“An act has no ethical quality whatever unless it be chosen out of several all equally possible.” – William James

Two ETR readers who are employees of a corporation I consult with began a side business to handle the data of the company they worked for. Since their initial interest in starting the side business was based on need (they weren’t happy with the data-service companies they were dealing with at the time), they didn’t see the venture as a conflict of interest.

Rather, they viewed it as a double plus — a business that would benefit both themselves personally and the company they worked for. Trouble was, they never told their employer what they were doing. And when their employer found out about it, he felt uncomfortable. “I don’t like the fact that someone I trust to run my business might run into conflicts simply because he has a direct interest in one of our vendors,” my colleague explained.

And the conflict can go both ways. When the company recently decided it would be financially advantageous for them to handle the data internally, our two “intrapreneurs” had to wonder whether the job was being taken away from them as a form of punishment.

Were it not for the fundamental good will that had existed prior to this incident, the relationship might have terminated badly. So how do you ethically springboard off your employer’s business? Start by recognizing these fundamental business truths:

  • Before you become a valuable employee, you spend months and sometimes years producing so-so work. During that time, your employer is paying your salary, providing for your benefits, and teaching you skills, industry practices, and company secrets.
  • In return for investing so much in you, your employer expects you to be reasonably loyal to him. Usually, that means sticking around and working hard after you’ve become good at what you’ve been trained to do.
  • If you quit before you’ve had a chance to “pay back” your employer, you are cheating him. And if you quit to start a business that was made possible by the knowledge you gained and the contacts you made as an employee . . . you are cheating him twice.

Here’s how to use your current job to create a second income:

1. Become an amazingly good employee by (1) becoming an expert in your specific job, (2) becoming knowledgeable about the essential business of your business, and (3) applying all that knowledge in a way that makes the business more profitable.

2. As you become more valuable, don’t hesitate to ask for better compensation. Your employer, if he’s smart, will not refuse you. So long as you are providing him a great deal of value, he’ll be cognizant of the fact that you are free to go elsewhere. By paying you at or just above the market rate for the job, he’ll not have to worry so much about losing you.

3. Think about creating your own business and work on it for as long as you like, but don’t actually do it until you’ve worked for your employer long enough to pay him back. Generally speaking, that’s a period roughly equivalent to the time it took you to become good at what you do. If it took a year, give him another year. If it took two years, give him two.

4. Once you are sure you want to branch out on your own, discuss the topic with your boss. Explain that you have a general interest in self-employment. Assure him that you haven’t made a final decision yet but that, as your thoughts develop, you will be respectful of his interests and will keep him updated.

5. If your employer threatens to fire you if you do go out on your own, don’t panic. So long as you make it clear that you intend him no harm — and, in fact, expect that you can actually help him out — he’ll probably come around to your way of thinking. If he doesn’t . . . well, it’s his loss.

6. When the time is right and everything is in place, make your employer a very attractive offer — and tell him exactly when you will be leaving to go off on your own. When the deadline comes, act decisively.

If your goal is to go into direct competition with your boss by doing pretty much just what he’s doing, he probably won’t be happy about it.

But if you approach it right — by following the guidelines listed above — he’ll probably accept it.

If your goal is to start your own support business, like the two intrapreneurs I talked about above, your chances of getting cooperation from your boss should be very high. As Gary North pointed out in a recent issue of “Reality Check”, outsourcing yourself can benefit both sides. It gives you an unlimited upward arc to your career — and it allows your employer to hand off a chunk of work to someone who has specialized knowledge in how to do it.

“Consider an employee who is very good at managing a particular service within a company,” Gary wrote. “No matter how well he does his job, he is unlikely to become the CEO of the company. He is employed to manage a specific component of the overall operation. He maximizes his return for the company by mastering this one operation. He is never going to rise above vice president in charge of this division. If he is ambitious, this fact thwarts his career objectives.

“If this in-house service is necessary to companies in the industry, he has a way to advance his career. He can start his own company that specializes in this service. Then he sells this service to several companies in the industry. He maximizes his income. He maximizes his authority. He rises to the top in his own company. He may even rise to the top in his sub-industry. He is no longer facing the career barrier of vice president.”

There are several reasons to behave as ethically as possible in the way you handle a situation like this. First and most important, you want to be able to look at yourself in the mirror. The second reason is more pragmatic: Your venture might not work out. And if it doesn’t, you may very well want to go back to your old company and get re-employed.

I’ve worked with employees who have outsourced themselves and I’ve always supported them so long as they did it the right way. A few of those people succeeded and are currently enjoying the lifestyle of successful entrepreneurs. Of those who failed, most happily came back into the fold.