Rick Kurnit, partner of advertising, marketing, IP and employment at Frankfurt Kurnit, a New York media law firm, explained the intricacies of hiring and firing talent and why placing too many restrictions on individuals is bad for the industry as a whole.
From the hirer’s perspective, excessive non-compete clauses will poison the development of coveted talent, Kurnit noted. Hirers should carefully weigh the cost of imposing “career-ending shackles” instead of creating a culture of purpose and opportunity, he urged.
From an IP standpoint, employers rightly want to protect confidential data, creative content and case studies that talent helped to build for the company but belong to the company. That is a given, but attracting and retaining talent depends more on corporate culture — how compelling the sense of purpose is, how rich the opportunity for learning is. Excessive provisions are essentially a “means to interfere with the movement of talent”.
A career is a balance of fortune, fame, fulfilment and fun for millennials, with fun further broken down into family, friends, food, fitness and faith, said Kurnit. From a lawyer’s take on the ultimate battle in recruitment, different career choices offer very different long-term incentives, be it phantom equity, options, restricted stock and deferred compensation. Today, key talent can easily migrate across businesses, so engendering loyalty and motivation requires a compensation package that is competitive with alternatives that appear to offer more.
For talent drawn to startups, Kurnit issued a warning. “Someone has to sit them down and be realistic with them, because the actual stock that a typical startup offers will be diluted unless you are one of the first three or four founders.”
The hard part is when talent quits “because some startup is going to make them a partner in the new job”, so Kurnit advised that profit distribution on an annual basis as well as a share in the capitalisation of the company itself can be covered contractually without getting into the sticky business of equity.
Kurnit said he saw a “tremendous amount of difficulty” in the degree to which the quarter-to-quarter financial reporting of established public firms dictating and determining their culture. “It will need executives to push back, such as the example of the CMO getting the CFO to give a budget that has no ROI calculations tied to it,” he said. This is important to creating a culture where talent can feel a sense of mission and alignment with clients.
The second problem lies with legal counsel. An employment agreement is “not terribly useful or relevant”, said Kurnit, particularly when things are not going well. There is nothing that prevents a company from saying ‘you’re fired’, in the absence of termination provisions. “So the 20-somethings don’t bother with it,” he said. Despite consequences of talent exodus, employers pay very little consideration to the parts of their standard agreements that cushion firing — something that Kurnit attributed to other lawyers.
What employees need is the notion that it “costs companies something” to breach the agreement, he said. A generation ago there was severance but over the years this has diminished, Kurnit pointed out. “The finance and legal people have driven this [media, advertising and marketing] industry to be extremely ungenerous to employees.” Comparing startups with privately held companies that are less stingy, it is worth thinking about the fundamentals of the employment relationship that “honours employees and concerns themselves with employee concerns”, he said.
‘If it’s about the money, it can be a colossal mistake. If it’s about the culture, how do you give the next generation a pathway to fortune, fame, fulfilment and fun?”