To Compete or Not to Compete...

...I don't get a say in that question!



Have you ever signed a non-compete agreement? Why!?! Chances are you are like one of my many minions and your hand was guided through the loops and lines and curves of your Herbie Hancock by fear--fear that you would not have a job unless you signed. So what do you do with it and would it really hold up in court. Of course any lawyer would say definitely maybe. As of this morning, I have heard arguments for yes and no. There is the philosophy that a non-compete can be written in such a way that it can not be broken by the wisest of lawyers, but that monster is about as realistic as bigfoot--of course in my ignorant opinion.



I really do understand the importance of the non-compete to certain business owners, I just do not agree with them. Non-compete agreements are little more than another government shelter for those who fail to compete effectively in the market. Maybe if the individuals being forced in to signing the non-compete agreements were viewed as more than a piece of rented equipment, and all their original thoughts and ideas as commodities of the business rather than well earned inspiration, then fewer of those individuals would leave and take away your customers (unless they have a personality like mine and do not play well with others to begin with.)



I have three main reasons for disagreeing with non-compete agreements and they relate to competition, a customer's right to choose, and caring for your employees.



First of all is competition. It is crucially important to understand why it is that people are choosing to become your client. If people are choosing to become your client because they really like one of the people working for you, and that person leaves, what are you left with? I have learned a lot about marketing lately thanks to my business advisor, and one of the important steps in developing a marketing plan is clearly defining your products and then also defining how you are going to set yourself apart from your competition. If your primary selling point is your low cost, that is terrific, but it is also a very fragile thing upon which to base your marketing. If an employee leaves you and offers a cheaper product or lower price--and that is what your clientele is basing their decision upon, you are going to lose that customer. However, if your company offers many intangible things along with the products and services, then your customers may be purchasing from you instead of your competition because of the intangibles you offer, as opposed to price.



The ski resorts here in Utah can be used for a great analogy on this topic. Why, do you suppose, do the ski resorts have more clients during the winter than the summer? Okay, stupid question, right? But that is exactly my point. The people that love to ski and snowboard go where the snow is. Some people are driven exclusively by the almighty dollar in their consumption, but not all. If I can get something for a fair price and it includes a pat on the back and a smile, I am there! So, for a company that fears losing clients to former employees, what will your former employee offer and how can you out compete him or her in the market.



Number two is the client's right to choose. It would be a beautiful endeavor to be able to put a chain on all of your clients and not allow them to leave. Unfortunately, we can not do that. Your clients may or may not have a familiar relationship with you, but, either way, you do not get to force people into purchasing from you, and, if you fail to meet your client's needs and one of your former clients does, you really get no say in their decision. This all somewhat comes back to the topic of competing, but from the opposite side of the coin. If you are a consumer, you do not want your choices limited by some middle school staking of territory. If a former employee can leave and start his or her own business and out compete you, then you have failed and he or she deserves your business.

The last reason I have briefly mentioned. Retain your employees! If your employee is talented enough that he or she could leave your business and take clients with them, do all you can to keep the employee around--or prepare for battle. Either way, the end goal is to keep money coming in to your company and the only way to do that is to keep clients. Besides, there are so many benefits to happy employees, but that is another post.

In closing, the term 'non-compete' in and of itself is offensive to me! Sounds like communism...

Tanker You Capitalism

I recently entertained the opinion of a friend about the involvement of governement in the market. The story goes that there are tankers marooned in a bay in India. These tankers are owned by some rich individual(s) there in India and they are paying people $1.50 a day to tear apart the tanker so the metal can be sold as scrap. Apparently, the workers do not wear shoes, they sleep in the mud, and there are frequent accidents during the process which results in the maiming or death of the workers. All very tragic occurences.

My friend's side of the argument is that the government should at very least regulate the on-site safety for the workers.

My side of the argument is that government involvement is a slippery slope. Safe conditions would undoubtedly mean steel toe boots for the workers--so the employer or the governement (India's loyal taxpayers...) would have to pay for those. Next, the workers could not be left to sleep in the mud, so housing would be required for all workers. If you are putting the workers in houses, you would have to provide transportation to and from the job site. Now the workers are clothed and housed appropriately, they would need to be making more than $1.50 a day for their labors, so a minimum wage would have to be instituted. The work site would have to be accessible by handicapped people and you of course would have to give equal chance at employment to the buddhists that you would to the hindus...where do you stop and when is it enough. By the way, this sounds very familiar to me!!!

Additionally, the answer to the bleeding heart stance that it is just not fair for these workers is first and foremost that you could not be more absolutely correct. Since when was life fair! I would guess that every one of those workers knew what they were getting in to before hand and willingly accepted the opportunity to earn a fair day's wages.

Not only that, but also, the solution to the problems is the same solution for most of the world's problems--capitalism. You see, the way the system works is that some individual feels bad for the way things are going for the workers--or just sees a money making opportunity--and buys his own tankers to maroon in the next bay over. He then buys his workers boots, housing, transportation and pay them $2.50 an hour. Where are the workers going to go to work? Hmmmm. And if you have all the workers, how much work are you getting done compared to your competition? And if you are producing more than your competition, who will control the market prices? And voila (I can't tell you how much it pains me to use a FRENCH word!), a free market economy!

To satisfy the potential claims of my ignorance, I will say that I realize that this is not an overnight process, but it is so clean and easy. Might I add there are no taxpayer funded debates about where to draw the line and how much regulation is appropriate. The less you can involve government, the better!