Training Your Competition

[KristineS]

Would you hire someone who told you in a job interview that they were saving money to start up a business that would be in competition with yours?

This question came up on another forum the other day. The people on that forum run screen printing and embroidery shops. One guy was asking what he should tell prospective employers since he already did that sort of work on the side and hoped to open his own shop someday.

I said, if it were me, I'd appreciate knowing. I'd also want to be sure he wouldn't steal my customers or my techniques, so I'd want an agreement in place so that couldn't happen without penalty.

How would the rest of you handle it? Would you hire the guy?

[vangogh]

I wouldn't be too worried and wouldn't have a problem hiring the person. It depends on the job of course, but most of the people you hire, particularly for lower level jobs in your organization, aren't going to stay forever. At least the person who's thinking of becoming your competitor is going to be interested in the job.

There's no knowing that person will start a competing business either.

However if I were a prospective employee I might not say I was hoping to become a competitor one day. I have a hunch most people would see it as a threat. I would want to get across my interest.

It's a tough call on both sides. I can see pros and cons for the person looking to get the job and the person looking for the new employee and I suspect different people will respond to the information in different ways.

[Evan]

I wouldn't hire them. You lose trust for them and will become suspicious of what they're doing. While you cannot expect your employees to stay with you forever, and perhaps moving on to a competitor (or starting their own business), one shouldn't note that. It, of course, depends on the size of the company.

If you were WalMart and somebody said they wanted to do such a thing, you could just laugh it off. If you're a small shop and things are tight, the last thing you need is more competition. So I guess it could depend on your financial situation. Furthermore, it depends on what you're giving them access to. If the employee was making t-shirts, that's fine. But I wouldn't let them near the customer list.

Non-compete agreements seem fine, but they're only as good as their enforcement.

[orion_joel]

I think that this sort of situation could be used to the advantage of the person already in business. Which from your original post i don't think they were the one asking.

However if i was the owner of a screen printing/embroidery store, i would see this as a good thing, because the first thing i would come back with if they mentioned wanting to start their own business is. "Maybe that is something that we can look at helping you do in the future."

Now some of you may see where i am going with that. Essentially i would put in the mind of the new employee that i want him to succeed which i would, it would also mean that when he does really get to the point of wanting to open his own business he is more likely to discuss it with me, and take advice i give. This would also give me an opportunity to help him set up his business in a location that will not directly compete with me, eg i operate on southside of city, i help him setup on northside of city. If i find that he is a good worker and i think that he could do well in his own business, i would maybe even consider offering to partner with him, to help him get a start and in addition this would mean i am expanding my interest.

This may not be the path that everyone would want to take and would not always be something that everyone could afford to do. However it does kind of help to turn the tables in your favor and give some chance that you are not going to have someone on payroll that you know is going to some day ditch your business and go and compete on the next corner.

[Steve B]

I make all employees sign a non-compete agreement. And, yes, I would definitely enforce the agreement if it were violated. In my business, a non-compete will be limited to my geographic area.

If they wanted to start a similar business outside of my area I would have an arrangement with them as a consultant. Then, I would show them everything they wanted to know and be available by phone for a period of time. In that case, I wouldn't be hiring them, they would be hiring me.

[Aaron Hats]

I wouldn't hire the person. Plain and simple. I worked too hard to get where I am and some of my contacts/vendors took me over a year to find.

[KristineS]

What concerned me is that, on the other forum, some people chimed in and said don't tell him that you're planning to start a competing business, and just steal all your employers knowledge and customers.

Personally, I think that's just wrong. I'd prefer someone who was up front to someone who was dishonest.

[vangogh]

It's definitely wrong to go in and steal knowledge and customers, which is likely why so many here wouldn't hire the person. I might not go into the interview saying how my plan is to open a competing business at some point, but I don't think I'd go out of my way to hide the fact either.

Like it or not a lot of people you might hire over the years will have ideas of going into a competing business. Let's say I decided to hire another web designer as my business grows. I wouldn't hold any allusions that that person will work for me forever and I would expect after leaving my employ the person would still be working in the web design field. That wouldn't stop me from hiring the person though.

[Steve B]

That's a good point. We may be hiring future competitors whether or not they admit it. They may not even know it at the time, but might fall in love with the business and want to do it on their own someday. That's why a lot of companies have them sign a non-compete as a matter of routine.

I know a guy that went and get a job with every one of his competitors - learned all their prodedures, then quit and formed his own company. He was quite universally hated in his area.

[vangogh]

Hmm? I wonder why no one liked the guy.

It probably depends on the type of business you run as to how much hiring your future competition will be a problem. Not that I'm looking to hire anyone at the moment, but I assume anyone I do hire is looking to compete with me at some point. I'd also think that they'll learn what they need to compete with or without me. However, if I served as a mentor they may not be so quick to compete directly with me.

Besides I'm competing with other web designers now anyway. What's one more. I think my success has more to do with what I do and don't do than it does with what my competitors do and don't do.

