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#324: Non-Competes for Consultants

Posted By Mark Haas CMC FIMC, Thursday, June 10, 2010
Updated: Thursday, June 10, 2010
A prospect wants me to sign a ‘non-compete’ clause. It's a sizeable contract but I am reluctant to sign a non-compete. I've never signed one before. Should I just tell them I won't sign it?

If you flatly state that you won't sign under any conditions, you are at high risk of losing the assignment and maybe that's acceptable to you. But there are other things you can do to handle this situation more effectively.

Start by determining, without being defensive or antagonistic, the rationale, history, and flexibility the organization that is behind their request for the non-compete. It may be that they have been recently burned by a consultant or just that they have a conservative legal counsel. Once you have the business reasons for their concern, explore alternatives with your client. Describe these alternatives in the form of scenarios they will accept, person to person. Don't get into the legal terms - those are for formalizing what you two agree to in business terms.

Then run this past your attorney. The clock is ticking, so act quickly. Find out what your attorney recommends in order to minimize your exposure and liability in time and dollars. Go back to the client with suggestions for revisions (or it may be that your attorney has recommended you not sign) and would like to talk to the client's attorney. The key in successfully resolving this situation is to maintain a highly cooperative attitude (in business terms) while making sure to limit your exposure and freedom (in legal terms).

Tip: Some non-compete clauses are unnecessarily restrictive and guard for every possible contingency. Given that your objective is to improve the effectiveness of the client's condition, consider framing your non-compete discussion in terms of how, given your professionalism and ethics, a non-compete is a constraint on that effectiveness. Make a strong business case for an appropriate non-compete, or none.

© 2010 Institute of Management Consultants USA

Tags:  client relations  confidentiality  customer understanding  goodwill 

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Comments on this post...

Andy Beaulieu says...
Posted Friday, June 11, 2010
If you are doing strategy work at the highest level, I can see why a non-compete might make sense. But otherwise it is overkill. More so than ever before, I am being asked to sign non-disclosure agreements with my clients. These agreements prevent consultants from sharing information about the project, and often extend even to mentioning that the organization is a client. It's an annoyance because future clients want to get a sense of your experience. But at least it does not preclude one from making a living. I would suggest offering some form of an NDA as a substitute for the non-compete, if possible.

Andy Beaulieu
Results for a Change
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Cox Ferrall CMC FIMC says...
Posted Friday, June 11, 2010
This really is a sales problem and I like Mark's tack: discuss it with 'em. Ask them if they've been burned before, question them (in a non-confrontational manner) about the origins of this policy, how long it's ben in place, and why it was initiated in the first place. And, of course, have a copy of our Code of Ethics ready!
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