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The Ethics Coach on the Secret to Hiring Honest Employees

This story appears in the October 2014 issue of Entrepreneur. Subscribe »

Q: I don't have the resources for the personality tests that big companies use to weed out dishonest job applicants. Since references generally leave out negative information about candidates, what's the best way to be sure we're hiring honest and ethical people?

A: The smartest thing any business can do is involve a mix of its best employees in the interview process. They'll bring the perspective of high standards and effectiveness, and are likely to look for the same traits in potential candidates. In smaller businesses, where employees are often stretched, everyone has a stake in seeing that excellent candidates are hired.

If it sounds like this process is too time-consuming for your business, consider the aggravation you'll avoid by making sure employees you trust get to know the finalists and weigh in with observations on cultural fitness. To avoid a pool of an elite group doing interviews, make sure all employees understand the vision you have for the culture being built--the behaviors that create wins for them, the organization and customers.

Keep developing employees so the interviewer circle expands. When members of the management team interview candidates, make sure they ask candidates about their personal definition of resilience, how they handled past mistakes (both their own and those of others) and what they feel they can bring to the work environment you are creating. (Bonus points for candidates who already know about and can discuss your organization's values.)

There is no foolproof way to make sure new hires are honest--or to guarantee they will always behave honestly. However, once recruits come aboard, discuss the many ways acting on company values leads to success within the business. Also be clear that failing to meet these standards is grounds for dismissal, a consequence that can be an effective deterrent to bad behavior.

Q: I understand the importance of noncompetes for my management team, but I don't believe in making people sign an agreement that will keep them from moving to new jobs within their field. How can I craft an agreement that allows people to leave but keeps them from taking my company's ideas, materials, programs, systems and procedures to their new jobs?

A: Since, as you point out, noncompete agreements can restrict employees' ability to earn a living after they leave your organization, let's first consider some other ways of protecting your organization's intellectual property.

First up: Get to your employees early. Starting on the first day, be upfront with new hires about what constitutes confidential information. Rebecca Walker, a compliance attorney with Santa Monica, Calif.-based Kaplan & Walker, suggests adding provisions to employee agreements that protect confidential information and trade secrets and require reasonable restrictions on the solicitation of customers and employees. Use orientation materials and the code of conduct to further clarify how the organization addresses intellectual property issues.

Organizations "should protect their confidential information by making sure it is segregated, clearly designated as a trade secret and not shared with third parties like vendors, development partners and sales channels without confidentiality agreements in place," Walker says.

If you still want a noncompete agreement, bump up enforceability by making it as fair as possible. Limit the agreement in terms of geography, duration and scope of activities (though there's a good chance it still won't be recognized in all states). But, no matter what you do, keep in mind that great ideas, materials and processes in the public domain can be adapted by former employees for other organizations.

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