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What Do You Do When a Former Key Employee Becomes a Competitor?

leave company to start competitorIt happens every day. An entrepreneur learns that a former key employee, who left on good terms, has solicited their suppliers and customers with a competitive offering. The key employee was a trusted one who learned the business at their side; with whom they shared much of the inner workings of their company.

And, because they were just starting out the thought of a non-compete agreement was probably not even on their radar. So they are, with a new or stronger competitor and a not a legal leg to stand on!
"What do you do?"
The short answer is not much. There will always be "bad actors" out there with a vague morality code; folks to whom relationships and loyalty mean little. So they can't stop it, but they can prevent it. Sometimes, there's more to the story, and all entrepreneurs can learn lessons and steps to take to deal with this potential predicament.

If it's happened to you (employee leaves to start a competitor), here are some steps to take:


"Circle the Wagons"

If it's happened to you, you need to alert all current employees as to what is going on. Have a "one on one" with each of them to ensure that this situation is not symptomatic of deeper problems of which you were seemingly unaware, or that the former employee won't try to convince others to join him/her.

Determine if anybody knew that this might happen when the former employee left (people rarely are quiet about such things). An employee leaving your company to start a competitor could be a "one-off" situation, or it could be a tip-off of other problems you might have within the organization.

Talk to the Market

Make sure suppliers and customers understand the employee who left to start a competitor doesn't work for your company anymore. Explain that you value their relationship and would hope that the past quality and support of your product or service and long-term nature of your relationship would win the day over any competitive offering.

Before leave to start a competitor

Before your employee leaves to start a competitor:


Create an Environment for Growth

Most often people leave because they are frustrated, either with their growth or the company, in general. Create as open an environment as possible. One where employees feel valued, with contributions appreciated; one where they are challenged, have a voice and are heard.

Hire to Your Values; Listen to Their History

Your best bet is a better initial hiring process that comes as much through respected referrals to get the right people, who fit your style and culture, into your organization, who will grow, and hopefully, remain with you.

Practice Safe Business (Protect Yourself and Your Future)

If you have a unique technology or unique processes or even a unique business model, you should try to protect it as best you can starting with employee #1.

All staff signs a simple (not onerous) confidentiality and non-competitive agreement that limit what employees who leave your company can do for a specific but reasonable period of time (maybe as short as only one year).

These agreements are deterrents and temporary barriers, not absolute prevention techniques. Remember, if they violate these agreements YOU have to prove they did and YOU have to pay for the defense of them and, in some states, they are often difficult to defend.

There's no way to stop folks from leaving you except to create an environment where they don't want to. However, at the same time, hiring better and then protecting the company are critical preventative measures. You have enough competition. There's no sense in creating more!

"The Entrepreneur's Yoda" knows these things. He's been there. May success be with you!

Have you had a critical employee leave your company and go to a competitor? Please share that experience in your comments. It can help another entrepreneur.

If you like this post, by all means, share it with your networks and colleagues.


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1 COMMENT(S)

2013-10-29 07:34:45 by Mary Miraglia

About two years ago, I was getting ready to sign an agreement with a company in Israel. I asked the attorney reviewing my contract how I could enforce the contract, should the company not pay me. And he told me this very intelligent thing: the business relationship must stand above the contract. Once you are falling back on legal agreements, the business relationship is usually damaged beyond repair. I realized he was correct. The business relationship did indeed go south, and I moved on. To retain key employees you need to be the best you can be in your business, and you need to keep communications open so people feel free to discuss their concerns. Then if you can meet their requirements, do -- and if you can't, move on. Even with non-compete agreements you can't prevent a person from working in the business in one capacity or another, nor should you try.

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