Six hiring mistakes entrepreneurs make in the early years
This article was published as part of the Denver Business Journal Leadership Trust, an invitation-only network of influential business leaders, experts, executives and entrepreneurs.
My company specializes in helping startup and growth stage companies build their teams. I am privileged to work with brilliant founders every day. These courageous individuals have challenged convention to strike out — often without a safety net — and embark on a journey to do something no one has ever done, or to re-engineer something that cries for revolution. As an entrepreneur, you are responsible for R&D, sales, accounting, finance, operations — every component of your company — and that includes hiring your team. Founders are incredible visionaries, but their future vision doesn’t always help them make great hiring decisions. Here are some of the hiring mistakes I most often see entrepreneurs make in the early days.
1. Hiring in your own image
It’s natural to hire people who think like you and even look like you. After all, you have great ideas, and like-minded people can join together to make them even better. The problem with this is that you may miss obstacles: if everyone thinks alike, there is no one to fill your knowledge gaps. As a founder, you need people who will challenge you, help you level up and offer a different perspective.
2. Hiring your buddies
Hiring people you know and like is easy. “I know someone who is super organized so managing the supply chain will be right in her sweet spot.” “My friend’s son is looking for work, so I can hire him cheap while I wait to raise money.” These are the most dangerous and potentially damaging hires you can make. When you are starting up, you need people who are proven startup pros. By hiring people you know, you risk both ruining a friendship and putting your IP/invention/customer relationships in the hands of someone who doesn’t understand their importance. Just because they are friends doesn’t mean they have the required passion or expertise.
3. Hiring a “project”
Mining your network is a great way to find talent when you’re starting out. There are two types of “project” hires. The first is a fresh college grad. The early-career professional may be a great hire, but keep in mind that they will need constant mentoring. You will need to be prepared to task them daily and check their work consistently. As a startup founder, you probably already work 60-hour weeks, so think about the time commitment before you hire an early-career professional. The second kind of “project” hire is the free spirit who just can’t seem to hold a job. This person has changed jobs or careers every few years and it never seems to be their fault. They are very practiced at interviewing, so you’ll find them smart, charming and articulate. But this profile is a bad hire for your startup — period.
4. Failing to document job responsibilities
I realize that writing job descriptions is at the end of your very long list of things to do when you are starting a company. I don’t think you need a formal two-page job description for everyone you hire, since roles will shift and change regularly, but I do believe that documenting job scope, expectations and primary responsibilities is good for both you and your hires. This will serve as a foundation to build on and help you and your team evolve roles in the company as you grow. As a manager, you owe it to your people to help them understand their place in the organization.
5. Inflating job titles
Almost all early-stage CEOs offer inflated titles in lieu of market salaries. But if everyone on your team is a VP, you will create — in very short order — a culture of entitlement. About a year from now, all of your overtitled employees will do their own salary surveys and bring you expectations of earning market salaries based on their current title. Younger employees in particular are accustomed to getting raises or promotions every six to nine months, so if you start them out with inflated job titles, they will very quickly expect to rise to senior levels.
6. Failing to fire underperformers
Founders are proud and confident humans. They have to be if they are going to start a company, build a product and convince others to buy it. Confident, proud individuals often take hiring decisions personally: “I hired this person so of course they will be amazing.” Only sometimes they aren’t. It’s important to decouple your decision-making from your employee’s performance. Holding onto an underperformer is bad for you, bad for your team and bad for your customers. Moving them from one role to another in hopes of improving their performance can work, but usually doesn’t. Expecting someone who isn’t meeting your needs to suddenly do so is unrealistic. You have a responsibility to help them exit and find a place where they can be successful — just not in your company.
Final thoughts
Running a startup is hard! I’ve done it twice. I’ve made every one of these mistakes and endured the outcomes. When my clients ask for my advice, this is what I tell them: Hiring great talent takes time and focus. But done right, the return on investment is substantial.
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