|Susan Solovic, The Small Business Expert is an award-winning entrepreneur, an attorney, a New York Times best-selling author, a media personality and a highly sought after keynote speaker.|
How to Keep Employees from Becoming Competitors
After hearing me speak or seeing me on television, many small business owners email me with questions regarding their businesses. Recently, I've been getting a significant number of questions regarding employees who leave to become a competitor. I selected a representative one to share.
Eric from Wisconsin wrote that he had successfully grown his marketing business over several years and had reached the pivotal moment where he felt he needed an employee to help him manage his current workload so he could add more clients. Eric’s fear about adding staff wasn’t focused as much on the financial risk as it was the risk of training someone on his unique strategies, then watching the employee take that knowledge and start his own firm or go to work for a competitor.
Yes, that can happen and it’s a risk every business owner takes. Whether it is intellectual property, a customer list or even something as simple as excellent hands on training, an employee may leave and attempt to take valuable information with him. My father groomed a young man in the funeral business, taking him in as an apprentice and teaching him the business for over 20 years. We learned from a family friend that he was in the process of building a new funeral home and was copying files at my family’s business at night. My parents and I confronted him and found out that it was true. We asked him to leave immediately. He cried and said he was sorry, but the damage was done.
There are two important things to acknowledge. First, you can’t build a successful, sustainable business without a team. I call it the MYTOP theory. Multiply Yourself Through Other People.
Secondly: There are unethical people in this world and one of them may end up working for you at some time. As I said, it’s one of the risks of building a business. There are, however, a few things you can do to protect yourself.
Make your company a place where people want to work. Create an environment that is empowering and fun. Give your staff the opportunity to profit as the business profits. Allow them to feel part of the success and they are more likely to remain loyal. When your staff feels a real part of the business, there is less incentive to leave.
Ask employees to sign a non-compete agreement as a condition of their employment. Non-compete documents must be reasonable in time and scope, and you cannot bar an individual from making a living except to the extent that it is necessary to protect your business. The extent to which non-competes are allowable varies per jurisdiction so be sure to consult with your business attorney.
Some people believe non-competes don’t provide much value, but in my opinion it minimizes the risk of an employee jumping ship to go to work for a competitor or to start his own business. At least when the employee signs the document, they are aware that there may be serious consequences for actions they take that could cost you business. If my father had asked his employee to sign a non-compete, the employee would not have been able to launch a competing business in the same small town. An important lesson learned.