Detention vs. Retention
Employers usually try to retain their best executives with perks: Bonuses, stock options, enhanced benefits, extra TLC, etc. When these types of compensation and benefit work best, they are known as golden handcuffs because they do cause the executive to stay in order to receive the maximum benefit. Usually, these are win/win scenarios. The company benefits by having the executives stay longer, and the executives benefit by earning additional compensation, equity, benefits, etc.
Sometimes though, the handcuffs are just handcuffs, without the gold! Peter Cappelli (one of my favorite HR experts) wrote last month about The Hypocrisy of Suing Workers Who Leave. Cappelli points out that employers who sue departing executives are usually relying on non-compete or non-disclosure (NDA) agreements. Non-competes and NDAs are put in place upon hire, to protect fearful employers from an employee jumping ship to a competitor or revealing “trade secrets.” The “detention” effect is that the executive is unfairly restricted from pursuing their livelihood, and the courts usually side with the employee.
Executives often have spent their entire career in a particular sector. They are often experts on not only their own company, but on all the competitors, their customers and their products. This is not based on one employer’s trade secrets, but more on the body of knowledge amassed in a career. How could an executive be expected not to use all their knowledge in their own career? The courts usually say that they CAN.
It also turns out that one of the key issues in court cases about trade secrets involves recruiting. In some of the cases, the employers who have sued their departing executives were also guilty of recruiting from the very companies the executive was headed for! We all know that mutual poaching is completely common. Companies that hate it when an executive goes to company “B” are themselves hiring from company “B”! The courts have said poaching is essentially hypocrisy – if a company wants to prevent their competitor from hiring their own people, they ought not poach from that competitor. Or at least, they shouldn’t sue the departing person. Most of these cases are being decided in the employee’s favor.
Gone are the days when companies truly valued and rewarded loyalty for its own sake. Employers apply golden handcuffs because it is good business to attract and keep the best people. The positive side of this works, and employers should keep it that way – retention vs. detention.