8 Hiring Mistakes Leaders in Startups That Sink Make
7 April 2019
Startup founders and early leaders need to hire efficiently to progress to the next level. If they do that remarkably well, they have won half the battle; a great team can turn even a bad start/strategy/product around and take the baby organization towards a successful adulthood. If they do it badly, they have lost eighty percent of the battle; as any seed stage/angel investor worth his/her salt will tell you, startup = its team. Ideas come dime a dozen, it’s the team that matters.
Sample what Mark Suster, the former entrepreneur and now prominent angel investor has to say without mincing any words:
“ Individuals don’t build great companies, teams do. “
Startup founders and leaders hire primarily for three reasons.
One, recruiting top performers to work under them in domains the founders have expertise in, e.g. technologist entrepreneurs wants the best technologists to work under them for product development. Two, hiring leaders to deliver in areas the founders don’t possess expertise in e.g. a marketing founder may hire a technologist as a CTO or a technologist founder may hire a CFO to handle finance. And three, do clever talent acquisition to delegate less valuable work that the entrepreneurs themselves were doing to begin with – for example recruiting a person to manage the nitty-gritties of human resources or hiring an executive assistant to do everyday communication – so they can focus on more value-adding business.
Despite the availability of plethora of advice telling them to how to hire, startups often face challenges in recruiting due to their limited available resources; and it’s a far bigger challenge as compared to HR in established companies. At least in the early days of a startup, resources could be stretched, HR/hiring managers could be too costly to employ, and the founders and the early team-members may have to search in the talent pool for their desired choices themselves.
Following are the few hiring errors we feel startups should avoid while choosing their nascent team. While these tips do apply to almost any company in relevant contexts, startup or not, committing the recruiting mistakes mentioned below can especially endanger startup survival and success.
Hiring Mistake One:
Seeking only a specialist and NOT a problem solver
Startup organizations require frequent problem solving. Many challenges that startups face don’t have precedents – these problems have never been solved before. Unlike established companies that often face age-old problems and therefore can benefit a lot from specialists who have deep historical knowledge of the domain and can simply follow established solutions or copy strategies/tactics developed by competitors (and therefore need not be problem solvers), startups inevitably require people that in addition to domain knowledge have a problem-solving attitude and competency; only having deep domain knowledge is not sufficient for a startup scenario.
For example, according to an article in Harvard Business Review,
LinkedIn was facing the problem that users weren’t seeking out connections with the people who were already on the site at the rate LinkedIn had predicted. After doing plenty of data analysis, Goldman decided that LinkedIn users would feel helped if LinkedIn figured out their networks for them capitalizing on the data they had already provided LinkedIn. Though some in the company were skeptical, LinkedIn’s then CEO (and co-founder) Reid Hoffman recognized the value in Goldman’s prognosis and backed him. He gave Goldman a way to circumvent the traditional product release cycle by publishing small modules in the form of ads on the site’s most popular pages.
Goldman started testing his ideas and the result was soon there for all to see: 30% higher CTR when compared to any other method and millions of more page views! Today LinkedIn is the most successful professional networking company in the world with no other competitor within miles. And not only this, Goldman’s success in solving the problem helped create a job description that never existed before: a data scientist!1
It’s clear: startups need Jonathan Goldman kind of problem solvers cum specialists backed by Reid Hoffman like leaders because presence or absence of such employees and leaders decide whether the startup will be a success or a failure!
Do you have any doubt now that as a startup leader, you should definitely seek problem solving skills in a potential employee?
Hiring Error Two:
Hiring someone without evaluating their capacity to learn and change, especially with regard to new technologies
Alvin Toffler, the former editor of the Fortune magazine said that the illiterates of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn. This is nowhere else truer than in startups. Only those who can learn, unlearn, and relearn at a rapid pace can cope up with the mindboggling rate of change 21st century startups face.
Unless startups can find enough number of such people, they face great danger.
This is because startups, unlike established companies, don’t have the capacity to absorb the shocks that the forces of change generate; the smaller the organization, the lesser the capacity. Establish companies can still get by, even do well, despite changing only when forced by the crises caused by the changing circumstances. In contrast, startups must anticipate and embrace change for if they wait till a critical situation is breathing hot on their necks, they will likely die.
