
Jackson was conscious that it might not be such a straightforward decision for Ms Lee and waited until he had left Phillips Fox before making the approach.
"There are downsides for someone of her age (28) making the jump from a big corporation to a smaller firm," he says. "Big firms have obvious benefits such as international travel and experience, and they also give young lawyers a chance to change their practice area.
"I had a chat to her and said, 'I would like you to work here and if your ambition is to be an insurance lawyer, it's all blue sky here.' It's all about mentoring; she came to our team when I was a senior associate and the three of us had a close connection. I'm fairly impatient with people who don't cut the mustard."
The team move was completed when paralegal Angela Schofield came across.
"We all knew what we had complained about, what we wanted to improve. After working closely with a group of people, you understand each other's idiosyncrasies, strengths and weaknesses."
While such jumps are becoming more common in the legal profession, they still evoke strong feelings for those who believe young lawyers in particular should consider where their loyalties lie. Recruitment experts say a person's loyalty is to their team first now with the employer a distant second, but this doesn't sit well with many in the "noble profession".
''Speaking as one who has both left and been left, I can say that when a team leaves it causes tremendous ructions," says one lawyer who declined to be named. "Reactions range from anger to a sense of abandonment and absolute panic. It's a very difficult time."
Jackson acknowledges that there was acrimony over his departure, which sparked a range of reactions. Interestingly, he says now he could not have picked who would be feeling what.
"Some of my mentors were surprisingly negative but I also received tremendous support from some individuals."
The recruitment of teams demonstrates the value of interpersonal relationships, or what Ian Williamson from the Melbourne Business School describes as "social capital".
"Thirty, even 20, years ago there was a great emphasis on designing a process. People were interchangeable; as long as there was a process there was a lever to pull to drive a return," says Williamson, associate professor of human resource management at MBS. "Now there is a great push toward customisation, and you can't create a process around that because it involves individuals thinking collectively about how to accomplish a complex goal."
Williamson notes that this type of work has always been common in the academic world, where scientists and researchers have long moved in groups because they have developed a "a working relationship where there is more than just intellectual capability.
The nature of work is changing, so social capital is of more value than it has been in the past," he says.
Teams are, quite simply, good for business.
"If you think about a law firm, the typical junior lawyer doesn't make any money for two to three years," Williamson says. "A partner knows that if he or she has to train up a new one it will cut into the partner's earning capability. So it is pretty straightforward in that sense. A senior partner is not doing research or writing briefs, just like a fund manager is not doing the nuts and bolts analysis of industries and companies. They rely heavily on subordinates to do that, to give them a clear and articulate synopsis of what they should make their decision on so they can do other value-add activities, like meeting clients."
However, there is one possible danger in that familiarity can cramp innovation.
"At some point the relationship between homogeneity and performance declines, and that rate of decline accelerates in firms dealing with a lot of uncertainty," Williamson says. "If you have a team that was diverse initially, you can probably resist some of those negative outcomes. If they have been together for a long time, however, and have very similar backgrounds and you push them into a novel setting where they have to engage in a different type of task, they may find that difficult.
"So it is a wise, and effective, management strategy to find and manage talent, but it is not without its shortcomings."
This is an interesting point, given the remarkable run of economic prosperity that has driven the furious pace of recruitment in recent years. It is easier to succeed and shine in good times and perhaps some of today's high-performing teams would start to look decidedly second rate if the market turned.
Come a downturn, there could be fewer deals being brewed in coffee shops.
Fairfax Business Media
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