Take time to ensure that your earliest hires fit your company culture. Go slow when hiring your team. The wrong fit can hurt your success.
Even in the biggest, most stable corporations, putting together a small team can be a perilous process fraught with personality clashes, hierarchical imbalances, and conflicting visions.
But in a startup, the challenge of assembling a solid team — and then keeping its members inspired and focused — carries the added stress of being potentially fatal. When a company consists of a half-dozen people, a single recruiting misstep can topple the house.
Stanford Graduate School of Business professor Lindred Greer has been studying and teaching the art of team-building for 12 years, with an ever-increasing focus on startups. In Greer’s course The Psychology of Startup Teams, students spend time outside of class analyzing the interpersonal dynamics at a nascent business, report their findings to the class and visiting experts, and then return to the startup to offer advice.
Much of this course-related fieldwork has made its way into Greer’s scholastic studies and even directed her future research. “It’s a nice feedback loop, because there isn’t a lot of good research on the people side of startups,” she says. “There’s a lot on product and strategy and structure and funding, but not a lot looking into the social interactions.”
Here she shares how startup founders can assemble strong, motivated teams.
What are the key differences between creating a team for a startup versus creating a team for an ongoing business?
First, there’s the intensity of interaction. If you’re on a project team at a big existing company like, say, Google, you’re not really married to the people on your team. But if you’re starting a business and choosing co-founders and making your first hires, you’re looking at one of the most intense relationships you’re going to have in your life. It’s similar to marriage.
At Google, there’d be more room for error, because the team is more likely to be a small cog in a huge machine.
Yes. But with a startup, it’s more of a life-or-death situation. Issues around power and fairness are bigger, because your entire life is probably vested in the business. You might be living hand-to-mouth while waiting to get funded. With so much at stake, little obstacles are harder to navigate.
It’s essentially a hiring challenge?
It’s hiring decisions, and it’s having a clear culture and clear statement of values even before you go looking for a co-founder. And then when you start the first phase of hiring, it’s making sure that you and your founding team have an aligned vision, so it’s clear who’s going to be a cultural fit. One of the things that can really break an early-stage team is bringing in the wrong person and then not having any idea how to fire them. That can be a train wreck, especially if there’s equity involved.
You might not even have an HR team in place.
You usually don’t, so you’re doing it on your own. And that’s rough because most people aren’t trained in this.
Would you go so far as to actually sketch out a dream team and then go find them?
Definitely. You don’t want to just be grateful for the first decent coder you find. You want to be intentional about it. That’s the main takeaway from my course: Be as intentional about your people as you are about your product.
Does that mean looking beyond personality and experience?
It means looking at everything. Make a list of your own competencies. What are you great at? What are the skill sets you need to have in other people? And, just as important, what common values are you looking for?
Can you define values in this context?
Things that you hold dear to your heart. Things that you’re not willing to compromise on if you get into a conflict over them.
So that’s a squishy, ethereal thing?
Not necessarily. The best value systems for startups are directly tied to the product. One startup that I know, they have a 3-D printing company, and their value system is, “We love to build things, and we love sharing what we build.” So there’s a passion for building things, but also some gregariousness and intellectual playfulness.
You should also ask, “Am I in it just for myself, to make a million bucks, or am I in it to make the world a better place?” That’s a fairly big, basic value decision.
That would seem to be one core value where you’d definitely want people aligned.
You need to find people who are excited by the company’s mission statement. Like Disney makes families happy. Adidas is competitive.
Would you consider that a primary filter?
I would apply an ability filter first and then choose between my top five candidates based on who is the closest fit in terms of values. It’s easier to siphon out people based on ability — you can do that with their resumes. And then once you have them in for interviews, that’s when you start thinking about values and culture. Is this person going to be happy here? Are they going to fit in with you?
So maybe you’ll end up selecting someone who’s a slightly less talented coder.
