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Comment by danvoell | Hacker News Reader

For sales people I see a value in non-competes. I own a company which can run successfully with 100 clients. If I hire a sales person who builds good enough relationships with 50 of our existing clients such that he takes them to another company, he could cut our revenue in half. Why is that supposed to make me want to set up my business in Massachusetts? This announcement would seem to make businesses less competitive in my mind. I'm just going to look for competitors in Massachusetts who's sales people I can cherry pick.

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I might be inclined to agree, but doesn't the wild success of so many California companies where even these non-competes are unenforceable suggest the net value isn't high, maybe even negative?

Massachusetts has had one modern era wildly successful civilian high tech period, stretching from the minicomputer era to the early PC era (both Visicalc and Lotus 1-2-3 were done in the Boston area). But this part of its high tech scene died hard by 1990 (and I left the area, I was an eyewitness starting in 1979); non-competes were I believe part of the problem with Silicon Valley wildly out-competing the Boston area.

Since then I've heard things got better in the web era, but still nothing compared to the Bay Area.

It's pretty good here (MA), but the really successful high tech area here is the medical/bio/ informatics and biotech. It's amazing how much development there is in the biotech industry here.

If those 50 clients would be better served getting a different product from a different vendor, then why would you want to stop that?

If your product is superior in value, the salesman won't be able to move the customers away from your products.

Make better products.

Anyway, you'll attract better salesmen.

I don't want to deny consumers from the ability to choose. This concept theoretically makes business entities weaker and employees stronger. In practice I presume that this concept would force business owners to provide less information to employees if such information could be used against them in the future. So is the employee actually stronger?

Well, withholding useful information from an employee can weaken the business as much, or more, than the employee. Given that business advantages are relative, that could potentially balance out. Conversely, the employees ability to work at will is an out-right advantage, so I'd argue that the employee still comes out ahead.

Additionally, these non-competes are often used in business where no meaningful additional data is shared, such as in the Dental field (e.g. they can't not share their clients with Dentists they hire, regardless of non-compete status). You may argue they would choose not to hire an associate in the first place, but then that leaves clients on the table for a new practice anyways. (empiric data would be a god-send)

I agree

"If those 50 clients would be better served getting a different product from a different vendor, then why would you want to stop that?"

Because you need to earn a living for one thing. And you won't keep your job for long as another reason (see strategic cases below because there are exceptions of course).

Anyway along those lines would you suggest that a salesman for jet engines for Boeing not take an order and simply tell the client that a Rolls Royce engine is a better fit for the application? (And yes I know that there are strategic cases where it can build loyalty by doing this and/or if the stakes aren't to large you can try to be helpful.).

So in other words the salesman's job is to, at the expense of the survival of his own company, to simply help the client (on his employer's dime) make the best decision and as a result he will still be able to earn a living because everything will just work out? And of course his competitors are doing the same thing, right?

"Because you need to earn a living for one thing. "

Then make a better product, a more valuable product.

Perhaps you should learn something about sales instead of being so incredibly obtuse.

When an employer sends a salesman out to sell his product, he is sending him out on the company dime to wine and dine customers and get them to sign that contract for services rendered or product delivered. This costs the employer a great deal of money. The salesperson is worth nothing except for the relationships he can create between the employer and the client. These business relationships are created on behalf of the owner, not the salesperson.

So when a salesperson leaves a company and then decides to use the information he gathered during his tenure there to create new business elsewhere, he is essentially stealing what he was hired to create in the first place. I don't know of many companies that allow their employees to walk off with proprietary information, and information related to core business functions is certainly proprietary.

"Create a better product" doesn't fly. Anywhere. Not even in California. They simply call the list of customers a "trade secret" and sue your ass when you decide to start dialing them up at your fancy new employer.

But the real reality is that it's the salesperson the client is forming a relationship with, and that it's the salesman they trust to get stuff done.

Also, companies often like to hire experienced salesmen _because_ of their rolodex.

(Do they still use rolodexes?)

Companies don't trust sales reps for the most part. They use them, but they don't trust them. Hence the trade secrets clauses in their employment agreements. Companies like to hire experienced sales reps because of their contact list? Sure, because if that employee's former employer hits them with a lawsuit, they can fire the employee and settle out of court. It's worth the potential risk. At the same time, there aren't many companies that are going to stand behind a brand new employee when they know he's probably holding onto data that is considered a trade secret.

What happens when your previous employer fired you for using data you stole from a previous client?

Good luck taking years to build back your reputation.

I think the main issue is not the product but that the salesperson knows who in the 50 companies to talk to, and has relationships with those 50 people so they will talk to him/her. The amount of money spent by the original business to obtain those 50 contact's trust and business could be very large, yet the salesperson is allowed to steal all that investment and take it as their own.

If a sales person is keeping around 50% of your business, you should provide incentive for them to stay- right?

Yes you should provide incentives. I'm not in favor of bad management or bad partnerships, I just think that the value of an employee who can bring new relationships to a new company should be more than the value that they have maintaining relationships at their existing company.

You are talking about the "book of business" problem.

I agree but I think there might be other legal (or see "know the customer yourself" below) ways to protect your clients.

So while you can't prevent someone from working for a competitor I believe there is a reasonable way to protect the customer list and/or specifically soliciting an existing customer. [1]

Nothing can prevent a client who knows the new business from approaching the salesman of course. But if the salesman is prevented from contacting them it is a bit of friction.

Separately, a way that you can protect against this is also to build some loyalty (as the business owner) with the client. Make contact yourself and let them know you value their business. Not fail safe but will definitely help. In other words multiple contacts, not just one contact.

[1] I've seen this even with hair salons for that matter. You will see ads which say "Joan is now at XYZ Salon" because Joan isn't allowed to go after her clients. But she can advertise that she has a new job. But not directly (by direct mail to a list of only her clients but she could spray direct mail though or advertise in the local paper because it's not targeted).

> I've seen this even with hair salons for that matter.

This would be really odd for salons. Most beauticians are contractors so technically they are her clients. She's paying the salon to rent their facilities. So salons get the best of both worlds. They skirt labor laws and tax laws.

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