Andy like you mentioned if it is an issue you have them sign something preventing them from competing with you for a certain time after their employment ends.

[Blessed]

I think it really does depend on the type of business.

When I hired in at my last job and was asked my "career goals" I said that I would eventually like to work for myself doing graphic design. They were a printing company that only offered very basic design work, after I'd been there for a year they were offering a whole lot more than basic design work because I brought a skill set in that was new for them.

Then they tried to make me sign a non-compete and I laughed at them. I did agree to not pursue their customer's but also said that if their customer's came to me that I'd work for them. I stayed at the company another 7 years and got grief about who I was doing work for until about the last two years when the Vice President's son started working in my department and started doing a lot of design work on the side for current customer's... all of a sudden it wasn't much of an issue anymore.

Now that company is out of business and the VP's son and I are friends and we refer customer's back and forth because we have different styles and know who can provide the customer with work that they will be happiest with. If he knows that I'll be better at a project than him he refers the work to me because he knows that he won't be able to keep it anyway and vice versa.

I think it really depends on the industry and the product and the company doing the hiring - with or without a non-compete I would only go after someone if they started trying to get my existing business once they started their own business.

[orion_joel]

Blessed you are absolutely correct, it depends a huge amount on the business. You will find that many smaller businesses such as previously discussed will be much more prone to impacts from competition especially competition that they have helped create, then for example larger companies like banks, or major retailers.

For example i work for a Cash In Transit company, can you imagine if i walked in there for an interview and they asked what are you career goals, and i replied "To operate my own Cash In Transit business". They would most likely laugh, while it is potentially possible i could do so, the chance that it would greatly impact them in a significant way is really very small. The same with any other company that operates on a national or even state level. The chance of someone they employee leaving and starting a business that competes with them and cause a significant impact to their business is at best minuscule, they would not think twice about employing the person.

To a great extent this probably comes back to the goals of the business many small single location businesses are only ever going to be as big as they are now. Their revenue and profit may fluctuate, however they will not grow by a significant amount. Where as larger companies are continually looking at growth, and while they may be a $10M company now in ten years they may be a $50M company. Although there are people that could start work for a company today spend a year working there and leave to start there own company that could impact this growth, there is little chance it is going to happen in reality.

[Leatherneck]

In my business sooner or later the kids I train usually go on there own and try it. I know it is going too happen so i try and train them to do things right, so may be when I bid against them in the future I will be bidding apples for apples with them. Some one is going too be teaching them right or wrong so I like too do my best too even the playing field of the competition.

[vangogh]

That's really how I see it too Mak. I don't think you can stop someone from competing with you by not hiring them and I also think we all have a lot less 'secrets' than we might think we do. I'd rather teach someone how to design sites well and have them compete with me than have them learn the wrong way and compete with me.

In the end I think my success has much more to do with me than it does with my competition.

And for those cases where you do have some trade secrets or worry about a loss of customers have your employee sign some kind of legal paperwork to keep them from taking your clients/customers or using specific information from your company.

[Leatherneck]

Thanks Steve, One thing that would really up set me would be if I had a person working for me or even a sub for that matter and they where approched by a neighbor or a passing motorist, and where asked too give a estimate. When I sub contracted I never stole a customer from the hadnd that fed me if i was doing a job for them.

[vangogh]

That's a different issue. It's one where someone is stealing a customer from you while they're still working for you. I know it happens and I suspect it's one reason why many don't want to hire future competitors. I think it has less to do with someone wanting to going into the same business as you though, and more to do with someone who's just unethical.

[KristineS]

In my business sooner or later the kids I train usually go on there own and try it. I know it is going too happen so i try and train them to do things right, so may be when I bid against them in the future I will be bidding apples for apples with them. Some one is going too be teaching them right or wrong so I like too do my best too even the playing field of the competition.

Mak, I think that's a great attitude. I'd rather train my competitors and have them be ethical and do things right. At least then you're fighting on a level playing field and you can be sure no one will stab you in the back.

[Steve B]

Mak - if you get them to sign a non-compete you can be sure they won't compete with you in a certain geographical territory. Then, if they go into business down the road you can help each other out with referrals.

[Leatherneck]

Good thoughts and ideas fellas! Good way too maybe save a frienship also. Thanks Kristine for the compliment. ;)

[orion_joel]

When i was sub contracting in IT, it is very prevalent that people ask the person on hand doing the job about things, rather then calling the company you work for. For anyone that does not realize the value of being loyal to the person that is paying you directly it would provide quite a large picture in their mind that they may be able to make some quick extra money doing things direct to the customers.

It was one thing that i never did though, if i was ever asked how much for this to be done or how many hours would this take or such, i would always suggest it would be better they ring the guy who sent me to do the job i was doing. I always noted what they asked, and made sure i let the guy know they had asked, because then even if they didn't call he had a good hint at something else he may be able to approach them about doing. At the time i meant i pretty much was given as many hours as i wanted working for him at some pretty good hourly rates. He knew i could have had the chance to do it behinds his back but he rewarded my honesty and i think in the long run it probably paid off to a much better amount then i could have made on the side.

