Is it OK to Hire People from Your Friend’s Company? (2011)

http://www.bhorowitz.com/is_it_ok_to_hire_people_from_your_friend_s_company

by ski • 12 years ago

74 54 12 years ago

bhorowitz.com

cousin_it• 12 years ago

It is important to note that just about all of these kinds of policies violate the Right to Work laws in California.

Is that the only law they violate?

yaur2• 12 years ago

"you should get the issue onto the table by informing the employee that you have an important business relationship with his existing company and you will have to complete a reference check with the CEO prior to extending the offer"

Is that even legal? IANAL but it seems highly unlikely that only hiring someone if they agree to a reference check with someone they didn't list as a reference is kosher in most states. Typically the way this would work is that you could make a conditional offer, and anything beyond date of hire and date of departure (that caused them to not get the job) would be grounds to sue their previous employer... in which case you really aren't doing your friend any favors.

IMO in the scenario described you should just hire them and apologize to your friend.

Edit: and even if it is legal in your state its unethical as hell. If your friend says not to hire they are most likely going to be looking to replace them ASAP with someone who isn't looking to leave.

argonaut• 12 years ago

IANAL, but the correct question to ask (the opposite of your question), is: Is that illegal? And I'm pretty darn sure it is not illegal. Why would the even be illegal? You can reference check as much as you want.

Be careful not to conflate social custom (it is customary that a company not reference check you with the company you work at) with law.

EDIT (reply to below): which has nothing to do with law. Parent claimed it was illegal, however. Not to mention the fact that it is perfectly ethical to make an offer conditional on letting you talk to their employer. What would be unethical is if you talked to their employer without asking them.

wavefunction• 12 years ago

I would prefer to ask (a question you don't ask), is: Is that ethical? And I'm pretty darn sure it is not ethical.

yaur2• 12 years ago

If you have a general policy where you have to talk to their direct manager or where you always have to talk to the CEO then you might be alright. But if you are making a special policy for employees of a certain company you should probably be talking to a lawyer first. This kind of stuff is almost all state law, so there isn't going to be a universal answer.

That aside, in the scenario "Fred" is good friends with one of your top engineers in the scenario presented. If you ask "Cathy" and she says yes everything is golden, if she says no and Fred gets canned or Cathy's company goes under one of your top employee's good friends is now unemployed because you put your personal relationships ahead of the buisness. This is not a good situation to be in.

Also from the article: "It is important to note that just about all of these kinds of policies violate the Right to Work laws in California"

fenguin• 12 years ago

I've met (and quickly distanced myself from) many people here in the Valley who prioritize short-term/short-sighted goals over long-term relationships. Even if you're not yet part of a tight-knit community here, word travels fast, especially on Secret. Screwing someone over can have long-term repercussions, and the last thing you'd want is for something as trivial as a single employee ruining a strong relationship for life.

Plus, friendships can often lead to far greater payoffs in the long-term -- I've given and received many introductions to stellar employees among my circle of friends; having a reputation as a robber is the fastest way to stop this flow of introductions.

OT: Ben has a lot of really great material on his blog, and I'd highly recommend anyone who hasn't yet to read through everything! He also has a great book that compiles all his wisdom into one place [1]; if you're too busy to read it I've shared my notes on Evernote [2].

[1] http://www.amazon.com/The-Hard-Thing-About-Things/dp/0062273...

[2] https://www.evernote.com/shard/s345/sh/7b35d8ab-daba-4181-8b...

skj2• 12 years ago

So, the advice given here is certainly practical and useful, but it's also wrong. Not wrong as in incorrect, but wrong as it's effectively steeling an opportunity from an individual (and you!) in order to appease a relationship with someone who views their employees as property.

The "thing" there is not the employee, but the opportunity.

justizin3• 12 years ago

In addition to the fact that this is inhumane, even from a business perspective, it's important to look at the Apple Google relationship, appeasing Steve Jobs was not a winning strategy for Google and it becomes increasingly clear that they AND individuals who wanted to work for them lost out on great opportunities to do things that were clearly in their mutual interest because it might upset a fucking sociopath.

