Kai-Fu Lee as a Valuable Employee - Essay Example

TABLE OF CONTENTS When examining the prevalent practice in business whereby the best and brightest employees within a companyare lured by the competitors, it is prudent to state that this is one of the most unethical practices in recent business history. This practice has been employed to a greater degree within the technological sector wherein exceptional developers are few and far between. These strategies are utilized as standard business practice by Google, Yahoo and Microsoft to name just a few. When recruiting these very high profile employees, the competitors not only gain a valuable employee but the gain the trade secrets of its competitors. In an attempt to mitigate the damages a company incurs by the loss of a valuable employee-one who also holds a great deal of its trade secrets, companies such as Microsoft often include a non-compete clause in their employee contracts. In the case of Kai-Fu Lee, Mr. Lee was prohibited from working with the competitors of Microsoft for a period of one year after the termination of his employment. In July, 2005 Mr. Lee left the employ of Microsoft and went to work for its competitor, Google. As a direct result a law suit was initiated. This research paper examines all the relevant factors in the case of Kai-Fu Lee as well as its implications with regards to the hiring practices of many other companies. BACKGROUND OF THE KAI-FU LEE CASE The Kai-Fu Lee case represents the culmination of Microsoft's efforts to put an end to what many consider to be a long-standing and unethical practice of Google. This practice involves the attraction and retention of the most qualified employees irrespective of their contractual obligations to its competitors or any other companies. This practice is one that represented an overall strategic plan on the part of Google. An integral part of its strategy was to establish offices in close proximity to Microsoft's headquarters. In so doing, Google was in a position to offer the employees a better overall financial package while ensuring that there is minimal interruption in the personal lives of the employees. In fact, in November of 2004 Google hired Mark Lucovsky who was at the time one of Microsoft's top engineers (Elgin, 2005). Kai-Fu Lee as a Valuable Employee In order to examine the case of Kai-Fu Lee and the suit incited by his engagement by Google it is prudent that we look into the background of Kai-Fu Lee and how and why he was recruited by Google. This coupled with Microsoft's efforts aimed at preventing him from being employed by its competitors will serve to establish the rationale behind the entire case. First and foremost, Mr. Lee was a Chinese immigrant who migrated to the United States in 1973. He graduated from Columbia University in 1983 at the top of his class and went on to Carnie Mellon University where he earned a Ph.D. in computer science in 1988. While at Carnie Mellon he established himself as one of the up-and-coming leaders in the field by pioneering the development of an artificial intelligence based system for playing the famous board game Othello. His development won him the top award at the U.S. National tournament of computer players in 1989. During the course of his academic career he made many significant accomplishments which were responsible for launching his career as a faculty member of Carnegie Mellon and subsequently as a research and development executive for Apple Computer. While at Apple he was spearheaded the team of developers responsible for developing PlainTalk, Apple Newton and QuickTime. He then left Apple Computer for Silicone Graphics where he served as the president of their Virtual Reality Modeling Language (VRML) division. After working for Silicone Graphics for only a bit over a year, he was recruited by Microsoft and founded the Microsoft Research Division in Beijing China in 1998 where he worked until 2000 when he returned to the United States and served as the Vice President of Interactive Services for Microsoft (Microsoft, 2005). He remained in the employ of Microsoft until July of 2005 when he left for a more lucrative and prestigious position at Google. It was very clear that Microsoft had lost a valuable employee but much more than that was the notion and ever present danger that along with the loss of Mr. Lee came the potential of the utility of proprietary information possessed by Mr. Lee. Microsoft's Suit against Mr. Lee and Google On July 19, 2005, Microsoft launched a suite against Google and Mr. Lee in a Washington state court. The suit alleged that Mr. Lee violated his non-compete agreement when he became employed by Google less than a year after leaving the employ of Microsoft. This suit was heard by a judge in the Superior Court of Washington on July 28, 2005 and a ruling was issued by Judge Steven Gonzalez whereby Microsoft was granted a temporary restraining order preventing Mr. Lee from taking an active role in any projects undertaken by Google which proved to be in direct competition to Microsoft. This temporary restraining order was to remain in effect until the scheduled trial on January 9, 2006 (Fried, 2005). Before the trial, however, there was a scheduled hearing on September 13, 2005 wherein Judge Gonzalez ruled that Mr. Lee may work for Google but there were restrictions placed on his engagement. These restrictions included the prohibition of Mr. Lee working on technical projects for Google until the expiration of the non-compete agreement in July, 2006. Under this ruling, Mr. Lee may recruit employees for Google in China as well as engage in open dialogue with governmental officials in order to deal with issues involving licensing of Google's work products. He was unable to work on any of the search engine technology as well as speech recognition software as they are integral parts of Microsoft's developmental projects. Additionally, Mr. Lee was prohibited from engaging in budgetary