Author: Nancy Wise

It is generally accepted among business leaders that “poaching” or hiring a competitor’s employees violates an unwritten rule of business and may be unethical. A new research paper concludes that as long as their actions are not deceptive or illegal, companies that intentionally identify, contact and offer employment to a rival firm’s employees are within the bounds of ethical behavior.

In “The Ethics of Lateral Hiring,” which was published in the latest Business Ethics Quarterly, Associate Professor of Management Tim Gardner suggests that the practice of poaching other companies’ employees should be an accepted or even encouraged form of business competition.

Companies that declare an ethical breach following the loss of an employee to a rival are claiming ownership of employees in a way that hearkens back to feudalism and indentured servitude, says Gardner, who co-authored the paper with Jason Stansbury of Calvin College and David Hart of Brigham Young University.

“When my colleagues and I started this project,” Gardner says, “the first questions we tried to address were: Where did employers get the idea they owned their employees’ energies, efforts and human capital? And why does that line of thinking continue today?”

Based on a review of historical and contemporary accounts of employment relationships, the authors concluded that modern employers don’t generally believe they “own” their employees. But by suggesting, even subtly, that lateral hiring is unethical, employers are misusing ethics to try to prevent rivals from using a common, fair and competitive business practice, the study says.

Instead, responsibility for entertaining or rejecting an outside offer rests with the employee in question, the authors suggest. Only employees can determine whether, for example, a current employer provides a collaborative environment or whether they have reaped the benefits of educational and training opportunities and owe their current employers more time.

“Another tactic is the so-called ‘gentleman’s agreement’ among firms that discourage lateral hiring. That is not much different from gas stations on the same street corner agreeing to keep the price of gas high,” Gardner says. Informal agreements not to hire each others’ employees benefit the colluding employers to the detriment of the employees. Since the employees are not party to these agreements yet are affected by them, the practice is clearly unethical, the authors say.

Gardner and his colleagues point out such agreements might also be illegal. In June 2009 the U.S. Department of Justice opened an investigation of Google, Yahoo!, Apple, Genentech and others for allegedly agreeing not to target and recruit each other’s employees.

A version of this article originally appeared in National Review Online on Aug. 12, 2009.

German Sterligov is well-known in Moscow, but unlike Roman Abramovich, Oleg Deripaska and other publicly flamboyant Russian billionaires, he is little-known abroad. Sterligov neither sails the Caribbean nor drinks in London’s Mayfair district; most of the time he lives a traditional peasant lifestyle deep in the Russian countryside with his wife and five children. In winter their farm is accessible only by horse-drawn cart, and the nearest house is seven miles away. Sterligov’s way of life makes a strong Russian Orthodox statement and amuses Moscow’s public.

Sterligov made his fortune in the 1990s running a large barter business. He founded a mercantile exchange where Russians traded products they were unable to buy or sell for cash. He lived the luxurious life of a billionaire and owned properties in Moscow, London and Manhattan. In 2004, after an ill-fated bid for Russia’s presidency, Sterligov sold everything and moved to the countryside.

However, the financial crisis forced him to put on a suit, get in a car and find his way back to Moscow. Today, when not milling his own flour or hatching his turkeys and chickens, he occupies the Russian capital’s newest skyscraper in the trendy Moscow City district. He rented “B” Tower’s entire 26th floor and injected $50 million into the new business.

Sterligov is an economic mastermind who’s helping Russians overcome their country’s lack of financial liquidity. His barter business model has been applied across Russia, particularly in Moscow. It may be the main reason why today, despite economic turmoil, Moscow’s roads get paved and its skyscrapers continue to rise.

Sterligov’s business model may appear confusing, but it’s basically simple. If a provider of goods or services cannot find a client with money, they can offer their product in exchange for other goods or services. But since straight-up exchanges are the exception rather than the rule, additional participants have to join the circle of exchanges in order to satisfy everyone’s needs. Stergilov uses an advanced computer system to match product with consumer.

Often the series of exchanges begins with a debt. When Sterligov described the process to the Moscow Times, he used a steel company’s debt of 1 billion rubles to a coal company as an example. The steel company might not have the money to pay its coal bill, but it will soon be able to put 1 billion rubles’ worth of steel into the exchange. The coal company can provide a list of goods or services it will accept to fulfill the steel company’s 1 billion ruble debt. Eventually another company—or a whole chain of companies—will bridge the gap, taking the steel and either providing products or services directly to the coal company, or bartering them to the coal company’s eventual benefit. When all is said and done, every player has made a fair exchange, and Sterligov’s business has taken 1 percent of each transaction’s value.