EGreg• 12 years ago

Looks like the understanding that most people in this industry had (not poaching employees of "friends") is being considered illegal on HN.

I understand that this particular case of Google-Apple happens to be considered illegal. However, I am not convinced that a law banning this practice will not make things worse for most people.

A cartel involves an arrangement where members REFUSE TO OFFER a better deal than the others - a pricefixing arrangement. On the other hand, this is very clearly about not going blatantly on each other's turf to solicit / poach. Consider this ... how did Apple find out about this? Was the employee called during work hours?

How come recruiters - internal HR or external agencies - can be instructed to not advertise job openings in venues like porn sites, but - it seems from all this outrage - cannot be instructed to not advertise on their competitors' websites? Why can't companies decide that the cost of reprisals for poaching key members is too high, independently and internally, before agreeing not to do it? To sum up - I do not see this as a cartel AS LONG AS neither company turns away candidates who applied on their own, based on a mutual agreement. To be fair, Google did have such a policy and to the extent that this policy existed, that WAS a cartel. But NOT if the agreement is limited to not advertising offers to each other's key employees. Those employees can easily find out job openings and average salaries just like everyone else can.

If you are going to make the argument that recruiters calling certain key employees of the other company to lure them away will give the majority of employees a better sense of how much they are worth and everyone's salary if going to go up, you'll have to work pretty hard to show the connection. Poaching key members of a team (e.g. to sabotage a competitor's project) seems to mostly benefit those key members. It increases the cost for everyone else including the companies involved. And that cost is very likely to be passed on to the other employees. You would also have to show that the companies will always choose not to pass on the cost of poaching to their employees -- because otherwise, you will have to admit that LESS poaching might actually lead to LARGER salaries. And in fact, the data seems to show this. (Once again, by poaching I mean reaching out and specifically cold calling key people in rival companies to advertise positions that they could have found on their own.)

prutschman• 12 years ago

On the other hand, this is very clearly about not going blatantly on each other's turf to solicit / poach

To the contrary, the article is clearly about the case where someone from another company's "turf" approaches you unsolicited:

You check with your people to make sure that they did not approach Fred first and they assure you that Fred was already looking and will go to another company if not yours. Now what?

I think this is clearly about CEOs treating employees as the company's property in a psychological sense, rather than thinking about them as beings with agency.

mayop100• 12 years ago

The similarities between this post and the actions that Google and Apple took and are now being investigated for are striking. At a small scale, it's just "good business" not to poach. At a large scale it's "evil" and illegal. Seems rather arbitrary to me.

throwaway2048• 12 years ago

Plenty of things that are inconsequential in the small scale are huge problems in the large scale.

I don't think anything is particularly arbitrary or contradictory about that idea.

https://en.wikipedia.org/wiki/Continuum_fallacy

Just because there is no sharp division between two states, doesn't mean they don't exist to begin with.

Quantity has a quality all its own

greggman• 12 years ago

Agreed

Your friend starts a company, you become friends with his employees. Eventually you start a company a really want to offer an amazing opportunity to one of your new friends but you don't because why?

Why are you denying someone the choice? It seems almost immoral that you wouldn't give her the choice and instead deny her the opportunity just because she happens to be employees by another friend

What if you had no faith that your friend's company would survive? Does that change your mind? What if you thought your friend's company would survive but never be more than limping along whereas you had faith that your company would become huge?

I ran a company,this issue came up when a friend asked if it was ok to poach from us. My first reaction was to think "no way" but my partners pointed out denying our employees opportunities was wrong. Fortunately none of them left.

nraynaud• 12 years ago

I don't see why this blog post would give legal advice, it might well be plainly illegal, or half illegal. It's describing customs to newcomers, not law.