and salary negotiations as well as the rendering of research directions to Google's employees in China (Gonzalez, 2005). Finally, On December 22, 2005 a confidential settlement was reached between Microsoft and Google which ended the pending litigation and established both Microsoft and Google as winners (Vise, 2005). ANALYSIS The Kai-Fu Lee case is not an isolated one. It is one that is facilitated out of need and relates to the unscrupulous practice of many companies both within the United States and other parts of the world. In examining the particulars of this case, it is prudent to state that despite the fact that the recruitment practices of many businesses prove to be extremely unethical, they are not illegal. In fact, these practices have become standard industry practice within the technological sector. This practice is one that is facilitated out of the need for highly qualified and innovative professionals in the field of technology. This is further complicated by the fact that technological advances are taking place at an unprecedented rate and there is always a consumer need for faster, better and smaller technological gadgets. According to Raymond Kurzweil, a pioneer in the field of information technology and an ever-present figure at the PC Expo, the unprecedented rate of change in both micro and mini processor capacity and speed power will continue additionally there will be advances in the nanobot technology that will impact image processing which will mimic that of the human brain and virtual reality will advance to the point of mimicking the six human senses (Ferranti, 2000). With these clear and most noble demands, it is prudent that companies position themselves in a position whereby they can be the first to pioneer development in this area. The financial implications of this are significant in that pioneering such technology can mean the establishment of new market leaders. With these high stakes in mind, many companies feel that the end does in fact justify the means. Essentially, these companies will go to unprecedented limits to recruit the individuals who are in a position to catapult these companies to further greatness. Google's Recruitment Strategy Within the last quarter of 2005, Google, Inc. was successful in recruiting and hiring eight hundred new employees and had tripled their global workforce in two years. In so doing, they successfully lured one of the top technical minds in the person of Mr. Lee, Mr. Vint Cerf, a co-designer of Transmission Control Protocol/Internet Protocol (TCP/IP) who recently worked for MCI and Mr. Louis Monier, the founder of AltaVista-one of the first Internet search engines (Mills, 2005). The pertinent question here is one which begs the question as to how has Google been effective in recruiting the best and brightest from the most reputable companies. The offering of intangible perks is at the heart of Google's recruitment strategy. When Google identifies an employee the company wishes to have in its employ, the company has been known to offer those employees many intangible perks. These perks include free cafeteria meals, onsite child care centers for the employees as well as dog-friendly offices and a free annual ski trip. Additionally, program developers were allowed a great deal of flexibility in choosing the projects they will work on. Google's recruitment strategy was not limited to the recruitment of top industry players; they were interested in recruiting individuals with varying levels of technological expertise. Their recruitment strategy involved recruiting university students and luring them by offering free perks. Additionally, they utilized job postings both online and in newspapers as well as running software design contests in popular technological publications. As a final attempt at strategic recruitment, they would offer computer groups the opportunity to host their meetings in Google's offices. These recruitment strategies have been effective in ensuring that Google remains a lucrative company. To date, its stocks are well worth over $400 per share (Mills, 2005). Recruitment Strategies of other Hi-tech Companies Certainly, Google is not the only hi-tech company which chooses to recruit the top employees in other well-established companies. In 2005, Yahoo has recruited and hired many of the top engineers from other companies. These new hires include Larry Tesler who was the vice-president of Amazon.com and Mr. Prabhakar Raghavan who was the chief technology officer at Verity-a competitive company which produces software programs utilized in searches (Elgin, 2005). Google and Yahoo of today are very much like Microsoft was in the past when Bill Gates left IBM, taking much of its proprietary secrets and building Microsoft utilizing those secrets. The irony of the Lee situation is one that could be understood first and foremost by Mr. Gates and has essentially served to initiate the law suit initiated by Microsoft. The underlying fear here was the notion that Google could potentially do what Microsoft has succeeded in doing to IBM when it was established. In order to circumvent this Microsoft launched a case in the hope that the non-compete agreement would stand. Non-Compete Agreements In order to circumvent the utility of proprietary secrets by disgruntled and otherwise unsatisfied employees, many companies include a non-compete agreement as a condition of the hiring of key employees. In so doing, it renders its current and departing employees unable to work for their competitors. This has become an industry standard for almost all of the companies within the technology sector. An example of this can be seen in the sample non-compete agreement whereby a company delineates the term of the non-compete agreement. The industry standard is one year but it can be as many as two to three years. These agreements generally include remedies and other courses of action (Onecle, 1998). These agreements serve to