Why startups need to pay more attention to hiring right
A recent paper in the Journal of Management noted that 60 per cent of new ventures fail due to problems with the team.
What determines the success or failure of a startup? Is it raising seed capital or is it getting the minimum viable product (MVP) right? Or is it getting the product-market fit (PMF) or the path-to-profitability right?
It is all of these and something more. A factor that is more important than others — hiring of the right people for the team.
A 2013 research paper published in the Journal of Management noted that 60 per cent of new ventures fail due to problems with the team.
People are the lifeblood of every organisation, but it is especially true for startups because of the endless stream of critical challenges they need to overcome through the various stages of growth. The same business challenge that would barely unsettle a mature organisation could easily bring a startup down to its knees. Often, this is because of the relative shortage of high-quality management bandwidth available in a young organisation.
Additionally, a significant number of startups also tend to focus on disrupting their industries by attempting to create ground-breaking innovations. In this single minded pursuit, they tend to focus overwhelmingly on hiring precisely the people who will directly work on these innovations, disregarding other functions, skills and competencies.
Defining roles and hiring high-quality people for them is crucial at every stage of a startup — right from the early stages when the initial set of people give shape to the company’s vision and culture, to the later stages where a startup goes through rapid capital infusion (often through investment rounds) and corresponding growth, and suddenly has to hire hundreds or thousands of new people with varying skills and competencies.
While a number of hiring frameworks exist for young firms in the West, practising entrepreneurs know that those frameworks may not succeed in India. The reasons vary from differences in social and cultural norms to personal motivations. In fact, there are distinct socio-cultural norms even within different cities of India, and founders who have built a high-performance team in Delhi may find the terrain to be significantly different in Bangalore or Chennai.
Regardless, we can draw some important lessons from research into hiring for startups. Some researchers argue that all startups that need to achieve the desired results need a team that has the right blend of two skills — technical and business. The technical team innovates, while the business team takes it to the market. An empirical analysis published in the Harvard Business Review showed that companies or startups equipped with both business and technical skills ‘are disproportionately more likely to introduce new-to-the market innovations,’ than companies that have only one of these skills.
However, not all firms equipped with both types of skills are able to profit from them. Firms profit disproportionately from a mix of business and technical skills when the founder has the technical knowledge and employs additional business experts.
There is another way to look at the skills diversity needed for startups. When hiring for an early-stage startup, founders should make sure that they check for two specific types of people — creative problem solvers, and process minders or those who make sure that the work happens as per expected timelines. While all managers are by definition process minders, even technical hires in a young startup have to demonstrate a high level of ownership and self-sustainability, simply because of small team size and limited executive or managerial bandwidth.
The last point cannot be emphasised enough. All startups need employees who can function with a high degree of independence, are ready to take ownership, and have a solution-oriented mindset (they don’t find ways to blame delays or poor execution on lack of resources, but rather find ways to work around the constraints). The entitled bunch — who demand full resources, human and non-human — tend to become obstructionists, who then struggle at a startup.
Of course, the founders’ job is not just limited to identifying and recruiting the right people. They must also put strategies and processes in place to nurture and retain good talent. Research has shown that talented employees will stick around for a few reasons — they can visualise the social or business impact of their work; they feel their good work is adequately appreciated and rewarded; and finally, they find learning and development opportunities to grow in their career, not just through formal training programmes but also from their equally or more accomplished peers.
In my experience, one of the most powerful ways to make talented employees feel appreciated is by involving them in strategy building and decision making at appropriate stages. Instil in them a sense of ownership and mutual purpose and offer them ample room to grow. That’s the mantra that will take you forward.