Remember, the law is often here to try to destroy "from now on" customs that are deemed toxic.

mcv3• 12 years ago

I don't think it's good business at all. It's stupid and evil. It's very small scale, so it doesn't have a lot of consequences outside the one employee that gets screwed, but scale is really the only difference here. And even one employee getting screwed unfairly is one too many.

justizin3• 12 years ago

Right. We need to stop treating human interaction and people's livelihood, their very ability to earn a living and have a home and feed themselves and perhaps their family, as something that can be statistically gamed.

Grow the fuck up or do not run a company. Childish viewpoints are for the playground. If your friend can't deal with the fact that you offer a more attractive work environment, he or she deserves for their company to tank and the smart employees will follow the first one who leaves.

Zigurd2• 12 years ago

It should be clear that taking money from your employees by denying them open choices in employment is unethical at any level. Having a multi-company cartel to do that is no less unethical and illegal than agreeing not to pay more than $X for processors or memory or LCD panels.

rayiner• 12 years ago

It's not arbitrary at all. At a small scale, the activity has little impact on the market for labor. At the large scale, it has a very substantial impact.

MimiZ• 12 years ago

True.

But you can't really hold it against companies that are poaching. Whether or not they are friends with you because everyone in tech basically knows each other (through networks).

There seems to be a limited talent pool in specific skill sets for certain geographies. In this case, the market is in the favor of the employee, not necessarily the employer.

ronaldx• 12 years ago

It's "good business" in that you maintain higher profit levels.

It's "evil" in the sense that you are deliberately and dishonestly screwing employees in the worst possible way. It's exploitation.

The very reason this is illegal is because it's quite obviously morally and ethically wrong, but people are motivated to do it anyway.

The only difference is that on a small scale, you might not be caught, or you might be able to bluster your way out of the consequences.

S4M• 12 years ago

There is a difference between poaching someone from some company and hiring someone from that same company who happens to apply to yours.

cheepin• 12 years ago

Why shouldn't companies retain employees by paying them what they are worth and giving them a good work environment rather than colluding to keep them from leaving?

ericd2• 12 years ago

It's not about colluding, it's just that the new CEO is bound to not hire you out of loyalty to his/her friend. Social laws and laws on the books don't always line up well.

stephencanon• 12 years ago

She’s not much of a CEO if loyalty to her friend trumps the best interests of the company in (what should be) a purely professional decision.

Her friend isn’t much of a friend if he lets a purely professional decision interfere with their non-professional relationship.

gtirloni• 12 years ago

col·lude (kə-lo̅o̅d′) intr.v. col·lud·ed, col·lud·ing, col·ludes To act together secretly to achieve a fraudulent, illegal, or deceitful purpose; conspire. --

Seems like colluding to me. Just like in the Google/Apple/Adobe case. It doesn't matter if it's done out of friendship or fear of upsetting almighty Steve Jobs.

hartator• 12 years ago

Such a terrible article.

Just ask your friend. In 99% of cases, it's okay to ask. I mean if the guy or the girl want to leave, your friend is gonna to tell everything you need to know, what matters. And maybe, you aren't gonna to hire him because he is actually terrible or maybe your friend will just say he is fantastic and give you a green light.

It is important to note that just about all of these kinds of policies violate the Right to Work laws in California.

There is no right to work in California. [1] It's the actual opposite. Coming from a VC, that's shameful.

1. http://en.wikipedia.org/wiki/Right-to-work_law

Fuxy• 12 years ago

Yep it should be quite easy to just ask your fiend about any potential employee applying to your company as long the employee is ok with that.

Being straight with the employee and your friend is the best policy.

You shouldn't mix business with friendship why would you care why the employee is leaving that's none of your business just give your friend a heads up so he can do something about it.