protect and safeguard proprietary secrets while impacting severe sanctions on employees who wish to leave their employ. It is an interesting employee retention strategy-one that has effectively and efficiently served to facilitate unscrupulous employee recruitment strategies. EVALUATION In the Kai-Fu Lee case, the ruling served to modify the scope of a non-compete agreement wherein Mr. Lee was able to work for Google but in a modified capacity. This brings many questions to mind. First and foremost, how will this order be reinforced What are the implications for future non-compete agreements Can a non-compete agreement be modified by judicial intervention What message does this send to companies which utilize aggressive recruitment strategies In addressing all of these questions, it is fair to say that the Microsoft-Google battle served as a means of making companies accountable for their actions when they employ unscrupulous recruitment practices. Ironically, however, Microsoft and Google were able to reach an undisclosed agreement which has been seen as a victory for both. The lesson here is that non-compete agreements are flexible and negotiations can be reached to ameliorate their damages. First and foremost, we need to examine the recourse Microsoft can take in remedying the situation. Mr. Lee was not the first employee to be recruited in such a manner by Google and certainly he wouldn't be the last. Google has a clear, tunnel-versioned approach to building its staff and expanding its potential within the technological segment. In so doing, this company is in need of employees with innovative insights and a proven track record within the entire product development life cycle. These employees must be able to develop new concepts and see those concepts to fruition. This can only be done by employees with industry experience and the technical savvy which has developed over the course of time. These employees realize their true worth and possess the necessary leverage to negotiate their very lucrative employment contracts. Oftentimes, many of these employees become disenchanted with their employers and seek new employment of are actively recruited by competing business which are willing to offer them anything in response for their technological innovation and insight. Like Mr. Lee many of these employees often opt to work for the competition despite the fact that they signed non-compete agreements with their current employers. In several cases, the employees can do so without any sanctions or penalty. The hire of these employees often go unnoticed but in the case of high profile employees, there is no was of keeping this information secret. Clearly, Mr. Lee should have realized that he signed a non-compete agreement and should have abided by the tenets of this agreement. It was unethical for Mr. Lee to accept a position with Google even before he left the employ of Microsoft. His agreement prevented him from being employed by Microsoft's competitors for a period of one year after his termination of employment with Microsoft. This agreement was in the best interest of Microsoft and should have been enforceable. In attempting to enforce this agreement, Microsoft had two alternatives-to reach an agreement with Google wherein it would relieve Mr. Lee of his responsibility with regards to the non-compete agreement independent of the legal system and secondly, to skip the negotiation period with Google and to allow the Courts settle the dispute. In choosing, the latter, Microsoft made a clear statement. That statement was one that dictated that Google stop its recruiting practices and procures employees outside of their company. This case held the potential to be precedent setting, however, it was not in that Google and Microsoft settled their suit and Mr. Lee was able to work for Google in some capacity even before the expiration of his non-compete agreement. This case however, was effective in challenging Google's long-standing policy and to send a clear message that such behavior would not be tolerated by Microsoft. This stance taken by Microsoft is one that is necessary and serves to protect the proprietary secrets of companies as well as fostering the spirit of competition our country prides itself in facilitating. It is prudent that new recruitment strategies be explored in order to prevent what happened in the case of Mr. Lee and what continues to happen to companies such as Xerox, Borland International and countless others. In seeking legal solutions, the notion that non-compete agreements are completely enforceable is one that prevails. I think Microsoft was doing what it needed to in order to protect its human capital. Any other company in its position would do the same thing. RECOMMENDATIONS One of the most important parts of human resource management is the retention of the most talented employees. In retaining those employees it is prudent that a company know its competition and the benefits and perks it offers the compensation scale for employees. In studying the competitor, a company is able to devise methods for retaining its own employees and preventing them from being lured by promises. In a market where human capital is limited, it is prudent for employees to be satisfied with their employment situation and could not be lured by other companies. In order to ascertain the needs of employees and the factors which contribute to their leaving a company, it is prudent that an employer conduct a survey to ascertain the factors which contribute to employee dissatisfaction which results in his/her departure from their company. This process involves an examination of the following: Employee satisfaction Organizational systems within the corporation The strategic management practices The likelihood of employees leaving the company within the next year The compilation of this information serves assist the company in developing a retention profile and in the development of a