The fact that most businesses fail within five years is hardly news for anyone with a pulse on the startup community. In fact, quite the opposite is true nowadays.
Related: 47 best management books
With how much the figure gets thrown around the endless growth-hack seminars and local tech meetups, startup implosions often feel like a self-fulfilling prophecy. And since most founders choose to ignore even the basic principles of HR from the very get-go, it can be hard to argue the opposite.
Why there’s no ‘hacking’ HR for startups
Every founder feels like he’s working against the clock. Market demand needs to be tested, new product features are overdue, and the competition’s always breathing down your neck. Every hour is zero hour, and coffee’s for closers only.
With so many variables, startups often feel like they have to resort to radical shortcuts and operational ‘hacks’ if they want to stay afloat. One of the first things to get thrown under the managerial bus? Effectively dealing with the people you work with.
Don’t get me wrong. Some of the biggest startups today have successfully broken the traditional business model, which in turn skyrocketed their growth. Unfortunately, countless others have failed in their place – many because they thought employee happiness and teamwork chemistry are just an easy hack away.
Team disharmony is repeatedly cited as one of the biggest reasons why startups fail, which is hardly a surprise. Most new startups don’t have a designated HR manager, and most CEOs lack the proper HR training. Instead, they rely on the company’s grandiose vision or founder’s social skills to compensate for the lack of basic procedures. That typically works well enough the first few months, and then the dust begins to settle, and operational holes become evident. If you live by the hype, you die by the hype.
There’s a reason why startup accelerators prefer teams with a long history of working together, preferably across multiple projects. It shows they’re less likely to just get in a fight one day, pack up their laptop and leave everything behind. On the other hand, you can be sure that investors look at employee retention rate as a sign of your CEO prowess. Bottom line: you can hack industry standards. You can’t hack people.
So how can a bootstrapped startup make sure they hire the right people, that don’t start contemplating new job options before the first quarterly report?
Step 1: Recruiting
The hiring process is usually the origin story of all ensuing HR headaches. Particularly in the startup’s early days, many founders foster the ‘too small to matter’ mentality when making operational decisions.
Due to their size, they either think they don’t have to follow the various employment laws or feel that new employees should pretty much onboard themselves. Here are the most important things not to miss in your recruiting process:
Employee contracts are not optional
Whether you have 1 or 50 employees, the same laws apply to your business. For one reason or another, many startups fail to provide clearly defined, formal working agreements when hiring new personnel. They treat the terms and conditions of an employment very much like their website’s T&C – it only becomes important once you made it big.
There are several reasons why you want to consider formalising employee contracts up front. For one – it’s the law, dummy. The government wants you to define your company’s relationship with every new employee. Are some of them going to be working as independent contractors? Is that even legal? How much will you be paying them? If you’re struggling to follow all the necessary procedures, consider seeking legal advice. Yes, hiring lawyers as a young startup can be costly. Most of the time, it ends up not being nearly as costly as not hiring one.
On a human level, a formal working agreement is the first step to a happy future employee. Him having a clear picture of his salary and benefits, his work hours and various job responsibilities give him some much-needed work security and a piece of mind. It also allows your new hire to effectively organise his personal life, which seems to be a growing concern for new startup employees.
If you’re still not convinced, there are plenty of selfish reasons to use employee contracts as well. Many companies choose to integrate non-disclosure and non-compete clauses directly in these agreements. That way, you get to protect your intellectual property and make sure your new CTO can’t start working for your direct competitors, even if he starts absolutely dreading working for you.
Don’t bypass the onboarding
For small startups without a standalone HR department, onboarding can be a nightmare. Due to the lack of personnel, it’s usually up to the founder or another ‘senior executive’ to take the new hire under his wing for the first few days.
Proper startup onboarding typically fails for a number of reasons. Since the CEO usually sees it as a burden on his workflow rather than a chance to bond with a colleague, he’ll skimp on both the time and the passion when guiding the hire through his new role.
As a result, not only does the new employee feel inadequately prepared to take on his responsibilities (which leads to new problems later on), he also doesn’t feel an equally valued member of the team from day one. Take the time to empower and excite your new co-workers. You’ll thank yourself for it in the long run.
Another reason why startups take onboarding for granted is their emphasis on values like ‘self-initiative’ and ‘proactivity’. They want employees who pick up fast and work well under pressure, so they’ll sometimes hijack the onboarding process to test just how resourceful the ‘new guy’ is.
Don’t do this. Onboarding is not about you, or even your company. It’s supposed to be solely about the employee. You should feel confident that there’ll be plenty of opportunities to test his competence later on. For now, focus on showing him the ropes and getting him excited enough about your brand to want to prove himself in the first place.
Stop overselling it
It’s only natural you want to praise your company to prospective job candidates. The startup world has become fiercely competitive nowadays. To attract top talent, you need to show them exactly why they’ll be happier sitting in front of a computer in your, rather than someone else’s office. Still, many founders tend to go way overboard when selling their company culture.
