Should you hire from your competitor?

If there's one lame recruiting strategy I've seen repeated endlessly, it's this:

"Let's steal the best people from our competitor. And they'll fix our business."

Talk about uncreative, lazy, and -data shows- ineffective. (We'll get to that in a moment)

It repeated again?this morning, when sweetgreen announced that it nabbed -not just one but- two executives from Chipotle Mexican Grill .

Clearly, they're hoping to bring some of that bowl-filling magic over to the salad shop.

Sweetgreen hired their new head of marketing & head of menu development from Chipotle, which survived a near-death food-poisonings experience 6 years ago.

Why?

Based on countless discussions with hiring executives over the years, here's why Sweetgreen likely looked to Chipotle’s crop instead of growing their own from within:

Industry knowledge: Candidates from competitors are thought to have a deep understanding of the industry's nuances, trends, challenges, and opportunities. Hiring such candidates might appear as a quick way to gain insights without the steep learning curve associated with bringing in outsiders.

(Today’s? The Wall Street Journal Street Journal?gives a good example: “[New hire Chad]?Brauze said he also wants to invent Sweetgreen’s version of Chipotle’s dips such as queso and guacamole.”)

Perceived reduced training time: The belief is that someone from a similar industry role would require less time to onboard and become productive, given their prior experience and knowledge.

In my experience, it’s often a false promise because the new hire needs to unlearn the bad habits & practices deeply-ingrained from working at a competitor. A blank slate would have been far easier.

Competitive intelligence: Hiring from a competitor can sometimes be seen as a way to gain a strategic advantage. The new hire might bring insights into the competitor’s strategies, customer preferences, technology, and more.

But I’ve seen countless execs spend time in courtrooms after acting on proprietary information would be unethical and potentially illegal.

Client relationships: In job functions where relationships matter, like sales or consulting, hiring someone from a competitor can bring along a valuable client list or deep client relationships, potentially leading to increased revenues.

Sadly, hiring someone for their network almost never works. Turns out, the clients were loyal to the vendor, not the sales rep.

Market signaling (i.e. Ego): Hiring top talent from competitors can be a strategic move to signal the company's dominance or superiority in the market. It can also demoralize or destabilize competitors, especially if the person leaving held a crucial position.

Cultural similarity: Execs believe that someone from a competitor has already been indoctrinated to the industry's norms, values, and ways of working, potentially leading to a smoother integration into the company's culture.

(They’re usually wrong. 2 companies in the same industry can often have dramatically-different cultures.)

Safe choice: Sometimes, the decision to hire from a competitor is seen as a "safe" choice. If the candidate performed well at a reputable competitor, there's a bias that they will likely do well in a similar role at the new company. This can reduce the perceived risk of hiring.

For this reason, execs often hire based on reputation & thus shortcut the hiring process - they skip steps like interviews, test drives, reference checks - which ironically increase the risk.

Speed of hiring: In rapidly changing industries or when there's an urgent need to fill a role, executives might feel that hiring from a competitor is the fastest way to get someone competent onboard without a long search or vetting process.

Lots of seemingly-valid reasons to steal your competitor’s best people.

But unfortunately, the results of hiring from your competitors are often as choppy as a Sweetgreen salad.

Why?

Cultural fit: Studies show that organizational fit is critical for employee retention & performance.

Yet just because a candidate thrived in a competitor's environment does not mean they will fit well in your company’s culture. Hiring for cultural fit has been linked to better job performance, greater job satisfaction, and longer tenure.

Knowledge transferability?: While the candidate might have deep insights into the competitor’s practices, transferring this knowledge might be challenging due to intellectual property issues, confidentiality agreements, or differences in organizational structures and processes.

I’ve been hit at the last minute countless times with “cease and desist” letters from the former employer of a candidate who somehow “forgot” what they had signed or misplaced their original offer letter.

(Pro tip: Ask early in the interview process.)

Adaptability issues: A 2012 study found that external hires often get lower performance evaluations during their initial years compared to internal promotions. They often struggle to adapt to new workflows, cultures, and team dynamics.

Whenever possible, promote from within, even if the internal candidate isn’t quite the ‘sure thing’ of the external. (And this advice is coming from a Recruiter!)

Higher costs: The same study also found that external hires tend to be paid more (18% average) than internally promoted employees, yet they have a higher exit rate.

Potential for toxicity: A 2020 HBR study found that poaching top talent can lead to negative spillover effects. The competitor from whom you're poaching may retaliate, leading to industry-wide talent wars.

This can increase wage inflation, and foster a potentially toxic environment of rivalry.

Diversity: Relying heavily on competitor hiring can reduce the diversity of skills & experiences in your business. You know that diversity of thought and experiences is a critical factor for innovation and problem-solving.

You’re less likely to find it in a competitor than a company in a different more progressive sector.

Overconfidence bias: There's a tendency to overvalue the expertise & capabilities of individuals from direct competitors, thinking that they bring a 'secret sauce'. However, a combination of factors (team, resources, culture) contributes to a candidate’s success at any organization.

Their success at a competitor does not guarantee in your business.

In my book, a far more effective strategy is focusing on the candidate’s accomplishments & achievements regardless of where they were planted.

Sure, if they happen to bring some industry experience, great. It's a bonus. But that’s far from a good reason to hire them or to shortcut the process. And if anything, it’s a slightly negative indicator than a positive one.

Instead, identify adjacent industries whose dynamics are similar to your own, but they’re less sexy (read: “candidates are often at a lower-compensation level”). Those folks will see moving to your business as a big step up.

What comes next?

Chick-Fil-A trying to steal Burger King's head of cattle?