Stephanie Chai of travel-site Luxe Nomad, the odd woman out in the world of male dominated tech startups, was able to accomplish the feat of raising funds from VCs though they are often reluctant to invest in solo founders. Add to that her background – she was no tech whizkid but a former Eurasian model since she was eighteen - and it’s a double whammy.
This is what Stephanie, one of the most glamorous tech founders around, had to say about her being a former model, an entrepreneur and changing with the times:
“ Did modeling help? Definitely. Living in different countries while not knowing anyone teaches you to be adaptable. And that quality is crucial in a startup environment; you better learn to move on with the times and fast. “
We are sure this precisely is the attitude that helped Stephanie accomplish what she did. And as a startup this is the attitude you need in your employees too: be adaptable, learn and change with the times, and fast, no matter where they come from.
Reid Hoffman, the founder of LinkedIn, takes the advice further with these following words:
“ The fastest way to change yourself is to hang out with people who are already the way you want them to be. “
Building on Hoffman, the best way for a startup to become a change embracing organization is to learn how to hire people who are already change embracing; in other words, who are already learning, unlearning and relearning.
Hiring Mistake Three:
Taking in someone who may NOT be comfortable with ambiguity
Startups should pick talent that can work under supervised and can create system by themselves. The employees should not be dependent on the entrepreneur always for guidance or processes.
As Lee Hong Minh, founder of another tech startup Vietnamese internet company VNG said:
“ You don’t really have a clear answer... only directions. “
People who can’t handle ambiguity and look for clear-cut answers before they can proceed can feel confused and paralyzed in a fast-changing startup environment. So in your talent acquisition process, include assessments to sieve out such people unless you want your startup to become paralyzed too.
Hiring Error Four
Recruiting people who do NOT lead by example
Someone I know said that Mahatma Gandhi would have been a great entrepreneur; I replied that he already was. The Indian freedom movement was perhaps the most successful startup of the twentieth century! The man who roused millions to fight against the British was a great marketer too: successfully pushing out from the Indian market British mills made cloth and promoting Indian handspun khadi instead.
One of the key reasons that Gandhi succeeded, as he himself acknowledged, lies in this saying of his: Be the change you want to see.
For startup leaders, not only the founders but others in leading roles as well, this advice is crucial if the startup has to succeed. This is because like in Gandhi’s freedom movement, being a part of startup often requires sacrifices not needed in established companies. Startups are risky to join, don’t provide the recognition that established brands do, and the work is often quite demanding. Of course the risk may pay out later, but till it does, employees may have to work in a crucible in the hope that cornucopia beckons just around the next bend.
Employees will be ready to do that only if they see their leaders too making the sacrifices expected of them.
If you expect them to work long hours, work long hours; if you expect them to work on weekends, work weekends; if you expect them to work for lower pay for the time-being, work for a lower pay for the time-being.
Or don’t have those expectations... your choice!
But if the leaders in your startup do have those expectations, which often they will, and they don’t lead by example, expect trouble. Such lacunae may be tolerated by employees in established companies that offer other cushy reasons to stay put, but in startups they will start a fire of resentment.
Hiring Mistake Five:
Choosing a person, especially in leadership roles, who does NOT have passion for what the company is doing
David Hauser, once listed among the ‘Young People Who Rock’ by CNN and among the top 5 entrepreneurs under 25 by Businessweek said about managing people in a startup:
“ Culture really comes from the entrepreneur articulating and promoting their core purpose and core values and then hiring, training, and firing around them. The process can sound very daunting but the value that you see after it is done is beyond amazing. Core purpose answers the question of why your employees work for you (and it is not money). “
Startup founders and leaders need to keep the advice of Hauser close to their souls, especially when hiring people for leadership positions. Your hiring process must be designed to make this possible. Some people are suited to startup companies because they believe in what their company is doing for its customers/world; while others are not, however good at their work they are.
As exemplified through this article, startup culture includes leading by example, being motivated despite failures, continuously learning, unlearning, and relearning, being a great team-player, having a make-it- or-break-it attitude... all of that. In addition, startups frequently involve improvising to getting your work done under resource pressure and being a continuous reservoir of energy despite frequent ups and downs. Being able to do all this requires tremendous amount of will-power which is possible only for a person who is working for something beyond money, someone who really believes in the company’s products and purpose (of course the company should have a motivating purpose and articulate it clearly for this to happen).
