Running a business isn't a hobby: It takes all of your attention, day and night.
I'm not paying employees to start their own business, I'm paying them to work on mine.
edit: I know this chafes with the 'free spirits' on this site who haven't found the guts to start an actual business yet, but I promise you'll find it's true when it's your cash going out as wages.
Let me know then how well you'd do as an employee working for someone else, and if you'd be eager to hire on staff with the same "starting a company on-the-side" mindset.
I have no problem hiring someone who is going to start something with their own time, as long as they do the job I hire them to do. Back when I was an employee, I was always pursuing ventures on the side, and without exception, my employers were supportive and sad to see me go when I left, for the simple reason that I did my job.
You don't own your employees.
There's a big difference.
If you retain a contractor, you're one of their clients and any improvements they make to their business benefits you.
If an employee on your payroll starts a business, they're not doing so with your best interest in mind and their work's focus will change accordingly.
Ah...I see. You're looking for employees whose primary interest is enriching your life, not what's in it for them. Good luck with that.
There will in theory come a time when my side efforts will require effort enough to get in the way of my regular job, which is in fact the goal, but I have the integrity to face that -- and when I reach that stage, I'll leave the regular job.
If you're running a small business where everyone working for you has to put in 80-hour weeks in order to keep up with their work, then the fault is yours for your poor management -- though to be honest, I'd never consider working for you just because of your attitude toward your ownership of me.
Get it straight: you don't own your employees, period. What they do when they're on the clock is your business. Everything else is not. If you can't get that through your head, you shouldn't be attempting to run a business that requires employees. That's not an opinion, it's actually law -- don't forget, we abolished slavery.
Fuck. That. Shit.
Everyone is a contractor. There is no loyalty on either side of the employer-employee relationship. It is a hurtful delusion to harbor fantasies otherwise.
Judge an employee on their performance. Nothing more, nothing less.
What happens off the clock is none of your business. Literally.
I'm still waiting to read of even a single example of a full-time employee who is working on (not preparing for) a business of their own while collecting a full-time salary. If it's such an awesome thing, there must be dozens of examples to choose from, right?
Why the silence? Because that employment arrangement does not work, and any person running their own full-time business would know why.
Working as a contractor while getting your business up and running? Great! That'll work fine.
Working as a full-time employee while starting a business? Doesn't work.
If you walk the talk and start your own company, you'll understand why you wouldn't want to be paying a person out of your own pocket while they're going through that process.
Quit worrying about what this employee can or can't do. Pay attention to what he does or doesn't do.
You're an entrepreneur or you're an employee. You cannot mix the two, and if you find the pills to start a business yourself you'll understand why.
Joshua Schachter, Delicious. It's rare, but not unheard-of.
That's one of the best answers yet. Anything else is entirely unacceptable. (And reminds me of amazon, worst place I've ever worked.)
If they're getting their work done, then you as an employer have no right to complain about what they're doing with their own time and equipment, end of story.
Stealing IP is a different issue altogether, of course -- and that's never acceptable.
However... the main reason that I pursue side projects is that my work fails to offer an intellectual challenge for me. I get my job done, and then hunt for intellectual exercise in order to keep my brain in shape.
Unfortunately, I rarely find that at work.
Or are you just assuming that the side business would make the employee less productive to an unacceptable point (a fine reason to let someone go, but that a side business would cause this is still just an assumption).