While having a great product or wonderful advertising can set your business apart from the rest, the key to success in a startup environment is having a great team of people. It’s easy to look at established companies and assume that their team came together naturally. However, every company began as a startup, and every startup has to put together its team the same way: piece by piece.
In doing this, it’s easy to make mistakes. Hire the wrong person and you could fall behind your competition. Use the wrong hiring criteria and you could assemble an entire team of non-performers.
What’s great about hiring for your startup is that you’re not the first person to be put in this situation. Other people have hired before you, and many of them have made mistakes. As a founder or co-founder, you can learn from their errors.
In this guide, we’ll share the six biggest mistakes startups make when hiring new people. From failing to test to hiring friends and family members, read on to learn what you should avoid in your startup’s hiring process.
1. Hiring friends, family members and former colleagues.
It’s tempting to hire your friends and family members for key roles. After all, you know them well and trust them to have your best interests at heart. Although this might seem ideal, hiring friends is often a costly and destructive experience.
Why? Because if they fail to perform as well as you’d expected as employees, you can damage not just your business, but your friendship. Avoid hiring friends and family members – personal bonds can often get in the way of business progress.
2. Giving equity to people with non-entrepreneurial backgrounds.
Giving equity to employees is one of the best ways to motivate your team early in the development of your startup. This is particularly true if you’re short on liquid assets but big on growth potential.
However, not all people view equity with the same value. If you’re hiring people with non-entrepreneurial backgrounds – for example, people with 20-year work experience in a large corporate setting – they may not be motivated by equity.
3. Hiring full-time employees for work that can be outsourced.
Many startups that have been funded via venture capital or outside investment go into a hiring frenzy, picking up people left and right to fill positions that could easily – and much less expensively – be filled by contractors.
Don’t be afraid to outsource costly, boring or repetitive tasks that cost your business time. Working with people on a performance basis also allows you to scale the level of involvement between your business and them up and down based on your needs.
4. Hiring top-level staff to manage low-level, simple jobs.
Many of the jobs you’ll find taking up most of your time as a founder or co-founder are repetitive, simple and easily managed by low-level employees. Many startups hire from the top down; it’s often better to hire from the bottom up.
Think about the biggest time-consuming jobs your business currently involves. Are they in the domain of a CFO or CMO? Of course not – so don’t hire one. Hiring from the bottom up lets you focus on efficiency while you search for top-level employees.
5. Not specifying exactly what you need in an employee.
Many startups make the mistake of hiring anyone to fill any job, thinking that having more people on-board will make them more efficient and successful. Not so; if you’re hiring the wrong people for the wrong jobs, you’ll actually become less successful.
The people behind your business are the keys to its success – the engine driving its growth and development. When you need to hire, specify exactly what you need to make sure you only hire people who are perfectly suited to your company’s goals.
6. Failing to test potential employees before hiring them.
Many people interview well but perform poorly after being hired. This is a classic frustration of managers and founders that’s easily solved by testing people during their interview (or prior to their interview) to assess their performance.
Challenge-based interviews let you learn more about the person you’re hiring and allow them to demonstrate their skills. Whether you’re hiring a programmer or a customer service rep, test their abilities with a challenge as part of their interview.