It is the CEO’s responsibility to set clear expectations from the very first job interview. Is your startup all about employee happiness? Do you guys do casual Thursdays, work flexible hours and insist you’re all friends first and colleagues second? If so, be sure to mention all of that in your job listing. I’d be surprised if the position doesn’t get filled by tomorrow.
However, don’t play casual when you’re really anything but casual. If you’re running a bootstrapped startup, chances are you’re low on cash, you’re working 12 hours a day, and you’re stressed out of your mind trying to figure out how to keep the company going. If that’s the case, you probably need somebody as ambitious and vision-driven as yourself, who’s OK with working in a highly intensive environment, constantly answering late-night work calls and never clocking out at 5:00.
Nevertheless, most startups worry when it comes to being completely honest about the job requirements. What if nobody applies? The truth is, there are plenty of go-getters out there that don’t mind breaking a sweat, as long as it means they get to be a part of something great. Overselling the position, however, will almost certainly end up in a cultural mismatch both you and the ‘new guy’ are going to regret.
Step 2: Retaining
Like it or not, HR’s work is never done. Once you went through all that trouble above assembling the right team, making sure they don’t leave is an ongoing process. Here are the main things to remember when it comes to employee retention:
Walk in everyone’s shoes
Each employee’s driven by different things, and there’s hardly a universal process to keeping everyone happy. Whatever motivates your co-workers, though, not addressing it long enough is often the first step to getting a resignation letter.
If you’re a burgeoning startup, some of your employees are likely driven by the need to make a difference, no matter the scale. Is their current position allowing them to effectively fulfil that need? Or have they been drowning in paperwork for the past two months?
No matter how small or unimpactful your venture may be at this point, there’s always a way to make your employees feel like their work matters. Is there a way to reshuffle their workload so that they’re more involved with product development? Can you create a task that would make them feel more connected to the customers you’re serving?
At the end of the day, just recognising that need and letting the employee know just how much everyone appreciates what they do can make a world of difference. In the absence of an HR or an occupational psychologist, a CEO must wear many hats.
Reasons aplenty as to why people may want to work at a startup. Hitting it big and swimming in cash is certainly not the least of them. A-type personalities are often driven by the need to quickly climb the corporate ladder. Others are primarily concerned with job security, or even customer satisfaction.
Whatever the employee drivers are, it usually falls on the founder’s heavy shoulders to effectively identify and accommodate them. That’s why practising empathy and developing emotional intelligence as CEO can be more important than any other role he has in the company.
Embrace the feedback loop
Whoever said ‘talk is cheap’ probably didn’t work at a startup. More than any other operational factor, effective communication can make or break even the most talented teams.
A culture of transparency and organised discussion is vital for long-term team chemistry. To that end, there are two things a CEO must do to make sure everyone’s on the same page, not just with how the business is going, but emotionally just as well.
First thing, a CEO should talk, and encourage everyone else to voice their opinion (in a carefully moderated forum, of course). If employees feel like there’s neither time nor place to express their concerns, it’s the founder they’ll inevitably come to blame.
Open communication channels aren’t just cool for team cohesion, though; they also directly influence growth.
How? Well, if there’s a history of humiliation or retribution associated with giving feedback, you can kiss those productive brainstorming sessions goodbye. What you’ll get instead is grou1pthink – a phenomenon where team members try to avoid conflicts at all cost, even if it means agreeing with a group decision no matter how stupid it is.
Once everyone’s comfortable enough with giving feedback on the company and each other, the second thing a CEO must do is listen, and (re)act accordingly. Startups are typically known for exercising at least some form of transparent communication – it’s step #2 they often get wrong.
It’s not enough to just ask for feedback from your coworkers. If anything, asking for feedback means you now know exactly what’s on their minds. What that means, is that if things don’t change from now on, your employees won’t help but feel cheated. In turn, they’ll stop voicing their concerns as the practice has proven pointless, and soon enough will just find it easier to leave instead. Listening to feedback is a promise you give to your employees. You break it, you pay for it.
Water your employees
For god sakes, put that bucket down. Instead, try making a continuous effort to help your employees grow.
Staff development is a vastly underutilised term in early-stage ventures. Most people view startups as local innovation hubs and creative silos, and many of them undoubtedly are. But when your burn rate has all but made a hole in the ceiling, innovation usually needs to take a backseat.
Rather than basking in tech media attention and offers from VCs, most startups are just struggling to survive. Under those circumstances, there’s rarely, if ever, time to experiment with new ideas and develop groundbreaking concepts.
Understaffed and overworked, all focus needs to be on things that have been proven effective, otherwise, you’ll all soon be unemployed. And it’s that sort of philosophy that tends not to sit well with employees that joined your company hoping for unabashed creative freedom.
While it’s clear that the bottom line needs to be your guiding light in all decision making, a CEO also has a responsibility to ensure both personal and professional growth of his coworkers. Sometimes that means approving pet projects or branching out an employee in a way that doesn’t guarantee short-term benefits. But if you always prioritise revenue over people, you will soon have neither.