The process of starting a business goes hand in hand with putting together a team. Every team, just like a business, takes a shape of its own depending on a variety of factors. Noam Wasserman points out how teams of likeminded individuals are a common occurrence when it comes to founding teams (Wasserman 2012). An entrepreneur holds the power in deciding who will be part of the founding team. These decisions carry consequences directly impacting a startup’s performance. The needs of a startup should dictate the level of homogeneity within the founding team. Therefore, it is important to be familiar with the benefits and risks of homogeneous teams.
There are clear benefits of working with similar team members. Noam Wasserman writes that some of the benefits of homogeneous teams include quick and easy communications about issues as well as making decision. Homogeneous teams are also more stable and appreciative of each other’s efforts when risk tolerance or commitment levels are compatible (Wasserman, 2012). People tend to associate themselves with other individuals sharing the same ideas, values or skills via formal or informal institution networks such as employment or groups of friends. Therefore, an entrepreneur doesn’t have to go very far to reach a pool of co-founders who will naturally bring the aforementioned benefits. Homogeneous teams usually bring together people already in close proximity offering entrepreneurs and startups quick access to short-term benefits, but possibly incurring long-term risks.
While the benefits of homogeneous teams are attractive, its risks cannot be ignored. Tangible risks include overlapping backgrounds and social networks, while intangible risk can include lacking effective counterbalance in terms of decision-making styles or risk tolerance (Wasserman, 2012). Considering the fact that startups require a substantial amount of differing resources, homogeneous teams can help solve a minor problem while simultaneously creating a more significant issue. For instance, consider an entrepreneur working on developing a product brings a fellow developer onto the team, the initial entrepreneur might benefit from this addition by speeding up the developing phase; however, longer term it would be more beneficial to integrate a team member with different skills to help commercialize the product. This example displays the tradeoff of benefits and risks encountered within a homogeneous team.
Analyzing the benefits and risks of homogeneous teams is important, but even more important is understanding that an entrepreneur should not settle with these tradeoffs. An entrepreneur should work on turning a homogeneous team into a more heterogeneous team. Bringing together individuals with diverse backgrounds can mean pushing boundaries or comfort zones, yet yielding exceptional results. In a recent interview with Steph Korey, the CEO of luggage startup Away, she discussed the importance and benefits of integrating new ideas in old industries such as the luggage industry. Her take on the subject is captured within this quote from the interview, “[Steph Korey] doesn’t want to hire people who know where the $32 billion luggage industry has been. She wants to hire people who can unpack where it’s going.” She goes on to describe how this philosophy of including people with different backgrounds and ideas has contributed to the massive success and growth experienced by the luggage startup (Click here for full interview). And they are not alone; many businesses and startups have turned his approach into a leading trend. Diverse teams are the norm in successful startups; therefore, any entrepreneur must consider the benefits and risks brought to the table by co-founders or other key business players. An entrepreneur who is able to be forward thinking and understand the benefits of diverse teams can also expect great success.
References
Fairchild, C. (2018). When everyone wants to work at your startup, what do you do next? Retrieved from https://www.linkedin.com/pulse/when-everyone-wants-work-your-startup-what-do-you-next-fairchild/
Wasserman, N. (2012). The founder’s dilemmas: Anticipating and avoiding the pitfalls that can sink a startup. Princeton, New Jersey. Princeton University Press.
I loved the quote from Steph Korey! Including people with different backgrounds and those that have high qualifications are important to a successful team.
Kay,
I was very intrigued by this article and definitely impressed by Steph Korey’s take on the subject. It just seems like the obvious thing to do. I did not want to overshadow the initial focus on homogeneity, but this article seemed fitting to the discussion. Thanks!
-Jose F. Saavedra
I really enjoyed reading your post this week, Jose. I totally agree with you in regards to the needs of a startup dictating the level of homogeneity in a founding team. After reading your post, I think it is also safe to say that all startups can benefit in some way in having a heterogeneous founding team in some way.
Morghyn
Morghyn,
Thanks for your comments! You are absolutely right, I think depending on each business, we can asses the level of homogeneity or heterogeneity that better fits our own needs. A key take away from all these discussions is that there is no right or wrong answer (maybe), but it’s all about better fitting the context.
Best regards,
-Jose
You did a very good job of showing the contrast between homogeneous teams and heterogeneous teams. While they both have their pros and cons, from what I have gathered, too, it seems like the most logical choice is to forgo the comfort zone of a heterogeneous team and build a more versatile team, instead. I concur that “pushing boundaries and comfort zones” may be a little painful in the beginning, but that is part of growing in business and in life.
Jennifer,
Thank you for your comments. I agree with you; I also think the idea of pushing our boundaries out of comfort zones can be applied on many other entrepreneurial dilemmas. When it comes to deciding how similar or different your team should be, it all comes back to individual business needs. We need to carefully look at each business see what is the best fit.
Best regards,
-Jose
“[Steph Korey] doesn’t want to hire people who know where the $32 billion luggage industry has been. She wants to hire people who can unpack where it’s going.” I agree with quote because companies do not want to hear about how the company came to be but how can you make the company move forward. How can you bring ideas to the team and make them more advance. Hiring someone that knows the past will only keep the company in a time loop. But having someone that can see the future will take the company forward.
“…doesn’t want to hire people who know where the $32 billion luggage industry has been. She wants to hire people who can unpack where it’s going.” I agree with quote because companies do not want to hear about how the company came to be but how can you make the company move forward. How can you bring ideas to the team and make them more advance. Hiring someone that knows the past will only keep the company in a time loop. But having someone that can see the future will take the company forward.