Non-Solicit Agreements: Why They’re Wrong For Humu—And Silicon Valley

August 22, 2018 — Written by Laszlo Bock

This post was originally published as “Employee Poaching is Good For Business—Here’s Why” on Fast Company.

There’s a lot to love about Silicon Valley. Some of the world’s most talented people tackling massive business challenges; flat, meritocratic cultures; an empowerment of employee voice that allows them to make real change happen. And of course the food.

Lots of us are spoiled by the food.

But in going from an executive at a big company (they created a popular search engine) to a co-founder and CEO of my own startup, Humu, I’ve discovered that there are a lot of things about Silicon Valley that exist merely because “that’s the way they’ve always been.” This psychological phenomenon isn’t unique to tech companies. But from interior design to employment policies, despite priding ourselves on innovation, we seem quick to accept standard practices.

Free food is one of those things, and at Humu we continue to bring in lunch and eat as a team because we see a significant upside in better relationships and productivity (time wasted choosing a restaurant really adds up!).

Another standard practice is the non-solicit clause that you’ll find in nearly every tech company’s employment agreement. Since most startups (including Humu) get our templates from the same handful of law firms, these clauses go in by default, barring employees who leave a company and join a new one from inviting former colleagues to join their new cause, usually for at least a year. Penalties can vary, but both the individual and their new company run the risk of litigation.

I’ve come to believe these clauses are toxic to company culture. This month, my co-founders and I changed our offer letters to remove non-solicits, and waived the clauses for existing employees too, making them free to recruit other “Humuns” to any new venture should they choose to leave us. Here’s why:

First, why wouldn’t people be free to recruit one another? Companies have a legitimate interest in protecting their intellectual property. But if you just quit at a blockchain startup and want to recruit a former co-worker to your new bluetooth salt shaker company (yes, this is a thing), as long as she wasn’t their “Chief Sodium Officer” the risk of I.P. loss is nil. Preventing conversations between colleagues is an unjust impingement on people’s rights to talk to one another, and an abuse of power by employers—not to mention a pretty arrogant condition to place on an offer of work.

Second, if you care about creating equal economic opportunity, you want people free to recruit. Because guess who doesn’t get calls for the newest, coolest jobs?

At many tech firms, only about one-third of the workers are women and about 5% are Black or Latinx. When you leave a big firm, you say goodbye (and thanks to non-solicits, lose access) to this small but stellar group of diverse colleagues and instead fall back on more homogenous recruiting networks, such as college and Y Combinator alumni associations, or even “the dudes I play ultimate with.”

For under-represented technology workers, it means they are cut off from participation in the nascent but vibrant networks of “recent alumni” startups. The impact is subtle, but real. It means that under-represented workers get fewer recruiting calls and for less interesting companies. And as a result they are often excluded from the first year of many startups, which can be the difference between getting an IPO windfall of hundreds of thousands of dollars and hundreds of millions of dollars.

Finally, ditching non-solicitation terms forces companies to build amazing cultures. If I know that when employees leave they are prohibited from recruiting my people, I work that much less hard on creating a strong culture. On the other hand, if I know that everyone who leaves for something better can turn around and recruit my best people, I’m left with no option but to create an amazing work environment. I’m forced to compete for talent not only when I recruit, but on each day that someone is with me.

Upon making these changes at Humu, we held an all-hands to walk the team through our thinking—and to celebrate a new layer of freedom in our relationships with one another. To an outsider, this might look like a pretty weird thing to celebrate: “Congrats! If you ever decide to quit you’re free to recruit any of our employees!”

But celebrate, we did.

We celebrated a culture of removing injustice when we see it—but more importantly, we celebrated building a company where status quo is the exception, not the rule. Where the way things should be isn’t informed by what’s always been, but by understanding the unique needs of our business, our employees, and our commitment to our culture.

Oh, and one other thing I’ve learned as a CEO. It’s easy to point the finger at HR for these kinds of policies, since they administer them. Or at lawyers, who write them. But the buck stops at the top. And if this sounds terrifying to any CEOs out there, it shouldn’t. For eleven years I encouraged my staff to go out and interview for other jobs at least once a year. This forced me to invest in their growth, and to prioritize culture.

I didn’t lose a single person.  

 

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