Forced Retention

Forced retention refers to the act of applying pressure to employees to deter them from leaving a company. The most common way to do this is through legal means, such as non-compete and non-disclosure agreements. Given an adequately broad agreement, a company may threaten employees who try to leave for competitors (or in some cases, non-competitors) with legal action. In some countries, the government may implement similar laws or policies to prevent or discourage employees from leaving certain companies or government organizations. It has also been applied to companies which offers significant financial benefits to employees to encourage them to stay, in particular after a merger (for example, a minimum period to qualify for stock options), but this usage is commonly considered incorrect.

Forced retention is most commonly used by companies on the decline, or at least with limited growth prospects. Top employees will often join a small or mid-size company, with significant growth potentials. They will also often join financially stable companies, which can afford to provide employees with very good remuneration packages, and large amounts of freedom (for instance, in pure R & D departments). Once the company begins to decline, many of the top employees will want to leave for greener pastures, while the poor-performing employees (who may have a difficult time finding employment) will cling to their jobs, radically speeding the decline. Companies will occasionally implement forced retention policies to try to stem the brain drain.

A recent example of forced retention involves Microsoft Corporation, when its stock price levelled off, limiting the value of its stock options and stock grants. Microsoft began scaling back on its employee benefits, resulting in a number of key Microsoft employees, leaving for Google, Yahoo!, and a number of startups. Eventually, Microsoft began to threaten, and in some cases, filed lawsuits against departing employees. While the actual number of lawsuits filed was fairly small, they were chosen to serve as examples. Due to Microsoft's broad scope (virtually all technology companies compete with Microsoft in one form or another), Microsoft was able to threaten lawsuits even for departing employees whose new jobs did not substantially overlap with their work at Microsoft. This had a chilling effect on the culture of the remaining employees, who were uncertain if similar lawsuits would be filed against them, if they leave. The most publicized example was the case of former vice-president Kai-Fu Lee, who left Microsoft for Google. As Microsoft had, at this point, been engaging in forced retention policies for some time, Kai-Fu Lee negotiated to have Google cover all legal costs, should Microsoft file a lawsuit to prevent his defection.

Another example involves the US military in Iraq. After invading Afghanistan and Iraq, U.S. military resources were stretched. As a result, the military implemented a stop-loss policy, under which it could unilaterally extend a soldier's contract.