Additional musings on Start Up hiring do’s and don’ts

I just shared a post on Linked In focused on how to avoid hiring the wrong employee for your start up. It made some very valid points, my favorite being that in a start up, every hire counts. It got me to thinking about all of the hiring I’ve done for start up companies over the years and some of the things I’ve learned and all of the things each client is looking for.

Some companies have learned it the hard way, through trial and error. Some from past experiences with former companies, a few have good instincts, but most entrepreneurs need help. They’re so busy being the visionary, fund raiser and often handyman/woman that they miss some of the more salient issues when hiring the latest member of the team. Since the majority of my clients are in a tech related field, they are all looking for well educated, industry experienced individuals who can hit the ground running and quickly add value.

A few of the common hiring decisions I see that keep me busy after the fact are:

  • hiring a Fortune 500 executive who hasn’t answered their own phone in the last ten years
  • hiring for pedigree only/including big company names on their resume
  • hiring family members and friends
  • over hiring for tomorrow the job that needs to be done today
  • under-hiring for the job to be done today without forethought of how this individual might contribute 2-5 years down the road
  • too quick to give undeserving large titles/pay packages
  • hiring too many chefs and not enough cooks
  • hiring a Board recommendation not properly vetted

I could add a few more, but let’s concentrate on the above. Each of these in itself doesn’t spell disaster, but when hiring dollars are so valuable and California employment law (where the majority of my clientel resides) so rigid, every hire – actually every pre-hire interview counts.

Most small companies require their mid level and senior talent to function at the four foot ground floor while seeing the company from the four hundred foot elevator. They need to roll up their sleeves, do their own work, collaborate and put their egos aside. They must be made to understand that the cash may run out and none might be forthcoming 2 payroll periods in the future before they even get an offer letter. That fancy offices are nice, but not essential to be excited about coming to work everyday. So is the Exec Assistant and someone to make your coffee, but guess what – this is every man to take care of himself and the company sinks or swims based on the contributions of every individual in the organization.

Risk adverse employees who’ve never been in a company under 100 people are big risks themselves. Not to say they can’t adjust, but if you hire a key employee whose career has been cradled in the arms of big companies, expect to see the “deer in the headlights” look at some point, usually at the first crisis. Again, there are exceptions and I can think of a few in my own client gene pool, but the rule applies more than not.

Family and friends – well, it goes without saying, it’s impossible to discipline relatives and no one wants to hurt  friends feelings or appear they are playing favorites. It’s touchy to even discuss this one!

If you are too generous with big titles and comp packages too early, where can this individual go? And if they’re lacking in talent and you don’t want to fire them, how do you hire additional talent to plug the hole, cheaper and with more experience under them? This is a very common mistake. Lure them in with money  and add title to offset the risk. A great idea – at first.

One of the most challenging issues for start up hiring is how to secure the right individuals who can get the company going, build it to the next level and have the bandwidth to take it the next level again. This falls in line with strong consideration to structure and compensation and building in goals and rewards that are attainable and achievable. Sometimes it is unavoidable. Many folks who are great in a pre-revenue  environment won’t have the depth of experience when the company grows to $50-100M plus, especially if it’s rapid growth. This includes senior level management as well.

I’ve often seen CEO’s reluctant to let go of deadwood employees because they were there from the start and they have a misguided sense of loyalty to them. Sometimes an employees skills are no longer useful to a company. The weakest link will weaken the whole chain. It’s a strong leader who recognizes this, makes the hard decision and executes for the good of the company.

Lastly, before this blog has me losing my beauty sleep, let’s talk about Board Member recommendations. This is where a little of the friends and favors behaviour kicks in. Hey, many of those recommendations are spot on. But when they are not, it can spell disaster. I recently filled a role where the board had the candidate all picked out, till the VP HR did her homework and unearthed some not so desirable behaviour resulting in a firing from the last job. That’s where I came in to save the day (my blog, gotta have some bragging rights – thanks for your patience).

You get the point. No matter where the referral candidate comes from, be it from ads, employee recommendations or a recruiter, do your homework, check their references (yourself preferably if you’re the hiring manager), test their willingness to roll up their sleeves, take risks and do the job required at the moment with foresight into the job they need to grow into as your start up gains momentum.

Lastly – compensation. I think for the most part, gone are the days when key hires would do the job for salaries under market. Especially since an equity play (particularly for mid management) is not usually going to end up in retirement, if there’s a pay  out at all (see era). Unless they’re an investor or a C level Exec who made a killing in his/her last IPO or acquisition, most potential hires (especially the passive candidate) have a mortgage, spouse, kids, cars, etc. They have the tools at their disposal to know what talent at their level is being paid too. And I don’t know if any of you have noticed, but it’s getting harder to find and lure good talent again. So cash is king and usually the bottom line. Great talent is expensive – a bad hire can cost forever.

A former mentor once told me, hire slow, fire fast. Something to think about.