Bringing in new hires is one of the next big steps after founding a startup. Taking this step signals positive progress for the business, but it also comes with a number of dilemmas given the typical limitations of a startup. Those predicaments include who to hire, what roles they would take, and how to compensate new hires. Making the right decision about these issues is important since these individuals will significantly influence the direction of a new startup.
After acknowledging the need to bring new talent to a startup, attention is shifted to who is being considered for these positions. According to Noam Wasserman’s research, founders reach within their network to fill position early in the life of a startup, shifting to external hires brought in by investor as the startup grows (Wasserman, 2012). The benefits of hiring within the CEO’s network include building a coherent organization by attracting employees who appear to be good fit for the organization, as well as familiarity with those individuals. On the other hand, this prior relationship might create problems when issues of underperformance or conflict avoidance arise within their work relationships. Hiring outside the CEO’s network presents its own set of dilemmas including less familiarity with those individuals and a perceived (or actual) greater alignment with the interest of the investor rather than the organization itself (Wasserman, 2012). Founders need to evaluate their options in order to bring the right balance given their flexibility and investor’s level of involvement. It is especially important to consider the long-term impacts of new hires and the role they intend to fill immediately as well as in the future.
When hiring employees, founders need to find individuals able to meet today’s needs and possessing the potential to grow and fill tomorrow’s opportunities. A recent Harvard Business Review article highlights the importance of shifting attention from competencies to potential growth (Fernandez-Araoz, 2014). Startups should account for their expected growth, and reflect such expectations when hiring for current positions. According to Denise Federer, this process should start during initial interviews, she writes that “asking the right question is the key to finding employees who are both technically proficient and a good fit for the organization” (Federer, 2014). Startups are growth environments and new hires should be flexible people who are able to adapt to changing environments and the possibility of performing tasks outside the scope of their role. A good organizational fit for startups must include the ability to perform current responsibilities and the potential to transition into leadership roles as the business thrives and grows.
Rewards and compensation bring a third set dilemmas regarding new hires. It’s important to remember that compensation is not limited to financial remuneration. Compensation can be comprehensive packages of salaries, benefits, equity and other non-financial options. Wasserman writes extensively about how “cash-poor startups cannot afford to pay salaries and bonuses comparable to those paid by large companies” (Wasserman, 2012, p.232). In these cases, equity compensation can help to make up for smaller monetary compensations. In order to better leverage equity compensation, founders can attach vesting periods to ensure new hires remain in place before walking away with valuable startup equity.
Adding new employees to a startup can certainly propel a business to the next level of growth and success. However, founders need to be familiar and ready to handle those dilemmas associated with adding more staffing to the initial team. There is no one right way to deal with these dilemmas, but founder should be considering all these factors beforehand.
References
Federer, D. (2014). Federal Performance Management Group, LLC Blog Site. (2014, November 14). Retrieved September 29, 2018 from https://federerperformance.com/2014/11/14/hiring-dilemma-high-potential-versus-high-performance/
Fernandez-Araoz, C. Harvard Business Review Video Site. (2017, November 6). Retrieved September 29, 2018 from https://hbr.org/video/5645965594001/21stcentury-talent-spotting
Wasserman, N. (2012). The founder’s dilemmas: Anticipating and avoiding the pitfalls that can sink a startup. Princeton, New Jersey. Princeton University Press.
I think you make some very interesting points here, from the discussion about new hires to your explanation of the hiring dilemmas facing today’s entrepreneurs and the organizations they have created. I realize a lot of people do not want to step outside of their comfort zone and hire outside of their own inner circles, but a lot of times it is necessary to “propel a business to the next level of growth and success. “
Jennifer,
Thank you for your response. You are absolutely right. Many people do not feel comfortable pushing the limits on all sorts of issues. When it comes to getting a startup off the ground, an entrepreneur has to pretty much do whatever it takes to get it going; including those things he or she never imagined they would be able or willing to do. Necessity really forces one to challenge our own fears.
Best regards,
-JFS
Jose,
For starters I really like the picture you used for this post, it really caught my attention and goes along well with the blog topic. Your blogs always breakdown the text so well and because of that I get a better understanding of it. It seems as if not only hiring people in the beginning phase is important, but we must take into consideration what type of individuals were hiring and their background. Bringing on hires with like preferences is comfortable, but is it the right thing to do, as this will impact the success of a given startup. Great post!
Morghyn
Jose,
Great job on this post! As Jennifer mentioned above, I love the way you write. It is clear and I gain a little more from reading your perceptive than I do on my own. I think when it comes to hiring, it is on in the pregame. We must do the due diligence and utilize our best hiring practices to find and keep the best employees (a team material). If not the whole company will suffer. I think if we had our inner network interview like we would a stranger, it would be clear to us, there could be potential issues in the future. Maybe not, however I don’t think we are very fair in juguding people close to us.
Best,
Merida