I'm sure he will appreciate it.

aptwebapps• 12 years ago

The 'right-to-work' doublespeak wins again. Horowitz is right (I think) that this behavior may violate California labor laws but he used the wrong term. The article you linked to explains what I mean but the gist is that right-to-work laws are laws that restrict union organizing in various ways.

Edit: It's not actually very relevant to this discussion but to the extent that it is, the fact that California does NOT have such a law means that workers have more rights than states that do.

mcv3• 12 years ago

What a bizarre kind of possessiveness. Companies don't own their employees. Slavery is supposed to have ended quite some time ago (yes, I know it still exists).

If you want to hire someone, hire them. If an employee leaves, let them leave. No hard feelings. If you really don't want them to leave, offer them more. Preferably do that before they think about leaving. This sort of unfair limitations on employee's employability is or should be illegal.

eshvk• 12 years ago

I feel like that is not the point though. The analogy he made was fairly reasonable: people have fairly demanding (sometimes irrational) restrictions on who they decide to keep in their lives as friends. This is about that. Not about slavery. Not about mismanagement of a company.

justizin3• 12 years ago

don't fool yourself.

mcv3• 12 years ago

Well, I don't need "friends" who make demanding and irrational restrictions on our friendship.

nsedlet• 12 years ago

When the friend is not also a business partner, this practice seems bad for the company - the CEO is hobbling the company's ability to hire to preserve a personal friendship. The CEO is not the only stakeholder - at the very least he/she should carefully weigh the effect on the friendship against the cost to the company of not making the hire.

On the other hand, Ben does point out that in practice you really shouldn't do this with very many companies, if any. And I'm not sure you could say that it's CEOs' (or any employees') duty to prevent personal considerations from affecting their work.

jnagro• 12 years ago

"You can hire people away from your friends’ companies without damaging your relationship with that friend. You can fight to retain people while they’re being aggressively approached by other companies. Sometimes you will win, and sometimes you will lose. But through it all, you should keep a very important lesson in mind: You must refuse to engage in any agreements with other companies that insist you not hire from each other. Because that’s bad business. Plain and simple."

http://www.eliastorres.com/blog/how-to-fight-illegal-recruit...

Zigurd2• 12 years ago

This article is terribly wrong except that it explains how otherwise intelligent people, advised by top-tier lawyers and employment compliance experts can go so wrong about a significant matter of law, ethics, and billions of dollars of the wage-earning economy in Silicon Valley.

bigd• 12 years ago

This is so sad, on so many different levels that is hard to pretend is not true.

While my hearth fights the need of shouting "stop behaving like a whiny bitch about the company relationships", then you realize that companies in US are equal to peoples.

And that, as John Stewart was pointing out recently, maybe sometimes they also pretends to have religious rights.

So I am not surprised that something like hires get taken as betrayals.

However, if logic had to enter this equation somehow, we should realize the purpose of a business is business. So, if an employee is an asset you should treat him as such, and let him go.

And if you or your friend CEO get emotionally attached to an employee, you have larger issues. One, maybe, is a narcissistic disorder.

wtvanhest• 12 years ago

Its interesting to see comments that require the founder to gain some level of permission from the friend before hiring their employee. Then in a simultaneous thread Steve Jobs, Google and Intel are all complete scumbags for talking to each other about hiring.

droithomme• 12 years ago

This article was written just a few months after the Justice Department in late 2010 announced its agreement with Adobe, Apple, Google, Intel, Intuit and Pixar regarding their anticompetitive practices. It is clearly a reaction to that agreement and its purpose is to lay out an argument that can be used to maintain plausible deniability regarding anticompetitive agreements by arguing that these activities are just friends being polite and displaying good manners, rather than a conspiracy to defraud top talent of market wages.

mindslight2• 12 years ago

It's not this post that's terribly wrong, but the widespread fallacy of equivalence between tiny companies and large corporations. It's not inconsistent to think it reasonable for small startups to avoid hiring each other's employees, yet that scaling this up to a significant part of the labor market is problematic.

greenyoda2• 12 years ago

Owning a small company doesn't magically exempt you from obeying the law.

