Should You Hire Employees To Build Your Startup?
Wrong Hiring Decisions is unfortunately the number one reason startups fail during the first 5 years. What are your other options?
True Story 1. Sometimes we join a startup for the wrong reasons.
Around 5 years ago I was almost hired as Chief Product Officer by a fancy FinTech scaleup in Stockholm.
The reason I opted out at the final stage? Because (I realised later) that I applied for the wrong reasons. And had I joined, it would have been unfair on the company that invested their efforts into hiring me; as well as to myself.
Backstory. I decided to leave my last employer during the challenging early days of the Covid-19 pandemic. Not only was it during Covid, but I was also a mom of “2under2” (two young children both below 2 years). Eager to return to work and use my skills, I applied for a CPO position at a prominent FinTech company. After quickly advancing through EQ/IQ tests and initial interviews, I met the founders.
Despite the company’s appeal and the impressive team, I realized during the final interview that the company and its values weren’t aligned with my own. After taking 24 hours to reflect, I decided to withdraw from the process. I informed the company of my decision, and they appreciated my honesty albeit being surprised.
Lesson learned?
- Candidate Fit Assessment. quality time spent to evaluate not just skills and experience, but also alignment and intention is invaluable. Especially if you decide to make permanent hires so early in the life cycle of your company.
- Transparent Communication. Encourage open and honest communication with the potential candidates to avoid misunderstandings and ensure that both parties have clear expectations.
- Flexibility in Process. Be prepared for changes in a candidate’s decision-making process; just as you are flexible in your own.
- Candidate Well-being. Recognize and respect the personal circumstances of candidates, such as family responsibilities, and how these may impact their decision to join a new role.
- Learn! Use feedback from candidates who withdraw to improve in how the role and company is presented. Who knows? One day you might invite a “ex-candidate” to join your Board in 5 years time.
True Story 2. This “bad apple” almost had the Owner facing insolvency battles.
One of my ex-colleagues and close friends, Ted, is a successful entrepreneur who spent over a decade in C-level banking roles before starting his own business. Over five years, he built a thriving company, carefully selecting his team and making strategic decisions. Despite his success, Ted made a significant error when he hired his cousin, Robert, as the Head of Sales.
Ted trained Robert extensively, trusting him with the business’s inner workings and offering him a substantial salary, equity, and profit share. However, Ted’s trust was misplaced. He later discovered that Robert had been diverting sales to his own competing company, disguised as a subcontractor. This betrayal came to light when a major client informed Ted that Robert had been falsely claiming Ted’s manufacturing lines were fully booked.
It took Ted an additional three years to resolve the situation and restore his company. This experience taught him the crucial lesson; building a trustworthy team and not relying too heavily on individuals who may lack personal and professional integrity.
Lesson learned?
- Be fast, be cautious. Be cautious especially when hiring family or friends! Ensure they are the right fit for the role, and they wish to join you for the right reasons.
- Verify loyalty. Even with trusted individuals, regularly verify their actions and decisions. Maintaining loyalty is a continuous process : it’s possible for loyalty to wane when it’s taken for granted.
- Protect Sensitive Information. Limit access to critical business information to those who have proven their integrity and loyalty.
- Monitor Key Roles. If it’s a client facing role for example, do some of the client visits yourself once in a while. Don’t hand it completely over to a third party. Your clients will love you for it, which means your business will grow.
- Build a Reliable Network. Establish a strong, reliable network of professional contacts and advisors to help safeguard against potential conflicts and risks.
- Learn from Mistakes. Even after doing all of the above you can still make mistakes. Use setbacks as learning opportunities to refine hiring practices and trust-building strategies.
True Story 3 : The “non negotiables” of the Founding team and consequences.
I once helped a Founding team to scale up a (then) thriving start up. Within months I came to learn the intricate internal politics that was driving cohesion and collaboration away from the teams at work. At the root of this problem was a non-negotiable condition of one of the founders, given as a way to safeguard his reputation.
His condition was that the company hire his “second skin” : his most loyal deputy (Sarah) to ensure that the quality is maintained at all times; quality that he has built over decades during his career. The company grew, and it grew fast. The rest of the hires (all operational roles) were made by the operating founder. And he hired bright but inexperienced people for all the important roles, including the C-level. None of them got along with Sarah, the other Founder’s second skin. She was “difficult to work with, was easily offended, and she didn’t know how to treat people with respect”. Unable to resolve conflict and inexperienced to know “how”, the leaders and staff continued to isolate her.
They removed her from company meetings, refused to look her in the eye. Talking about her behind her back (and soon about other people behind their backs) became part of the company culture. Anyone that befriended her was quickly mistrusted by the leaders. And this behaviour continued for years in this company, the two founders not addressing the root cause of the problem that they created themselves.
Misalignment of startup founders is a common reason for startup failures. Even the founders with the best intentions can create chaos when deep rooted misalignments are not managed.
Lesson learned?
- Impact of Internal Politics: Internal politics and personal agendas can significantly disrupt team cohesion and collaboration, leading to a toxic work environment.
- Role of Leadership in Conflict Resolution: Founders and leaders must address and resolve conflicts promptly and effectively to maintain a healthy work culture and ensure team alignment.
- Harmonious Team Dynamics: Hiring decisions should consider not only the qualifications of candidates but also their ability to work harmoniously with existing team members to avoid creating divisive situations.
- Influence of Personal Biases: Personal biases and conditions imposed by influential individuals can undermine organizational effectiveness and should be managed carefully to prevent negative impacts on the team.
- Addressing Root Causes: Identifying and addressing the root causes of internal issues, rather than just symptoms, is crucial for long-term success and maintaining a positive company culture.