Don't Hire From Competitors
Remember Base Rates
Note: the banking crisis appears over, at least for now…back to SaaS & VC stuff.
Interviewing can get boring. Except when interviewing candidates from competitors. That’s interesting:
They’ll tell you things you didn’t know about the competition
They’ll probably tell you things you didn’t know about your business
Compared to the average interviewee, they’ll knock your socks off
But: DON’T HIRE THEM!!!
I’ve seen startups hire “can’t miss” candidates from competitors repeatedly over the years years. It usually fails - and fails badly. What’s going on?
Let’s talk about base rates.According Wikipedia’s article:
[a base rate] is the proportion of individuals in a population who have a certain characteristic or trait…In the sciences, including medicine, the base rate is critical for comparison.
When making a comparison, it’s key to know the base rates. If you compare height between a randomly selected pro basketball player and a randomly selected pro soccer player, expect the basketball player to be taller.
What’s the base rate for knowledge about your business & industry? It’s very different if you are comparing someone who worked at a competitor against someone who didn’t.
The average job candidate who worked at a competitor will know a lot
The average candidate didn’t work for a competitor will only know a little
These two groups shouldn’t be compared based on industry knowledge.
Here’s the problem: implicitly, this happens all the time. Sure, industry knowledge is rarely considered the most important factor in in a hire. It’s usually considered a “nice to have.” But when a candidate has 100x of a “nice to have,” it stands out - and often outweighs more important factors such as attitude, intelligence, motivation, etc.
Oh, there’s also another issue: selection bias. If your competitor is doing well, won’t they try to keep their best people? Then why is this person job hunting? OTOH if the competitor is struggling, well, that might not bode well for the quality of their people.
Despite all of the above, it’s possible that hiring from competitors can work out. But startups should be very careful. Don’t forget to consider base rates.