We all know that relations between employees and their employers have changed considerably in recent years. Looking back, what once seemed rather simple—hiring, promoting and, if need be, firing—has somehow become a veritable minefield of potential problems and attendant risks. Employment-related laws, regulations, lawyers and lawsuits seem to lurk everywhere, and increasingly so.

While you might think that legal difficulties such as discrimination, harassment, disability-related claims and other potential employee actions are your most vexing hiring and firing risks, these fears are usually exaggerated. They are risks, yes, but not ones that go to the heart of your business. Lawsuits, labor-board audits and other manifestations of the ever-more litigious nature of the employer/employee relationship are both time-consuming and expensive. However, the departure of your valuable employees truly affects your bottom line over the long term.

Risk Mismanagement
For more than 20 years, I have been a hired gun on the frontlines of the intensifying battle for human capital. I have counseled and represented executives worldwide regarding their employment, compensation and severance. From their perspective, employment has become a potential minefield. They have suffered widespread job insecurity, along with growing distrust and disarray in executive suites. Most of my clients would like to go back to the good old days when loyalty meant more, and when stability at work was the norm rather than the exception.

Employers are using more heavy-handed techniques than ever before to maximize their human assets and minimize hiring and firing risks. Employers have armed themselves with more sophisticated defense mechanisms, such as noncompetition agreements. These prohibit former employees from working for competitors for a set period. Noncompetes are now nearly universal; even midlevel administrative staffers are often required to sign them. Employers are also trending toward paying bonuses partly in cash and partly in restricted stock that vests over a number of years, constituting de facto golden handcuffs.

Over the past six months or so, a new weapon of morale destruction has arrived from England: garden leave. This device, incorporated into initial hiring letters or other agreements, requires employees to give extraordinary preresignation notice, up to six months. After they do, this provision prohibits the employees from working elsewhere, so they simply “tend their gardens.” Garden leave is proving to be an especially effective way to dampen the free flow of human capital. One contract I negotiated recently even forbade the employee from negotiating future employment during her garden leave. Akin to demanding that someone stay in an unhealthy friendship, these efforts are inevitably doomed to failure.

These defensive measures are not especially effective; they must be enforced in courts, which are notoriously reluctant to limit employment freedom, and these days juries are not very employer friendly. Defensive measures can actually backfire: employees tend to resent restrictions, and often cite them in their decision to leave.

Attorneys circumvent these legal barriers in court, where judges seek to achieve fairness and equity. They rarely find that curtailing freedom is fair. Even restrictions that are enforced are done so only for what is deemed a reasonable period, usually far less than was initially agreed.

Surprisingly, perhaps, not one of my clients has left a company to seek greater financial rewards. Rather, each has resigned based on factors prized more highly than pay: the “three Cs”—clarity, commitment and community. Clarity describes the degree of certainty about where one stands in the company’s hierarchy. Commitment is a general sense of job security. Community equates with an estimable sharing of the wealth that the employee helps produce. I am not writing a socialist fairy tale here, but simply recommending that employers be clear about a few issues. They should explain the employee’s role in the company, offer a reasonable amount of notice and transition assistance in the event of a layoff, and agree to a formula for compensation dependent upon achievement.

Commit to Commitment
Successful people are successful in large part because they value the right things. This stands true for both employers and employees. From the employee perspective, the long-term foundation is more important than the short-term rewards.

Valuable employees seek commitment, or by another name, simple job security, first and foremost. They may achieve this by using a combination of an employment contract, an agreed minimum notice of termination and an “honorable discharge” if departure becomes necessary. That is it.

Employers continually surprise me by their general aversion to commitment. They will claim, “We do not grant employment contracts; our employees are all at-will. They’re here only as long as we want them to be, and not a moment longer.” Would you want the primary supplier of your most critical resource to be tentative or, instead, trustworthy? Would you prefer that your most important customer be loosely affiliated with you or firmly connected? Then why be so hesitant and so apathetic to your most precious business assets? Instead of using handcuffs, penalties and threats, you might clarify your company’s reporting structure, institute rolling, two-year commitments and define a clear understanding of compensation ranges—and then put each of these on paper. Employees without a sense of permanence do not heavily invest themselves into their positions, either. Afterall, no one changes the oil in a rental car.

You can achieve effectual, sophisticated risk management in hiring and firing by treating your employees—especially those who represent significant, unique value to your organization—as you would your most important supplier or your most lucrative customer. You must develop a long-term approach, and share both the rewards and risks of the relationship. There is simply no better way. Otherwise, I, and others like me, am always lurking about.

Alan L. Sklover, an attorney based in New York, makes his living helping senior executives circumvent the legal restrictions employers place on their freedom to find other employment. He argues that we can avoid these sorts of legal challenges and retain our best staff if we make the same type of commitment to our employees that we demand of them.