A new CB Insights survey says there’s almost a one in four chance your startup management team will demolish your startup through lack of relevant abilities. This shouldn’t and won’t come as a surprise to Founders and CEO’s of successful startups. Having a team in place that is diverse, specialized, multi-talented, and a good cultural fit makes them an A-Team.
156 companies were surveyed to find the Top 20 reasons why startups failed. The top two reasons were no surprise -- the new companies got the product wrong product (solve a problem, don’t strive to meet a market need) or were underfunded and ran out of cash.
Third on the list was hiring the wrong team. 23 percent of the startups surveyed, failed due to the lack of a good team. This can mean anything from hiring an under-motivated team to individuals with the wrong skillset. It can even mean that those team members weren’t willing or able to get on the same page with the founder’s vision.
This proves that Founders need to put a process in place to recruit a team that is suitable to execute their vision, the company and each other. The following 5 steps are key in hiring your best team:
Work with a recruiter.
Startup leaders who are new to the game do not have the bandwidth needed to make strategic hires. It is a great idea to get the aid of a good recruiter especially when putting together your executive team. Typically, recruiters in your niche will charge 25 percent of first year salary for the candidate hired. It can vary if it’s a strategic hire of a CFO etc. Be helpful, upfront and let your existing team participate in getting to know the recruiter. Soaking up the culture, office space and personalities will help the recruiter find a candidate to ensure long term success within the company.
Understanding that most early stage companies do not have a lot of funding and run lean, we recommend a recruiter to hire directors and executives when your company is ready for the growth. It is well worth the investment.
Hire a diverse team.
When hiring staff, it’s important to ensure diversity. Research from McKinsey & Company reveals that firms in the top quartile for racial diversity are 35 percent more likely to have better financial results while those in the top quartile for gender diversity are 15 percent likely to have stronger performance compared to average companies. Hiring people like yourself can be more comfortable but a diverse team will be more productive.
To that end, hiring Liberal Arts majors as opposed to Business will benefit you greatly. Each member of your team should bring a unique perspective, each as diverse as your customer base.
Hire for niche expertise.
Having staff with a deep understanding of a niche or a certain technology is vital. For example, if you’re building a software (SaaS) company that wants to conduct mergers/acquisitions to grow, hire an expert who has worked extensively in that field. Someone with 15-20 years of specialized experience can help challenge assumptions and shore up any shortcomings among company founders. This is the type of hire a recruiter would be very helpful in.
Bootstrapping requires multi-talented people.
Secondary skills matter when you are bootstrapping and need one talent to perform multiple tasks. Yes, you want a Jack and Jill of all trades related to your niche! Consider candidates with multiple degrees, certificates in another field or experience working in a variety of settings. Startups need a minimum level of expertise in a large array of skills. Finding employees with valuable secondary skills can help solve problems tomorrow that you might not even contemplate today.
Consider the cultural fit.
Have an honest discussion about the company’s culture and what the new employee wants in a job. 46 percent of employees will fail within 18 months of being hired and only 19 percent are deemed an unequivocal success, according to a study by Leadership IQ. The reason new hires fail is not because they don’t have the right professional experience, it’s because they cannot accept feedback (26 percent), are unable to manage emotions (23 percent), don’t having the motivation to excel (17 percent) or they simply have the wrong temperament (15 percent).
All that suggests that it’s important to get to know the person. An interview is not sufficient. An interview coupled with inviting the candidate to the team's usual Friday happy hour, along with a panel interview is a great start. Startups are not your typical jobs with set hours so it is vital that the candidate understands the demands on the job and is a great fit for the team.