[vangogh]

Being honest paid off for you. I think your approach was the right one. I have known people who would have done the opposite and just gave the customer a price and did the work for cash.

Of course the boss often finds out the next time they talk to the customer so the honestly policy is not only best, but safest if you want to keep your job.

[KristineS]

Joel, that was definitely the way to handle things. I always believe you get back what you put out. If you're honest and upfront and ethical, that should go a long way toward ensuring that's how you're treated in return.

[Marcomguy]

I wouldn't hire the person. Agreed, when you hire someone you don't know if they will someday leave you and start a competing business. That's a risk you take as an employer. But why hire someone you KNOW is going to be a competitor? They'll learn your best practices and your trade secrets, and maybe steal your customers. All of which are detrimental to you in the long run.

The applicant is looking for a job in the industry because a) his side business isn't providing a sufficient income, b) he wants to learn from the established pro's so he can improve his business, and c) he wants to get paid while he's learning.

If he were hired, I can see a lot of conflict-of-interest situations developing while he is on the job.

This is why non-competes were invented.

[Paul]

Would you hire someone who told you in a job interview that they were saving money to start up a business that would be in competition with yours?

This question came up on another forum the other day. The people on that forum run screen printing and embroidery shops. One guy was asking what he should tell prospective employers since he already did that sort of work on the side and hoped to open his own shop someday.

I said, if it were me, I'd appreciate knowing. I'd also want to be sure he wouldn't steal my customers or my techniques, so I'd want an agreement in place so that couldn't happen without penalty.

How would the rest of you handle it? Would you hire the guy?

I wouldn't hire a person who I knew was going to leave as soon as they could. I want somebody who is looking for a long term job or career.Why would I invest in training somebody who clearly has no intention of staying.

[rob0225]

Mak - if you get them to sign a non-compete you can be sure they won't compete with you in a certain geographical territory. Then, if they go into business down the road you can help each other out with referrals.

Steve,

Had you ever had to enforce a non-compete through the courts? Most of what I've read is that generally non-competes are actually unenforceable.

[samie]

I wouldn't hire them. Firstly they obviously don't intend to work for you a long time. And if they really are going to create a business that competes with yours then you are giving them a big advantage in terms of experience. He's going to know your business and when he goes to make his own then he can apply that plus things he thinks are better than your business.

Even from personal experience, myself going from management at one Web Hosting company to another Web Hosting company, I'm able to provide feedback and the standard for certain products and services as well as strategies that the other company had and even improve on them.

[Patrysha]

In my case, I'd really have no problem hiring them...they're only likely to specialize in one of the many things I offer, so it's not going to be much of a hit on my business and if they're good, I'd be quite likely to hire them on as a contractor or become an affiliate if they go that direction...

But it would be an entirely different scenario to my boyfriend's company. As a locksmith with a limited geographic market...I wouldn't advise him to hire someone who wants to own his own business (though that advice would change again once he's closer to wanting to retire and sell the business).

In the embroidery business, I'd have no clue. I don't know how that market works well enough to guess whether hiring a potential competitor is a big risk or a negligible one.

[KristineS]

I think the decision to hire or not to hire does depend on the type of company and the business you're in. For some businesses it won't matter, or might even be helpful. For other businesses, hiring someone who wants to be your competition could be a disaster. You need to know which situation fits your particular business and proceed accordingly.

That said, I still prefer honesty to not being honest.

[vangogh]

I think this thread might have set a record. It was almost 5 years between posts. You know I've banned people for reviving threads not nearly as old. Better watch out Marcomguy. I've got my eye on you now. :)

It's actually still an interesting question. As the person looking for the job, I doubt I would say I was planning on being a competitor at some point. It's tough call whether or not to mention the side business. I'd want to be honest, but I'm not sure if I'd share every detail. It really depends on the specific of the company and position though. For example if I decided to hire a designer or developer, I wouldn't expect they'd work for me forever. I'd expect that at some point they'd go out on their own and freelance and so would be competing with me. I wouldn't think it a big deal though. There's enough business for people building websites and it's actually good to know other freelancers. We typically have different specialties and can help each other or send each other work. Also the work I do isn't exactly a trade secret. I share what I do all the time on my blog and help people become competitors all the time.

Another industry might not be the same.

[KristineS]

Wow, I hadn't noticed it had been that long between posts. Crazy. Guess it goes to show that topics can still be relevant even years later.

And how weird is it that I've been posting on this forum for five years? Time flies I guess.

[vangogh]

This looks like one of the first threads ever started here. Think back to that first week we were live and you and I were creating as many threads as we could. I'm pretty sure this was one of them. Time does fly.

It's still an interesting topic. It's natural that people wanting to start a business, but not yet ready would work for someone in a similar business to learn more. I'm sure plenty of people find themselves in this exact situation and have to decide what they should or shouldn't say in any interview.