Employee Agreements – Helping Protect from Loss to Competitors – Post #15

Friends, there’s a way to build the company of our dreams. We small business owners CAN build an awesome team that pulls just as hard as we do toward our business goal of building value in our company in order to sell it for maximum profit. We can assemble our dream team of employees and executives. Once we do, we can cultivate company culture and add employee incentive programs to ensure our team happiness adding to company success. But what happens if employees leave? What can be done to protect us business owners during times of employee turnover or team member changes?

Podcast Time Index for “Employee Agreements – Don’t Share the Corn Seed, Share the Harvest”

00:45 – Don’t share the corn seed!
03:39 – You must not train Your Competitors’ Labor Force or Your Competition
06:19 – What are Business Owners to do?
07:04 – Fear and Greed
09:50 – Greed: Sweet Greens Rewards
14:06 – Fear: Big Stick Persuasion
18:17 – Why does this matter?

Help NOT Wanted

I shared a “Help Wanted” post on my Facebook feed some time ago, searching for the right team member to fill an executive position in my company. Sure enough, one of my friends gave me the name of a candidate who seemed to fit the position profile. During an interview, I asked this particular candidate, “Where do you see yourself in a couple of years?” I’ll never forget his reply. With no shame, the young man said, “You know, I’ve always wanted to start my own business. I thought working with you would give me enough information to go out and start my own business one day.”

Now if you’re a business owner, that’s an instant, “no-hire!” Intrigued, though, I queried, “Tell me about it. What type of business are you thinking about starting?” He said, “A wealth management firm kind of like yours. I want to work with small business owners like you do.” I’m thinking, “Are you serious?!? You’re going to come in so I can teach you how to go out and become my competition?” Yeah, I was born at night, just not last night, buddy.

The Allure of Greener Pastures

Why should we invest all of our time, energy, and money training and equipping another company’s employees? We shouldn’t. But if we train our team members and they leave to be part of a competitor’s workforce, or even worse, become our competition, we are doing just that. How ludicrous would it be to give our competitors our best employees and the knowledge they’ve gained from us? Yet, so many businesses lose good, quality team members to their competition. According to Wrike employee turnover already costs US businesses $160 billion a year. 

Even with incentives in place, competing companies might lure our team members with promises of greener grass. Sometimes, we have to gently prod our employees back in the right direction with “sticks” of liability protection for ourselves. With company-specific protective agreements, we business owners can reinforce team member loyalty and protect ourselves from harm. These protective agreements can also clarify employee/employer expectations at hiring time.

Employee Agreements Can Help “Encourage” Loyalty

If our competitors do happen to catch our employees’ eyes, what can we do to guide our team members gently back to our company? A healthy fear of ramifications can lead our team members in the right direction to begin with or lead them back in our direction if they stray.

What do I mean? What agreements or restrictions can we business owners put in place to help keep our employees from becoming our competitors or from going to competing companies?

• A Non-Compete Agreement keeps your employees from working with or as your competition.
• Non-Solicit Agreements prevent your employees from soliciting customers away from you. They also prevent vendors from soliciting your employees.
• A Confidentiality Agreement keeps employees from revealing company secrets if they leave or talk to other business owners.
• Intellectual Property Agreements keep work employees did for a company within that company if the employee leaves.

Guys, here’s the deal. We all want to build a strong team of employees who have our best interests at heart. There’s a fine line between making employees fearful and establishing healthy protections against employee retribution or employee turnover. Before enforcing any employee agreements, consult with your attorney to protect yourself from any known or unknown business risks. Not all court jurisdictions honor employer-employee agreements, so check with a legal professional before you implement any of them to be sure they actually protect you.

Buyer Happiness Brings Seller Reward

Employee turnover and employee unhappiness can hurt a company’s value from the buyer’s perspective. If a buyer notices that your current employees don’t want to be at work or that your best employees have already left, why would they want to buy your business? If they did decide to buy, they’ll probably refuse to offer top dollar for your business.

On the other hand, if you had a business that was treating employees the way you wanted to be treated, one that offered clearly defined long-term and short-term incentives, and one that implemented protections against employee harm, your business could bring top dollar at the sale’s table.

Next article in our quest to build your business, we will be addressing your Marketing… are you doing enough, to the right people (if you are marketing at all)?  So guys, like I always say, life is hard. Business can be complicated. Money doesn’t have to be. Let’s continue to make our lives, at least, financially simple.