Should the executive seek an employment contract, or a letter of understanding? They obviously can protect you if something happens with the new employer that negatively affects you. For instance, your manager leaves and his promises are not going to be met by his replacement. Attorney-prepared contracts (generally lengthy and phrased in legal terms) are not always granted by companies. They may prefer to use a letter of understanding, which will briefly describe the offer (title and basic responsibilities, compensation, perks, and start date). Generally, the more senior the position, the greater likelihood of your obtaining a contract. Otherwise, they’re granted less frequently. Straightforward employment letters are more easily gotten and many companies offer them routinely while others just don’t. Your ability to gain a contract is greatly increased in risky situations, joining a financially troubled company or a start-up venture. Herein one can also leverage for a separation clause, if the operation fails, you’ll be paid full salary for a period of time (often a year or more).

The final candidate for senior vice president and head of operations with a multibillion dollar company requested a contract. He knew that his predecessor had been terminated after several years in the job and by the new chief operating officer, who made him this offer. The chief operating officer countered that the fired executive had been given six months’ severance, outplacement assistance, and all this despite his being incompetent and untrustworthy. He wouldn’t offer a contract because he wanted his key managers to trust him as he would them. This element of trust was very important to him. For the executive to go to work without a contract would be an indication of that trust. There were dangers here. If the chief operating officer made promises and then wouldn’t keep them for whatever reasons, what recourse did the new man have? If the chief operating officer left the company or was promoted, would his successor honor the pledges? On the other hand, would the candidate get the job if he insisted on a contract? He decided to accept the verbal offer. The chief operating officer then voluntarily gave him a letter delineating most of their arrangement. He had wanted control and an ingredient of trust. Once that was established to his satisfaction, he was willing to come up with the letter of understanding.

If you want a contract or a letter, ask the headhunter about the possibility of getting one. There are certain industries where contracts are more common and often required by the company. In the June 6, 1983 Forbes article, “Who Owns Your Brains?,” it was pointed out that of the top 100 industrial companies in America, one-third require contracts. And industries which generally require them include the very competitive ones, such as computers, pharmaceuticals, toys, defense equipment, and electronics.

If your prospective employer requires that you sign a contract, have it reviewed by a lawyer before you sign and keep a copy for your reference. You may plan to leave the company in the future and the contract states what you can and can’t do. It may have a restrictive covenant which can prevent you from working in your field for a period of time after you leave the company. Several states prohibit this because it prevents one from earning a living. But if your new employer is inflexible regarding this clause, discuss a rider clause with the consultant that will give you full pay during the noncompete time.