Russia’s barter tradition comes not only from medieval history but also from the Soviet Union’s latter days and the early 1990s, when workers wouldn’t get salaries for months or years at a time and had to become creative to feed themselves and their loved ones. Factories paid workers with products, and babushkas from toy factories could be found at train stations exchanging stuffed animals for stuffed cabbage.

Modern Russians have witnessed several financial defaults and were prepared for another crisis. Every Russian family lost its savings in 1991 during the Soviet Union’s implosion. In 1998 the banking crisis swallowed the savings that Russians had accumulated after the painful rebound of the mid-1990s.

As for the current economic conditions, common people in Russia joke that those who weren’t wealthy didn’t lose anything, those who accumulated billions during shady privatizations endured a fair adjustment of their fortunes, and no one became homeless or starved. This black humor comes naturally to Russians. Of course, the same could also be said about their longstanding tradition of barter. And like their humor, it has helped them survive centuries of hardships.

Moscow native Yuri Mamchur is President of the MBA Class of 2011. He founded and edits Russia Blog, directs the Discovery Institute’s Real Russia Project, and serves as the Executive Director of the World Russia Forum.

© 2009 by National Review Online, Inc., 215 Lexington Avenue, New York, NY 10016. Reprinted by permission.

According to a recent large-sample study, the extent to which medical residents—physicians in training—are involved in reporting safety incidents is limited, indicating a need for more institutional focus about how, when, why and where incidents should be reported.

The study was conducted at a major medical center in the Midwest, with the intent to explore whether residents are well-trained in reporting safety incidents and the hope that the findings would indicate how to do a better job in the future, says Vanderbilt’s Associate Professor of Management Rangaraj Ramanujam, who co-authored the study with Dr. Lia Logio of Indiana University School of Medicine (IUSM).

Their findings were reported in an article, “Medical Trainees’ Formal and Informal Incident Reporting across a Five-Hospital Academic Medical Center,” which appeared in the January 2010 issue of The Joint Commission Journal on Quality and Patient Safety.

Ramanujam applauded IUSM’s desire to understand and improve on incident reporting among medical residents. “The underlying goal of the study is to determine how best to train physicians to become more engaged from the get-go in improving patient safety,” he says.

The good news is that the researchers were able to recommend a number of steps to improve incident reporting by residents—from intensive role modeling by faculty to regularly informing residents about improvements resulting from incident reporting.

However, medical residents often do not know how to file formal reports of safety incidents, which, the researchers point out, are not all medical errors. (Incidents could range from patient care that was not as intended to occurrences that were simply inconsistent with routine.) Further, even when residents did know how to file formal reports, they did so at lower-than-desired rates (38 and 42 percent, respectively, within the two groups surveyed).

On the positive side, the study found that residents frequently discussed safety incidents with peers and some faculty on an informal basis, demonstrating awareness that even small incidents merit attention.

The study involved two online surveys of more than 900 medical residents and fellows as they rotated among five IUSM-affiliated hospitals, including a large community hospital, a university referral hospital with expertise in tertiary care, a well-known children’s hospital, a VA hospital and a public county facility. The study—the largest of its kind—is also among the first to explore whether and how residents’ reporting behaviors change as they move among hospitals.

Ramanujam says a key way to involve more residents in the process of improving patient safety is for academic training to emphasize and encourage such engagement. At the same time, the study found that residents’ reporting behaviors also seem to be shaped by unique attributes of different hospitals—even within the same academic center. Therefore, individual hospitals must also encourage residents to report incidents and emphasize their roles in improving the whole system. Finally, Ramanujam adds, academic centers need to find a way to talk with hospitals about the specific behaviors that they would especially like to encourage in their residents during rotational training.

“The findings are important in an era of health care reform. While the main impact of better incident reporting by residents will be seen once they move along in their careers and have more responsibility for safe patient care, it will also mean fewer mistakes that can be costly for patient safety and the bottom line,” he says. “Some of the reasons residents don’t report more incidents are mundane. So the proposed solutions are simple, but their long-term effects are potentially profound.”