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Network: December 1992

Network questions and answers.

Gift Rap
I am a partner in a three-man machine shop with sales of about $150,000. We have some very large clients, and we want to let them know we appreciate their patronage. What are other CEOs giving during the holidays?

Jeffrey Harris

Partner

Harris Tooling

Stevensville, Mich.

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A gift should represent your business, of course. But that leaves most companies to make a leap of imagination. Larry Pentz, CEO of Pentz Design Pattern & Foundry, in Duvall, Wash., made that leap five years ago. He enlisted the assistance of one customer, a candy maker, for whom he had fashioned detailed chocolate molds. Pentz made a special mold for the holidays, and gave each customer a candy bar embossed with Pentz's logo.

This year Pentz is in the gift-giving mood again. He may cast miniature aluminum anvils for customers -- a couple hundred at about $15 apiece. John Deere and other foundries traditionally gave similar anvils at the holidays, so the gift demonstrates the company's heritage. The manufacturing demonstrates its ability.

The Delahaye Group, in Hampton Falls, N.H., measures the effectiveness of clients' public-relations efforts. CEO Katie Paine wanted to work the measurement theme into her holiday gifts. She considered giving rulers, watches, calendars, or egg timers. But a consultant advised her "not to hit customers over the head during the holidays." So last December Paine sent clients and prospects pottery made near her offices and a hand-drawn card, at a cost of about $10 per recipient. The gifts stressed her New Hampshire location and the solidity it implies. Afterward, she got not only thank-you calls but orders from people she'd been trying to reach for months. She's repeating the gift this year, and the cards will carry a sketch of the French town where Delahaye recently opened its first European office.

For more ideas, see " 'Tis Better to Give," in the Inc. Guide to Holiday Giving (November 1992, [Article link]), and "To Gift or Not to Gift," in the December 1991 In the Office ([Article link]).

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Can't Compete
For the past 15 years I have worked hard to grow a fledgling media-production business. But I feel I've wasted those years because I don't own the company. The owner, who runs another business full-time, gives me complete authority but will not give me ownership. I might start my own company, but I signed a noncompete agreement. What can I do?

Name Withheld

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"It's a catch-22," says Glenn Cafritz, who wriggled out from under a noncompete to become a partner in Global Mail, a $13-million international delivery service in Sterling, Va. (#35 on this year's Inc. 500). "You learn a business, then the courts say you can't do what you've learned." His first tip: go over the agreement with a lawyer to see if it's overly broad.

A noncompete agreement should protect your employer's business, but it should not punish your initiative. If the agreement defines your employer's industry or its geographical market too broadly, or if it runs for, say, 10 years, a court may "blue pencil" it (that is, pare it back to reasonable limitations), probably in a preliminary hearing.

If the agreement looks reasonable, you should stick to it. Your employer, too, must honor the agreement. Make sure he or she has kept to the provisions -- written and unwritten -- under which you signed. Before Cafritz made known his plans to leave, his employer cut his commission in half. Cafritz and his attorney considered that a breach of his agreement. Cafritz maintained that his original commission was a provision of the agreement, and said as much in a registered letter to his employer. His employer never sued.

One of Cafritz's new partners, formerly a salesperson at the same company, had also signed a noncompete, but he was fired a few months before starting Global Mail. Stuart Cable, a partner at the Boston law firm of Goodwin, Procter & Hoar, says that many noncompete agreements kick in only when an employee quits, not when one is fired. But, he adds, "a well-drafted agreement makes no distinction, because in many cases it's hard to tell what happened." Although the partner's noncompete was well drafted in that regard, the employer never pursued the issue, partly because in his new job Cafritz's partner controls no accounts directly.

What if the noncompete is reasonable in its limitations, your employer hasn't cut your pay, and he or she won't fire you? Well, some CEOs say, don't worry, noncompetes are worthless.

Cafritz, of all people, disagrees. His company requires all salespeople and key personnel to sign noncompetes. He limits the agreement to one year, and to proprietary information. Employees can leave for a competing company, they just can't use Global Mail's secrets.

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International Credit Checks
We are starting to make international sales. How should we check the credit ratings of foreign companies?

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