When Employees Become Competitors

Linda Jagiela
Posted on October 15, 2013

Limousine company owners know that they put lots of people into the business. Your chauffeur, reservationist, dispatcher all have their eye on the pie — self-employment. You have made it look easy and they want their chance to show how much better they can do it than you. Think about the limousine manufacturing business. Why do you think Springfield, Mo., is a hub for building limousines? One employee goes out on his own down the road from his old employer.

There is nothing wrong with this. That’s what America is all about. It is okay as long as they are not doing that at the expense of your business. We all know people who have started businesses while they are still employed by someone else. They are telling everyone at industry events what they are doing on the backs of their old employer and on his dime. Competition is not always bad but ethics and respect should go hand in hand.

Think about your staff. Could this happen to you? Of course it can, and it probably has if you are good at hiring star performers. You want ambitious people to work for you because they will work the hardest.

Non-Compete Agreements
Not all states honor non-compete agreements. Many do not stand up in a court of law. Check with an attorney. If they are allowed, make sure that the language you use stands up in court. Typically, non-compete agreements are a condition of hire.  

The problem occurs when you have a career industry person who only knows this business, and should you part ways, he or she will need to find a job. Non-compete agreements can hamper your hiring process. While interviewing, you should be able to get a feel if the person you are hiring aspires to be an owner. Ask the right questions and you will get the answers you are looking for.

Consider Non-Solicitation or Non-Disclosure Agreements
Non-solicitation agreements would restrict the employee from soliciting customers and employees in the event that they leave and go either to another company or start their own. This may be more palatable as you are not hampering the individual from earning a living but instead are stopping them from plucking your business.

A non-disclosure agreement is a contract in which the employee agrees not to disclose confidential company information. In this, you should spell out what you feel is confidential company information. Additionally, you should tell them what the penalty for breach of this will be. Again, consult with an attorney to make sure that the agreement is legal in the area where you do business.

Our industry is filled with family run businesses. Nepotism is rampant and often encouraged. How many families have been severed when an employee family member strikes out on his own? Trust is often the biggest factor. The perception is family members shouldn’t betray you, but they sometimes do. Be diligent and don’t relax your practices and policies just because they are a trusted family member. If other employees must sign non-compete or non-solicitation agreements, so should your family member.  

Watch For Signs
Personalities change when employees have mentally committed to leave. This also goes for the employee who has decided to start his own business. If your star performer is always going to you and telling you all of the problems the company has, and then suddenly stops, it may be a sign that he or she is ready to leave. If that employee once hated going out and visiting accounts and then suddenly wants to do it, you may want to flip the switch. Watch for signs that it could be occurring in your business. Speak to your employees about career goals. See if the path that they have laid out would fit in your organization or if they will be looking elsewhere to be their own boss.

Do Damage Control — FAST
Be vigilant. Make sure that you know your customers. Don’t let the only person they speak to be your employee. People buy from people and if your employee is the only person they have ever bought from then they are more likely to follow that person. Owners should periodically visit key customers. Take them out to lunch, bring gifts during the holiday — do what’s needed to get to know them.

If your employee turned competitor did a good job for you, be prepared to do damage control. Reach out to all of your clients and use the opportunity to tell them why they want to continue to use your company. Do it immediately. Stress what differentiates you from your new competitor. Avoid bad-mouthing the new competitor. This only makes you look bad.  

Don’t Make Price a Factor
The easiest thing a new provider can do to get a foot in the door is say, “I can give you a much better price.” But we all know that price is not the do all/end all of a sale. In fact, it should be the last thing the sales person takes out of the bag. Avoid the temptation of lowering your price to keep the customer. You have experience and a successful track record — sell on that. If you lose the account over price, you will probably get it back. Stay in touch and make sure the client knows he is still important to you, although he may be using your competitor. When he falls down, you will be there to pick up the client.  

Practice What You Preach
How many times has a potential employee walked into your office (either a chauffeur, reservationist or dispatcher) and said, “I have a book of business I can bring with me” as an enticement to hire them? Do you? Where do you think they got that business and what do you think will happen when they leave you?  

Don’t Burn Unnecessary Bridges
Employees who start their own businesses the right way, by keeping rapport and an open door with their old employers, often become customers. Don’t be afraid to mentor a newbie. They are less likely to bite you if you are helping them.

Related Topics: employee management, employee retention, How To, staying competitive

Comments ( 1 )
  • gus chacon

     | about 6 years ago

    In Miami There are Companies that their Owners think All of the Staff are Thief's, and wile addressing others in meeting have stated that in public. In Spanish is ( tell me who you hang around and I tell you who you are) i think in you call it by Association . Good luck to all . Don't call Chauffeurs shortage , Call it greet.

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