Turncoats are Turncoats

Benedict ArnoldIt is 1783 and the Revolutionary War just ended. Benedict Arnold applies for a job at your adVenture. Your patriotic leanings aside, and assuming he is highly qualified, would you hire him?

The answer is probably ‘No’, and the reason is probably ‘How could I trust him?’

You should apply the same sentiment to any former employees of competitors who come knocking on your door. Anyone who would turn on the people with whom they shared a foxhole likely has a significant character flaw.

The obvious question you must ask such candidates is, “If you are willing to screw your former employer, what assurance do I have that you won’t eventually try to screw me?” Despite what the candidate may say, the real answer is likely, “None. I have loyalty to no one, because it is me against the world. If you hire me, I may eventually turn against you too.”

It appears that the first documented use of the term "turncoat" in the context of a traitor was in 1557. At that time, it was common practice to turn one’s coat inside out to present the (relatively) cleaner side of it to the public. This was a time when people sporadically took baths, and clothes were cleaned even less frequently.

A potentially apocryphal tale, which may have lead to widespread use of the term as synonym for ‘traitor’, was told of one of the Dukes of Saxony. At the time of this Duke’s reign, Saxony had the misfortune to be located between the warring French and Saxons. The Duke allegedly wore a reversible coat, one side white, in tribute to the French, the other side blue, the color of the Saxons. This reversible coat allowed the Duke to quickly switch his allegiance whenever the need arose.

I once interviewed a former VP of Sales from one of our fiercest competitors who would have made a great Duke of Saxony. At the outset of the interview, he very proudly stated that he started to look for a job in which he could directly compete with his former employer the day after his Non-compete Agreement expired. He made it very clear that he was ‘mistreated’ by his former employer, and that he was ‘out to beat them’. Hmmm…

We treated this fellow like the CIA treats turncoat agents. We listened and duly documented everything he was willing to share with us (after gaining assurances that he was not violating his confidentiality agreement) and we then whisked him on his merry way. He was shocked that we were not jumping at the chance to use his insights and insider experiences to “take down” his former employer.

I am not suggesting that you should categorically never hire someone who once worked for a competitor. However, a number of mitigating factors must be considered, on a case-by-case basis, before hiring such an individual, including:

What was the individual’s role at the competitor?

    The more senior the role, the higher the risk that you have a Duke of Saxony on your hands.

How recently did they work for the competitor?

    The more recent their employment, the higher the ‘turncoat’ risk, and the greater the likelihood that they have an axe to grind with their former employer.

Are they are currently employed by the competitor at the time of the interview?

    During the interview process, assume that everything you tell the candidate could eventually be communicated to your competitor.
    You must consider if the risk that the information you share with the candidate could be used against you is more than offset by the potential gain derived from hiring the candidate.

If they are no longer employed by the competitor, what were the circumstances of their departure?

    The more negative the circumstances, and the less responsibility the candidate is willing to take for their departure, the higher the ‘turncoat’ risk.

The Traveling Salesperson

Rank and file sales people are an exception to the ‘seldom hire competitor employees’ rule, especially quota carrying salespeople, who generally have a low loyalty threshold, irrespective of where they work. However, remain cautious when entering into employment discussions with Executive Sales Leaders who currently, or at some point in their past, played for an opposing team. The higher a person’s seniority, the more suspect you should be regarding their willingness to change teams.

Such bay carrying salespeople tend to burn bridges as they hop from job to job, so it is unlikely (although certainly possible) that they will ever return to the competitor they are departing from in order to join your adVenture. Thus, the reward of hiring such folks usually outweighs the risk that they will return to their former employer. In a number of industries, including enterprise software, medical devices and pharmaceuticals, the sales teams are virtual revolving doors among the various competitors. Thus, the most likely risk is that they will jump ship to join yet a different competitor in your industry.

Ideally, you will have on your sales team at least one former salesperson from each of your significant competitors as a means of training your team the products and sales techniques deployed by each of your competitors. Salespeople from competitors know how to sell your competitors’ solutions, and thus, they also know their products’ weaknesses. This insight will help them to effectively sell against their former employers’ products. They will also know the tactics used by their former employer to sell against your products; information that can prove to be of vital importance.

Former competitor salespeople also have a compelling sales pitch against their former employer: “I used to work for Company X, which offered great solutions. However, after losing deal after deal to Company Z, I finally decided to join Company Z’s winning team. I am now proud to be able to offer you what I consider to be the best solutions in the market.”

Paranoid? Who Me?

When talking with current or former employees of a competitor, keep a keen eye out for candidates with an acute persecution complex. Throughout their lives (personal, professional, and otherwise), such folks are unable to internalize responsibility for their actions. Every time something goes wrong in their careers, it is always someone else’s fault, and invariably, that someone was ‘out to get them’. Such folks are masters of telling elaborate tales regarding how they were mistreated, ignored, mislead, etc.

Clearly, it is possible for anyone to occasionally become embroiled in a bad employment situation. Nearly everyone at some point in their professional career has been treated poorly in some way. However, if a candidate’s repeatedly negative comments make it clear that such ‘mistreatment’ is a recurring theme throughout their careers; the warning bells should sound, and you should quickly cut bait.

In such cases, the person either repeatedly exercised bad judgment that led them to accept jobs in unhealthy environments, or (more likely) they lack the self-awareness to accept and share some of the responsibility for the inevitable negative missteps in their career. Either way, you do not want their bad luck / bad judgment to taint your team.

Perpetually unhappy people are poisonous to your culture, and will drag everyone else down with their persecution complex. You simply cannot afford to have such people in your organization. As such, be suspect of any candidate who bad mouths a former employer, boss, peer, etc., and who does not accept responsibility for the ups and downs of their career.

A reliable indicator of someone with a persecution complex is the degree to which they relish the role of turncoat. After listening politely and taking lots of copious notes about your competitor’s operations, run from anyone who aspires to be a modern-day, corporate Benedict Arnold.

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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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