Why Hiring the Wrong People Can Kill Your Startup’s Growth?


Why Hiring the Wrong People Can Kill Your Startup’s Growth?

Dreams Gone Sour

Start-ups are an infectious lot – a single one can begin a great many, which in turn, can trigger many more to spring up.  And with ample funding opportunities available from Venture Capitalists, Angel Investors and Private Equity players, it’s not surprising that in India, too, we see a raft of start-ups, mostly technology-based, mushrooming with each passing day. Actually, we are witness to a whole eco-system developing around start- ups (Start up India, Incubation Centres and the like). Many of them command great market valuations but since none of them has gone public so far, it’s difficult to say anything about their financial success with a degree of accuracy.

Increasingly, corporate counselling in India has begun focusing on this issue with a lot of interest. Personally, since I am into corporate counselling as well, I also get a lot of queries for help from people managing start-ups. If you are one of those who were hell-bent on creating a startup, you were likely desperate to free yourself from the drudgery of your previous job. But having begun your own thing, you find yourself swarmed with newer problems – financial, technological and people-oriented. A Harvard Business School study (and my personal and anecdotal experience, too) reveals that more than 90% of all new businesses fold up by their third birthday. There could be endless number of reasons for this humongous proportion of failures. But the people problem has killed many a new enterprise much more often than have other factors. 

Companies aren’t about any product or service in particular. Essentially, business is all about people as it constantly deals with different sets of people only- customers, employees, vendors. You can put the wrong ones on work and kiss goodbye to those dreams of growth. Talent recruitment is the backbone of any business but if your employees can’t handle their tasks adequately, your business may go for a toss. Sound recruitment strategies are particularly vital to startups as they already face the challenge of catching up with older, established brands. Finding the best fit means recruiting those who have the skills you need and can work well with your team. Achieving this perfect fit is a challenge that entrepreneurs must rise to.

People Issues

Though most startups have an obsession with lean teams e.g. when Facebook bought out Instagram (for $1 billion), the company had just 13 employees on rolls. But disregarding numbers, taking someone on your payroll is a major step but if you are in the unpredictable world of startups, it could literally make or break your business. Besides the apparent financial cost of a bad hiring decision (from 30% of an employee’s first-year earnings to, to quote the Zappos CEO, “well over $100 million.”), the cost in terms of the current team’s morale and productivity is just incalculable. Remember, the whole is always greater than the sum of its parts!

People are quite unlike machines as they cannot be ordered overnight and every worker is unique; you can’t have a clone ready. Therefore, finding the right hire, training, developing and nurturing their talent to retain them in the long run is an art, which needs to be mastered by every wannabe entrepreneur.

Un (importance) of experience

The mindset of entrepreneurs dictates that they would value experience over inexperience. That’s quite commonsensical, too. So it’s often very tempting to go for the person with the flashiest track record. But remember, a start-up by definition, breaks new grounds. Most often, people with the lengthiest track records in a business are too constrained by their learning and would fight shy of trying out new things. That’s where the (un) importance of experience lies. Such veterans may have to do a lot of unlearning while working in a start-up. 

Despite popular belief, less experienced candidates often tend to outperform the more traditionally-qualified counterparts, at least in start-ups. Very often, fresh minds and fresh blood can lead to radical shift in the way a business handles its sales and marketing to redefine success. It happens because experienced candidates in a team carry the legacy of a bias for how their experience should be used, compared to less experienced who are hungry to learn.

Rushing into it

Haste always makes waste. So block your calendar and dedicate that time to crafting a well-considered plan to cover

  1. When will you hire?
  2.  What are the revenue and growth markers?
  3. Whom will you hire for each role — Specialist vs. generalist, experience vs. potential?
  4. How do you know that you have found “the one” —  Values, systems and processes?

You may have to invest some time and energy but it will pay back by steering you away from classic startup mistakes such as hiring your best friend or people who did well in the interview but didn’t actually gel with your company’s unique culture. Are you ready for gold? Or are you prone to compromise? When it comes to people, there can be no in-between. Don’t believe that it’s a good idea to put a warm body in a chair even if it’s not the right body. Adopting this philosophy will burn your business over and over.

Résumés Tell Nothing

Many startups use irrelevant credentials to define a “good hire.” The CEO of Basecamp Jason Fried is a poster boy in the startup world for his radical but pragmatic approach to hiring. You may be shocked to hear him say “We basically throw résumés out of the door”. Basecamp doesn’t care if someone went to an Ivy League university or a teaching shop as they want to know if the hire can do what they say they can do. That’s why they focus on the covering letter and ask the candidate to corroborate their words with a sample project.

Skyrocketing Turnover

Poor employees make unhappy workers and also make good employees miserable. The pandemic has caused most interviews to go virtual, which may not change in the foreseeable future. Still, that’s no reason to hire the first one who looks good on paper. Virtual interviews can be made as substantive and interactive as long as you use the appropriate tools.

