90% of startups fail. One of the most important reasons, aside from failure to find product-market fit, lack of need, and running out of cash, is not hiring the right people for the job. It is an often overlooked reason, but having the wrong team in place is a recipe for disaster.
Some surveys suggest 65% of startups fail because of management issues alone.
While there are plenty of guides on how to find the right talent, there’s considerably less material on avoiding common hiring mistakes for early stage founders.
To make the hiring process easier for you, we’ve compiled a list of the top 5 mistakes to avoid when hiring your first employees:
- Rushing the hiring process: When you are eager to get your business off the ground, it is only natural to be tempted to hire the first person who seems like a good fit. But this means you might overlook key factors that make someone a great candidate, such as their compatibility with your company culture or their long-term goals. It’s not enough to just go by their skills and experience. You want to build a team that works well together and shares your company’s values and vision. Taking your time to evaluate multiple candidates will give you a better chance of finding the right person for the job.
- Hiring based on qualifications alone: A candidate’s resume may look super impressive, but it’s not always a reliable indicator of their abilities. To get a better sense of a candidate’s personality and work style, there are several metrics you can consider such as their communication skills, problem-solving abilities, ability to work in a team & get things done. Many startups are also asking candidates to complete a task or project that is relevant to the position, which helps evaluate their abilities more accurately. Another common mistake is that you might have a list of expectations– it’s not always possible to find a candidate that checks all the boxes. Sometimes even if they meet 70% of your criteria, they may actually be a great fit. Manage your expectations to understand the trade-offs and prioritize the most important qualities.
- Failing to define the role and responsibilities clearly: Before they start the hiring process, many founders haven’t actually fleshed out the role and responsibilities of the position. As a result, they struggle to identify the skills and experience needed in a candidate to ensure that everyone is on the same page when it comes to job expectations. Understanding roles & responsibilities clearly helps avoid confusion and misunderstandings down the line.
- Don’t be too generous with equity: In their desperation to hire the most qualified candidate, founders can be tempted to part with too much equity. Offering equity is a great way for founders to incentivise employees to be invested in their vision, but be strategic about it. The advantage you get is to keep high ownership of your startup. As your company grows, your equity will become increasingly valuable, and it’s essential to retain enough to keep yourself and your co-founders motivated and incentivized. Common packages for employees No. 1 & 2 are 1-3% depending on seniority levels & how valuable the hire is to the company. It can drop off sharply to 0.1-0.5% equity for employees No. 3-5.
- Neglecting to check references: This seems obvious – part of HR101. But it is surprising how often reference checks aren’t completed before making a job offer. This is an important opportunity to verify a candidate’s work history, skills, and character to make sure you have all the information you need to make an informed decision.
Hiring your first employees is an exciting but daunting task for any entrepreneur. Finding the right people to turn your vision into a reality is no easy feat. This is by no means a holistic list of “don’ts”, but avoiding these common mistakes will help you find the right people for the job to set your company on the path to success.
Here are some HR resources we’ve put together, to make your hiring journey smoother and more successful:
- Equity for early employees: here
- ESOPs for early employees in Indian startups: here
- Recruiting debt when rushing to hire: here
- Playbook for startup hiring: here
- Managing attrition at early stage – here
- Email templates for hiring: here
- Defining roles for early employees: here
- Startup hiring trends report – here
- Skill-based hiring approach: here
- Attracting top talent: here