JumpCrisscross• 12 years ago

many companies employ written or unwritten policies that name companies where it is not OK to hire without CEO (or senior executive) approval.

This seems counterproductive. Executives should recuse themselves when emotionally compromised. A bona fide independent decision should calm a rational friend.

Business relationships are more complicated. An employee of your largest customer, for example. Good protocol works most of the time. Commercial reason and the law fill the gaps.

mathattack2• 12 years ago

This seems to be a little bit of golden rule, right? How would you feel if someone hired away one of your best employers? What if it was a close friend that was doing the hiring? Or an important business partner? Would it suffice to say, "They were looking anyway?" Would it make a difference if it was a customer? Does it matter to the morality if the other party will feel aggrieved?

My 2 cents is this isn't that black and white, but it's very delicate. The only way it works is if the employee in question approaches their current boss first, saying, "Here is why I think it's time to move one. I would like to approach company Y. Can I have your blessing?" This gives their boss a chance to either fix the situation, or encourage the move. You can give a wink and nod that the interview would go well (you would never do this without confidence based on work experience that you'd hire them) but you can't formally start the process before this happens.

collyw• 12 years ago

If the other company values their time more than you do, and makes a more attractive offer, then that's your problem. There is a fairly obvious fix.

Now expecting your friend who owns the company to still be friends afterwards is a completely different question.

tbrownaw• 12 years ago

This seems to be a little bit of golden rule, right? How would you feel if someone hired away one of your best employers?

How would you feel if someone refused to hire you as a favor to your old boss's boss?

mathattack2• 12 years ago

If I knew in advance that they were friends, I would go to my current boss first. The future boss should suggest the same.

pessimizer• 12 years ago

Is it OK to sell for cheaper than a friend? Is it OK to use a vendor who won't give your friend the price that he wants? Ultimately, is it OK to compete with a friend?

Maybe they should just rename anti-trust law into anti-friend law, the bitter killjoys.

michaelochurch• 12 years ago

This provides a lot of insight into how executives think. Employees aren't people, just pawns to be traded and weighed against the value of their own friendships and animosities. It's pretty disgusting, but not surprising.

What I like about the new Silicon Valley elite is that those asshats are too socially gauche to realize that their attitudes are considered completely unacceptable by, well, everyone else. It's really fun to watch them humiliate themselves in Valleywag.

justinhj• 12 years ago

Most American's sign an at-will employment contract, meaning the employer can terminate you without reason whenever they want. Given that, why would you give the company any more loyalty than they are giving you? The only reason I can think of is money. i.e a financial incentive is in place for not leaving. In accountancy for example I know a guy who was given 1 year salary for leaving his company. His domain knowledge being so valuable to a competitor it was better to pay him for a year to sit at home than have him work for them.

imgabe• 12 years ago

It is important to note that just about all of these kinds of policies violate the Right to Work laws in California. Specifically, if you block a hire based on this kind of policy and the employee loses their job and cannot find work, your company is liable for his wages. As a result, the business relationship with the other company must be extremely important for you to employ any kind of “hands off” policy.

I think this is an interesting aspect about business reasoning that a lot of people don't understand. Even though another comment here points out this isn't correct. If something is illegal and carries a risk of large fines or a large civil judgement, that doesn't mean you shouldn't do it necessarily. It just means that you have to weigh that potential cost against the benefits of doing it. If the benefits are greater, you go ahead and pay the fine or the litigation as a cost of doing business.

You don't change the way companies operate by going on about whether something is right or wrong. You have to introduce a cost larger than any potential benefit. If not hiring person X costs you a couple hundred thousand dollars in a civil judgement, but helps you keep a business partnership that's worth hundreds of millions in revenue, you'd have to be crazy to go ahead and hire someone from a business partner in those circumstances.

Is it OK to Hire People from Your Friend’s Company? (2011)

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