For instance, while hiring a software engineer, you can sift through résumés and cover letters to narrow down your choices. But during a code interview, the interviewer can see how someone codes in real-time. You can get a feeling of not only the candidate’s talent, but their workplace suitability, too. If you hire a great coder, who doesn’t gel well with the team, other employees will head for the exit door. Bringing a new employee on board always interrupts the normal workflow. Managers and co-workers are less productive when they’re training a new hire. But if you take all the necessary steps to hire the right person, the return on investment is worth it.

It Reduces Revenue

Hiring is costly. It costs companies up to a third of an employee’s salary to find a replacement. If it takes you a third time to have the right hire, you lose an entire year’s worth of work for the money. Bringing the wrong employee on board is a waste of both time and energy, which is a drain on revenues. And for a startup, its pockets are often not deep enough to sustain such losses. So make sure you put the right person in the right place to reduce problems.

Erosion of Confidence

Remember, the Start Up of the Year was not made in a day. It must have taken it years and years of diligent hard work to achieve the title. Like other companies, startups, too, have to work diligently to earn the trust of stakeholders i.e. customers, employees and investors. Social media can play a great role in making the brands relatable, cultivating loyalty, and allowing companies to respond personally to customers. But if disgruntled employees badmouth a brand on social media, such complaints spread like a wildfire. Also take into consideration the attrition among existing employees when you recruit the wrong people. Customers and vendors love consistency and if they’re forced to deal repeatedly with someone new, they are going to lose trust in your company as consistency and relatability build trust.

Invest right, business bright

Successful startups often credit their team for their success majorly due to the immense impact an early hire can have on shaping their growth stories. A great team is built along the journey traversed together by its members. But the starting point remains the right people. Hiring employees who are aligned with the company culture and match the required technical skills, can bring about success more quickly.


There is nothing like a solo entrepreneur. Nobody did it alone. The legendary investor Warren Buffett spent years trying to convince his longtime friend Charlie Munger to be a business partner but never went elsewhere. He knew Charlie was the man he wanted and he did everything to get him on board. The people you choose to work with have the ability to make or break your business. If you look at research on why startups don’t make it, the wrong team is among the top reasons. You need to be selective and strategic about your team. Nothing kills  a startup faster than having to put out fires every day.

  1. Begin with the beginner

Self-awareness is the foundation of everything good. A formidable team begins with you as the reality is, you don’t have every single skill to scale a startup. First, objectively assess your own skill set.

  1. What are you great at?           
  2.  What do you lack?

(Negotiations, Customer service, marketing, technical stuff, liasioning etc) And it’s about hard and soft skills, both. Your personality, values, and beliefs need to be considered. Once you’ve got a grasp of what you can offer, you can start thinking about your team:

  1. Do what you’re great or good at.
  2. Get competent people to do the rest.

Simple as that.

In this context, another word of caution. Several people begin a business just on a whim, without paying any attention to the idea, its viability, potential challenges and other issues. I know of many people, for whom a start up began “just like that” i.e. someone was looking for work and a cousin had enough capital in hands and two joined hands to set a business.  

But most often, such ventures come a cropper as the founders had never paid any attention to the issues of their own compatibility with each other, the convergence of their visions, personality issues and potential areas of conflict. The most common result in such cases is that the enterprise sinks without a trace.

  1. Hire action-takers

No business takes off based on just an idea. It is the execution part which transforms an idea into a revenue-generating business. Before you think of anything else, consider candidates for the hard skills they have. Why the emphasis on core competencies? Startups can be gruelling and move at a rapid pace. Challenges are thrown at you at every step. So it is imperative to have team members with the agility to deal with problems quickly. Given the competitive nature of your business, you also need resourceful guys.

Similarly, innovation and creative solutions are critical assets for a start-up. Many entrepreneurs wait until things actually go wrong and then scramble to fix it. Think of the potential challenges from the beginning and build a team that can handle whatever comes its way.

  1. Team for the long run

The startup phase is a temporary one. Right? Though many businesses don’t make it past this initial phase, you would like your trajectory to be different. So, it important to build a team for the long term with the entire organization’s structure in mind. Consider a long-term vision for your business. Write down all the departments you will need to bring it to reality. 

Marketing and sales 

Product design and development

Accounting and finance

Research and development

You don’t need a team member to represent every possible function, at least not in the beginning. Think of functions necessary to give life to a minimal version of your business.

  1. Customer Service

Customer service need not be the sole responsibility of one department. Every team member should be driven by a desire to serve the consumer. If you build a team that always places your customers in the centre, you’ll have no trouble meeting your revenue goals. When you start off, you may not have the resources to have a large team, which means everybody may be involved in the sales and marketing functions.

  1. Personalities

A sure-fire way to sink your startup is to hire people who don’t get along. Constant friction gets in the way of team work. Of course, a particular personality trait need not be a qualifying factor to join your team. In fact, you want a diverse group. But you should get to know your team.

What are their traits?

What are their skill sets?

What are their dreams and aspirations?

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