clear and concise retention strategy which involves the identification of key risk factors and to implement strategies to improve retention. This should be done with the notion that retention is an ongoing process and retention strategies should be utilized in a vigilant manner wherein focus groups are conducted on an ongoing basis. The aim of these groups would be to access employee satisfaction and identify changes within the organizational structure and its impact on employee recruitment and retention. Another recommendation for companies such as Google is one which involves the recruitment of relatively unknown but highly qualified experts. In recruiting highly qualified experts it is prudent for a company to utilize both traditional and unconventional recruitment methods. These methods include the search for new talent within colleges, through job postings both online and in print media, job fairs as well as more creative methods such as contests and incentives for employee referral. In the long-run the discovery of new talent can be more lucrative but this comes at the expense of time and innovation. Many companies may find it worthwhile to develop new talent rather than compete for existing talent. In developing new strategy, a company may develop an internal recruitment and outreach council. The council would involve the active participation of employee representatives at all levels of engagement. It is prudent that this council have a steering committee wherein the direction of the recruitment efforts can be done in a proactive manner as well as one that is ethical and circumvents incidents such as those incidents that proliferated the Lee case. The fundamental goal of the council would be one that develops and implement details of the recruitment strategy. This would involve the development of innovative recruitment strategies, processes and measures. Finally, the terminal role of the council would be to review those strategies in light of its fiscal implications. Finally, it is prudent that corporations such as Microsoft, Google and Yahoo be aware of the implications of non-compete agreements and incorporate unambiguous language as a means of establishing ease in interpretation. This can definitely serve to reduce the amount of litigation undertaken as a result of non-compete agreements. In the case of Microsoft and Google, the non-compete agreement was very esoteric in nature and it took legal intervention to interpret its scope and ramifications. CONCLUSION The Kai-Fu Lee case is certainly not an isolated one. Each day companies within the hi-tech sector compete for employees. Some of these employees are actively engaged with their competitors. This competition is one that breads many unscrupulous business practices that have somehow become standard industry practice. Companies such as Microsoft, Google, Yahoo and IBM have been both the victim and perpetrators of such practices. In many cases, companies fail to litigate their dispute over human capital but Microsoft took a stance and attempted to resolve their dispute through litigation. Much can be learned by Microsoft's attempt to litigate when one of their most valuable employees is lured from them. These lessons include the fact that non-compete agreements are fully enforceable and will serve to protect proprietary secrets. In the onset, it appears that when an employee is lured away by a competitor, this loss becomes a casualty of conducting business but when one looks beneath the surface, it does not have to be. I feel that as a direct result of the litigation of the Lee case, companies will begin to take a closer look at their non-compete agreements. This examination would serve as a means of incorporating more safeguards within these agreements. It was clear that despite the fact that Microsoft engaged in the same behavior as Google, the company was definitely disturbed to the point where it sought litigious intervention. Hopefully, this case as served as a strong call for a return to ethical recruitment and retention practices. This would definitely serve as a means of returning the true spirit of competition to the hi-tech segment-one which utilizes ethical decision making as its pillar. REFERENCES Elgin, B. (2005). Revenge of the Nerds-Again: Google and Yahoo! Are hiring away hundreds of top engineers from high tech's most prestigious firms. Business Week Online, Retrieved February 5, 2007, from http://www.businessweek.com/technology/content/jul2005/tc20050728_5127_tc024.htmcampaign_id=topStories_ssi_5. Ferranti, M. (2000). Fast-paced technology advances will continue. Info World Online. Retrieved February 5, 2007, from, http://www.infoworld.com/articles/hn/xml/00/06/29/000629hnkurzweil.html Fried, I. (2005). Kai-Fu Lee trial to stay in Washington, for now. CNET News.com. Retrieved February 5, 2007, from http://news.com.com/Kai-Fu+Lee+trial+to+stay+in+Washington,+for+now/2100-1030_3-5895446.html Gonzalez, S. (2005). Microsoft Corporation v. Mr. Kai-Fu Lee and Google, Inc.-Case Decision. Retrieved February 5, 2007, from http://www.metrokc.gov/kcsc/docs/Microsoftprelim.pdf Microsoft Corporation (2005). Kai-Fu Lee-(Former) Corporate Vice President, Natural Interactive Services Division. Retrieved February 5, 2007, from http://www.microsoft.com/presspass/exec/kaifu/default.mspx Mills, E. (2005). Google hiring like its 1999. C-net News. Retrieved February 5, 2007, from http://news.com.com/2100-1025_3-5924424.html Onecle (1998). Sample business contracts-non compete agreement. Retrieved February 5, 2007, from http://contracts.onecle.com/art/chung.noncomp.1998.08.18.shtml The search giant is stocking up on engineers and more as it races to keep pace with its own ambitions. Vise, D.A. (2005). Microsoft, Google both Claim victory. [Electronic version]. Washington Post, September 14, 2005, D05. Retrieved February 7, 2007, from http://www.washingtonpost.com/wp-dyn/content/article/2005/09/13/AR2005091301860.html Read More