UK: When intellectual capital starts heading for the door.

UK: When intellectual capital starts heading for the door. - The value of a business is increasingly determined by the ideas in the heads of its people, and modern companies are as worried about losing such intellectual capital as they are about old-fash

by
Last Updated: 31 Aug 2010

The value of a business is increasingly determined by the ideas in the heads of its people, and modern companies are as worried about losing such intellectual capital as they are about old-fashioned theft. But companies cannot keep such intangible assets under lock and key, so how can they prevent the loss of their corporate silver when staff decide to leave?

Make sure that they stay, says Mark Edelsten, human resources consultant at William M Mercer. 'Retention of key staff is too often dealt with simply by offering them more money. While it is important to reward people fairly for what they do, employees are far more likely to remain in an environment in which they feel valued and get real satisfaction from their work.' Angela Baron of the Institute of Personnel and Development (IPD) adds: 'You have to give staff autonomy in their jobs. Happy people don't leave.' It is the short-termist attitudes of senior management that are at the root of the problem, says Professor Cary Cooper of the University of Manchester Institute of Science and Technology (UMIST). 'They want to keep staff costs down, no matter what,' he says. But the downside is that staff loyalty is lost and self-interest takes over. That is when employees may feel justified in pinching ideas from their employer, because they feel undervalued.

A 'soft' approach may sound like common sense but there is plenty of hard-bitten scepticism as to its effectiveness. 'Soft methods don't really work in the modern environment,' says Elaine Aarons, head of employment law for Eversheds, the city solicitors. 'You can't escape the fact that people will leave.'

Her recipe for protecting intangible assets is more pragmatic: employers should be explicit about what they expect from their employees, in terms of confidentiality, and they should not be afraid to impose conditions on staff who leave to work for the competition. Such conditions, known as restrictive covenants, might specify that six months must elapse between leaving one company and starting work at another. Some say these agreements don't work. 'Restrictive covenants have had a bad press, but it is a myth that they aren't enforceable,' adds Aarons. Just get a lawyer to draft a watertight employment contract.

So much for protecting intellectual assets from benign wastage, but what about more malicious intent? It can be difficult to stop a disgruntled employee stealing company secrets for profit, or simply to get one over on the boss. If an employer thinks a staff member may be about to do the dirty, 'take out an injunction', exhorts Jeremy Brown, the gung-ho head of intellectual property at Linklaters & Alliance, the solicitors. 'It doesn't matter what's in their contract - all employees have a duty not to misuse confidential information.'

Most companies fight shy of such tactics. Going to court is costly and the outcome may be uncertain. In one recent case, former employees of a contact lens company were found to have misused the company's computer software when they set up a competing business. Despite this, the business was allowed to continue trading because the judge deemed that the lens company had tried to impose unreasonable levels of confidentiality on its employees. 'The number of companies that go to litigation is minimal,' says Jacqui Meadows, business development director at Vogon International, the forensic computing specialist. 'They just try to plug the leak and stop it from re-occurring.'

Whatever employers do, they should avoid rush measures and take an integrated approach. 'Make sure you get personnel involved,' says David Rosenberg, of solicitors Clifford Chance. 'Managers tend to panic if they feel they are losing control,' adds the IPD's Baron. 'You do need to recognise that some people will leave, and plan ahead for it.'.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today