Why I Banned Non-Compete Clauses From Our Hiring Practices
Like so many tech company founders, Jordan Cram, CEO of Enstoa, thought including non-compete clauses in employee contracts was a way to protect his company. Here, he tells us what led him to reconsider the conventional wisdom and do away with non-compete clauses altogether, and how his company has benefited as a result.
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My company has taken a bold but overdue step to abolish non-competes in our employment agreements. By non-competes, I mean the painfully worded legal clause in employment contracts that restricts what you can do or who you can work for after you move on. Clauses like this one, "The Employee hereby agrees that during the Restricted Period, the Employee shall not..." Shall not. Do not. Be not. Blah, blah, and blah.
Jean Jacques Rousseau wrote a dreary but thought-provoking observation about freedom. "Man is born free; and everywhere he is in chains... How did this change come about? I do not know." Maybe he was right, maybe wrong, or maybe it was true then but not now. What does resonate is the idea that people should be free, and non-competes in employment agreements unfairly limit an individual's flexibility.
We pour so much of our time and energy into our work and our careers. Thousands of pages have been written on the topic of career growth and helping workers move in a direction that enables them to contribute and grow professionally. For those employees in most industries, this means moving to a new opportunity when the time is right to continue an upwards trajectory that is not only beneficial to the employee, but to the company employing them.
Looking back on when I started my company several years ago, I realize now how easy it is for all of us to fall into the Value Protector view of the world. The future is full of so much uncertainty, and there is no guarantee a business will continue to innovate and generate value for customers. As a new CEO, I wanted to make sure I protected my hiring investments and, without putting a lot of thought behind it, included non-compete agreements in my employees contracts from day one.
As time went by and I saw the organic values my company and employees worked hard to cultivate, I realized enterprise value isn't defined solely by the one, two, or five coveted new hires I had made. Rather, enterprise value is defined by our brand, our culture, and the sum of all individual contributions from the beginning of the venture through the present.
As I thought on it further, it became clear former employees really have no way of transferring these multiple value drivers to my competitors. An employee who was a vital part of an organization, inciting growth and change within one company, might go to a competitor who doesn't foster the same values that enabled this person to grow.
Even if the individual leaves, it is impossible for that person to transfer the entirety of our environment to a new company. Beyond that, I started asking myself if I wanted to continue driving my company in a direction which would inevitably hold employees back from growing in ways that not only benefit their individual careers -- and, by default, their families – but the industry as a whole.
One day I was at a client site in the Middle East that relies heavily on expat labor. I saw dozens of hardworking people pouring massive amounts of energy into their jobs, far away from friends and families for weeks on end.
A wave of sadness came over me when I considered that these workers can't simply pick up and go to another opportunity that might locate them closer to loved ones or accelerate their career growth. A moment later, I realized our own non-competes had to go.
Lawyers might tell you non-competes are difficult and costly to enforce. Individuals who left our company for competitors were pretty sure we wouldn't act on our contractual "right." They were correct. It isn't in our culture to do so.
We'd rather spend our time and energy on value-creating activities. That focus doesn't mean the potential for enforcement doesn't create stress in the minds of employees. It's hard to see how that pressure helps anyone. I like the people I work with (currently and in the past) and have no interest in creating unnecessary stress for basically no benefit.
It is easy for individuals to feel they are on the losing end of the value exchange with a former employer. No leader wants disgruntled or begrudging people in their alumni network who can use LinkedIn, Twitter, Facebook, and other powerful outlets to voice their discontent.
In our totally connect world, this bad energy impairs an organization's reputation, and inevitably affects the overall culture of the organization. This, in turn, mitigates the organization's ability to innovate and compete in the long term.
Doing away with non-compete clauses has benefited our hiring program, and we hire many people worldwide each year. In the global war for talent, this is one less thing a tech or consulting superstar needs to think about when making a decision to join a company.
Removing non-competes from our hiring practices has also made it easier for people who don't feel at home with Enstoa's culture and business strategy to leave. In the end, this opens space for individuals who find our company to be the right platform for their own aspirations.
Most importantly, removing non-competes goes hand-in-hand with my belief that, in order to succeed in today's business environment, leaders need to truly believe a people-first strategy is the way to go.
As CEO of Enstoa, Jordan Cram believes technology is an essential enabler for organizations to continuously innovate and optimize performance. For over 15 years he has used smart technology solutions to streamline capital projects management with leading organizations ... View Full Bio
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