4 Hiring Mistakes for Startups to Avoid
People are the primary fuel for any successful entrepreneurial venture, but hiring is more difficult than ever in today’s tight labor market.
In fact, hiring quality people is the top concern among startup founders, ranking even above revenue growth and customer acquisition, according to First Round’s State of Startups 2018 study. More than 66% of founders in the survey said they were concerned about securing top talent for their organization. A separate study by venture capital database CB Insights found that team issues were cited as the top factor behind nearly a quarter of startup failures.
The stakes for hiring the best people for your startup are clear, even if the path isn’t always straightforward. However, avoiding these four common startup hiring mistakes is a good place to start.
Hiring Your Friends
Katee Van Horn, a diversity and inclusion speaker, coach and author, says founders often turn to family, friends or other members of their personal networks to fill jobs early in their company’s life cycle — even if those connections aren’t fully qualified for the positions. “It’s scary to be an entrepreneur, so you want people you can trust and rely on,” she says.
The consequence, Van Horn says, can be a homogeneous thought process that limits a company’s ability to innovate or avoid mistakes. “You want someone who will actually challenge you to be better,” she says, as well as people who can help you “find the right answer, not the same answer.”
She suggests looking for talent outside of your community or network when possible, or asking your network who they think is the best at the skills you’re looking to acquire.
Not Checking All the Legal Boxes
While a leader in an early-stage venture can be tempted to pay people under the table or with cash, any short-term convenience that these shady arrangements might offer will be eclipsed by long-term issues, Van Horn says.
Van Horn says startups at any size and stage should secure an attorney and an accountant, and understand the rules for contract workers and employees. “It’s very worth it to have an attorney, to have a payroll expert, to have these different things in place, so come tax time you don’t screw yourself or screw the other person by not having the right pieces in place,” she says.
Asking People to Help for Free
Van Horn says it’s common for penny-pinching early-stage startups to ask professionals — sometimes friends or acquaintances — to perform work for free or at a reduced rate. It’s an especially prevalent practice when it comes to website work and graphic design.
“If you're using people as a free resource, you get what you pay for,” she says. “They might say yes, but are you really going to be able to say ‘this isn’t exactly what I wanted’ when they’re doing it for free?”
If you want someone to perform work for your startup — whether they’re an employee or a contractor — pay them what they’re worth, Van Horn says. “If they’re good at what they do, they should be earning that pay and you should be able to get what you really need,” she says.
Hiring Based on Similarities, Not Values
Van Horn says hiring based on a loosely defined “culture fit” can be a trap when hiring people who you might like socially or who are similar to you. Instead, look for the best-qualified candidates who are also aligned with your clearly defined values as a company.
“You want to have someone who is actually aligned to you from a values perspective, but also someone who is going to challenge the way things are being done and the way you’re thinking — in an appropriate way — because that’s how you get better,” she says.
For more information on hiring based on values, Baton Rouge-based culture consultant Landon Snow covered that concept at a recent Tech Park Academy event at the Louisiana Technology Park.