Who of course but the legendary founder of Microsoft, Bill Gates, put it best: “My house is full of microcomputer magazines, and I still come home every night to my IBM-PC. I don’t play the violin, you know.”
While a clear template is not available to tell you how to hire such people - especially when believing in the company and its products is not enough (the person must also have the required expertise for the job) - finding or not finding such employees can make or break a startup.
Hiring Error Six:
Taking in people who can’t either work in teams or expect their teammates to be always nice and amiable to them when they do
Teamwork is another important requirement in an early stage businesses. Potential candidates must be good team players and people managers. A strong startup team is the key reason for organization’s success.
However, it’s not only the ability to work in teams that matters in a startup, but something much beyond that.
As Apple’s legendary founder Jobs said: “Through an incredibly talented group of people bumping up against each other...having arguments, having fights...and working together, they polish each other, they polish their ideas.”
Apple was able to do so well under Job’s leadership because as someone remarked, he was able to make the company function like a perpetual startup. Apple under Jobs consciously hired for most of the traits we have listed here. And one of them was to hire people who not only could work in teams, but beyond that could work in the crucible of a team that constantly had arguments and fights with each other, and yet... and yet was able to stick together and function as a team to pull out something dazzling from inside that furnace of heated, bruised, melted egos.
Startup founders thus need not only build a team of complementary skills, but a team that could survive together to give their best under tremendous pressure and conflict, a team such that if dropped on an uninhabited island will together be able to create a habitation there.
It’s a difficult task, enormous task, and no one perhaps has a how to hire manual for such a task, but those that are able to achieve it find the startup El Dorado. If there was one tip we had to list among the multitude here, it would be this.
Hiring Mistake Seven:
Selecting people who think in too linear and orderly way instead of letting their creative, chaotic cells spark now and then
This is one of the hiring tips that as an entrepreneur you may have heard a hundred times. But let us talk about it once more anyway.
As Robert Redford, the legendary actor, director and creator of the innovative Sundance film movement (which is a very successful if unusual startup) once told a reporter: “Do you think the earth was created by an accountant? No! The earth was created by the combustion of a creative explosion. Fire and chaos are what started everything. Then order came on top of that.”
Of course, this doesn’t mean that accountants can’t create successful startups. Hamish Edwards, an accountant from New Zealand is the co-founder of the accounting startup Xero, which promises to make accounting fun for its customers and has perhaps succeeded given his company is emerging as the number one challenge to Quickbook in the US!
But what Redford obviously meant was creating new things - like what startups do - can never happen without a pinch, a bowl, or sometime even buckets of creativity pouring in as the particular situation demands. And people who are too orderly and process-driven in their approach often fail to do that, preferring to stick to their timed and tested methods rather than figuring new ways to do things better. They are wonderful assets in established companies, but not so in startups.
Hiring Error Eight:
Or on the other extreme, hiring people who think creativity is jumping around like a headless chicken and showing the world how creative they are
As Theodore Levitt rightly pointed out in his well-known HBR article, ‘Creativity Is Not Enough’, neither creativity nor a plethora of ideas are enough, and most importantly:
“ Many people who are full of ideas simply do NOT understand how an organization must operate in order to get things done. “
So to take in such people just ballooning with ideas is a recruitment error you shouldn’t be making. While for an startup, new ideas and the resulting innovation is the food that keeps it running, people who simply produce ideas and don’t know how to act further to help the organization digest them and build muscles and generate energy, in other words structure and execute them to achieve a particular end goal, will just end up causing the organization indigestion and illness from all the excess ideas instead of helping it grow and act.
These people often act like a headless chicken; run to some place, start something, then run off to another place before the first work has reached some conclusion, start something else, run off to a third place... and on and on.
When you meet them in the hiring process, these people also act as if they are the go-getters you were looking for all this time, and are often eloquent and charming when they are bubbling and bursting with ideas, and will try to convince you as if they are the panacea for your ills. But be warned! For when the rubber meets the road, you may find they are only-idea-getters-sans-execution and will give your startup more heartburn than help. Worse, put them in key leadership positions and you may find yourself spiraling towards doom before you even know it.
Our advice: better to hire people a little short on ideas (though not much) but long on execution than to make the hiring error of taking in people who have a plethora of ideas but don’t focus on executing them well.