Startup Stories Part 9: Hiring & Firing at Startups
Startups, being small setups, need to move quickly when it comes to hiring the right people and removing those who aren’t carrying their weight.
Here’s the 9th part of my bi-weekly column with The Star Metrobiz. Read the original post here. Hope this helps.
Startups, being small setups, need to move quickly when it comes to hiring the right people and removing those who aren’t carrying their weight.
There’s an old management theory in the west that tells people to “Hire Slowly, Fire Fast.” However, this idea has become conventional wisdom in Silicon Valley and other startup ecosystems in the world. At startups, we cannot afford to lose good talent to another job offer, so the mantra is “Hire Fast, Fire Faster.”
In Malaysia however, most companies tend to “Hire Slowly, and Fire Slowly.”
Hiring at startups:
If you’re a solo founder, try to find a co-founder. Two heads are always better than one in the early days. It keeps you accountable and keeps morale up when things are rough because you have built-in support from your co-founder. Three co-founders is a good number too, as you commonly hear the trifecta model for co-founders being the “hustler, hacker, and designer.” Meaning one wears the business hat, another wears the technical hat, and the third wears the design hat.
Four or more is probably too many, and startups could end up getting stuck in indecision or risk a co-founder dropping out later. If you have four, you also only own max 25% of a company off the bat, which isn’t a lot, considering that you’ll get further diluted once you raise money from investors. All co-founders should be on a 4-year vesting schedule with a 1-year cliff. I’ll be talking about co-founder and early employee vesting schedule more in-depth in my next article.
When do you make your first employee hire?
After you’ve validated your product with early customer traction and proven that you’re creating real value. This means that you should be able to afford to hire them; either you’ve raised some angel/seed funding, or you’ve bootstrapped and made enough revenue to pay for someone’s salary. Otherwise, don’t even bother hiring a full-time person. Continue to bootstrap with your co-founders, or hire freelancers and outsourced help so you can remain flexible and keep costs down.
Before you hire, it’s important to determine what each co-founder’s “superpower” is, and what other skills your business needs to fill in the gaps. For example, in the trifecta model, if you already have three co-founders with business, technical, and design expertise, then perhaps your first hire needs to be very specific; like a head of sales if you’re an enterprise startup, or digital marketing specialist if you’re focusing on acquiring users online.
You should also always hire for “culture fit and personality first,” and skills/experience second. Especially at a startup, no matter how qualified or smart the person appears on paper, if he/she isn’t humble and willing to learn or work hard at a small startup, then you’re certainly hiring the wrong person. I’ve also learned that trust, respect, dedication and humility are crucial cues in a candidate that you should look out for. Everything else, including a domain expertise or even resourcefulness, can be taught. But ingrained character and attitudes are very difficult to change.
When you find a good candidate and your gut feels right, don’t hesitate. Hire him/her within 24 hours because good people are very hard to come by.
Firing at startups:
In my career as a founder and CEO, I’ve fired no less than 5 people. While I do not take any pride in letting someone go, I can comfortably say that I’ve never regretted the decisions. In fact, on many occasions, I’ve regretted not doing it sooner. If you’re afraid of firing someone, you shouldn’t be an entrepreneur in the first place. No startup has any spare capacity for an employee that isn’t productive or positively contributing to the company.
You can usually tell in about 4-8 weeks if someone isn’t going to work out. We usually give ourselves excuses like… “Lets give him a few more months to improve himself “ or “I can’t afford to lose this person now.” However, more often than not, the unproductive employee ends up affecting other employees with unhealthy vibes the longer you keep him/her. Then at the end of a few extra months procrastinating on the decision, you often wonder, “Why didn’t I do this three months ago?”
Unfortunately, things often don’t get better. Delaying the inevitable will only tie up the budget you have for someone better in your organization. So the only answer when you notice a problem is to: fire fast.
As a founder, you have to trust your intuition.
When the time comes, don’t be indecisive. Don’t make up fake excuses about why they’re not working out. Give them honest and constructive feedback; give them specifics so they can improve. Give them suggestions for how they might think about the situation differently at the next company. Chances are, they already knew that it isn’t working out and will appreciate your candor.
Most companies in Malaysia hire slowly and fire slowly – the exact opposite of best practices for startups. But if you’re running a startup, take risk on people whom you think will be a good fit. Don’t look for perfect but trust your gut and intuition. And when you are wrong, move on quickly. It’s okay, you’ll recover. Treat people with respect and professionalism. Be open and transparent about why they’re not working out or why they don’t fit in culturally. But move fast and don’t delay the inevitable.
However, there is a caveat to firing in Malaysia since the employment labor law here strongly favors and protects the employee. Look out for my next article where I will present more facts about the Malaysian labor law so you have a better understanding of what you can or cannot do when it comes to hiring and firing in the country.
And remember – when in doubt, always check with your legal counsel. Tune in for Part II of this series next week on: The Caveats of Firing in Malaysia.
Column by,
Breadcrumbs by Cheryl Yeoh 
One Response to “Startup Stories Part 9: Hiring & Firing at Startups”
Nice analysis of firing pattern and its reason. The major factor of rapid hiring and firing of startup is that the requirement of manpower fluctuates during its entire life cycle. Its very less during initial phase, grows during funding and hence expansion phase and then stabilize during stability phase. that why the rapid firing has become a common phenomenon in startups and hence raise a concern on its credibility as career option. Also find the in depth analysis of startup firing phenomenon here:- http://www.fuckedupstartups.com/fs-analyser/startup-hiring-and-firing/