It's complicated. End of story. I don't have a solution. Sometimes people who work for you are going to have side businesses they're trying to build. Who owns the product if they work on it during the day? How much of that do you allow if you're getting great results from the person and you don't want to chase them away?
Better buckle up cowboy. If you don't address it, you're heading for a train wreck. If you do get in front of it and start some dialog around it, you're causing a train wreck.
Which is to ask the following related to side projects outside your business your employees work on: When would you like the train wreck to happen?
On my mind related to to the following snippet from a Business Insider profile of Kevin Rose, founder of Digg:
"Bored with Digg, he began working on a number of side projects—some of which gained some serious traction. The members of Digg's board, who wanted the savvy Rose around to help run the company he cofounded, were livid.
In summer 2007, Rose began working on a "secret" startup that would go on to become Pownce, a file-sharing application that presaged Dropbox. Digg's board insisted that Digg shareholders should have a piece of Pownce, given that Digg's founder and a top designer, Daniel Burka, were working on the project.
This was not helping morale at Digg, and that led the board to tell Rose he wasn't allowed to have any more side projects. Rose's design abilities were obviously a key asset to Digg. But if he was going to be this distracted, Digg would be better off finding someone else.
Rose took even more money off the table when Digg raised $29 million in its third round of funding in 2008, according to one colleague—with Adelson's approval. "Adelson counseled us, saying, if you are offered those kinds of deals, you should take them because it's a great way to mitigate your risk," a colleague said.
But if Rose started another side gig, the board threatened to fire him, according to one colleague. That didn't stick. Rose decided to begin work on WeFollow, a Twitter directory, in early 2009 without telling anyone. He unveiled WeFollow at the South By Southwest conference in 2009.
Once again, Digg's board was pissed, and asked Adelson to fire Rose, but Rose and Adelson had negotiated a mutual protective clause. Neither could be fired without the other's consent."
When do you want to the train wreck to happen? Go read the whole article, lots of talent lessons in there....