If they’re a cultural fit, absolutely. But there’s a caveat. You want them to have similar values, but they don’t need to be your best friend. Too often, founders think, “Oh, I need to get along with them.” We overrate that. It’s important to have a diversity of personalities. Risk aversion, for instance, is more of a personality preference than a value. And that’s actually a really good thing to have diversity on.
I know one founding team that has a CEO who’s extremely risk-prone. If it were only up to him, he would scale way before his company is ready. But he’s paired with a great CTO who’s very good at putting on the brakes. And together the two of them balance out. So it’s also knowing yourself and your personality. And then finding complementary teammates.
But when it comes to personality traits, how do you narrow it down? There are dozens of personality types.
Whatever is more salient to you. If you had to describe yourself in five words, what pops into your head? Like I said, risk aversion is a big one. Optimism and pessimism are also important.
Do you actually want a pessimist on your team?
Yes. There’s research on that, showing that too many optimists can be bad for startup performance. Having a contrarian can be a great thing, especially at startups, where people tend to have such rose-colored goggles about the future. Having someone who’s more realistic can help turn around some pretty bad decisions.
How do you make sure that you’re asking the right questions and doing the right research on someone so that you get to know their personality?
Take your time. My favorite advice I’ve heard from VCs to founders is, “Hire slow, fire fast.” That one rule alone could save a lot of startups, because people are often far too quick to jump into relationships. If you meet a new coder who’s a friend of a friend, a one-day interview isn’t sufficient to say, “OK, you’re hired.”
You need to go slow because it’s really hard to fire someone after you bring them on board and get to know them. Beyond the legal issues, it takes a lot of emotional gumption to make that decision, especially if you’re an early-stage founder and you haven’t done it before. Some startups will take six months to fire someone who doesn’t belong. But in six months, the wrong person can corrupt your culture.
Because, like you said, it’s a marriage.
And it’s really hard to end a marriage. Emotionally, financially. You just don’t want to go there. That’s why it’s so important to take your time before you hire. You want to engage with them in a lot of different contexts. If you’re hiring a CTO, give them a task similar to what they’d be doing in your company. Give them two weeks to work on it, and see how they do.
Also, spend time with them one on one and in groups. Look at them across a variety of social situations, and look for indicators in behavior and personality. Just asking someone questions doesn’t tell you everything you need to know. It’s very easy for smart people to appear socially desirable.
There’s a startup I know where they really value having a positive, kind culture. The CEO has arranged his office so that when he’s at his desk, he looks out at his secretary. When people come in for an interview, his big thing is to watch how they interact with his secretary. If they’re kind and courteous or dismissive and abrupt, that’s a strong yes or no indicator for him.
Taking your time must be especially important when choosing co-founders.
Definitely. You want to spend months with someone before you formally commit to a partnership. We’re actually doing new research now in the realm of close-relationship analysis, looking at the benefit of prenuptial agreements between founders.
With my students, one of the big things I ask before they commit is, “Have you had a fight yet? Do you know what this person is like when things get stressful and ugly?” And if you haven’t seen that yet, then you need to find ways to gently explore how this person will react if you disagree with them or stress goes up.
Yes. Push back on something much harder than you usually do, and see their reaction. That can reveal a lot. I’ve had students come back to me saying, “Oh, my gosh. I’m so happy I did that. That was terrifying.”
Have you ever heard any stories of people who feel like they’ve been falsely seduced during the founder-dating period?
Oh, yeah. It can happen.
Are there ways to guard against that?
References. Talk to people who’ve worked with the person before. See how they are with other people.
Once you’ve hired a new team, how do you keep them marching in the same direction?
You have to put more effort than many founders realize into communicating your mission and your vision
What’s your distinction between vision and mission?
It’s something that we talk a lot about in my class. Mission, to me, is a very brief statement of purpose. “What’s our reason for existence?” So, again, for Disney, it’s “we want to make families happy.” For Stanford, it’s “bring knowledge to the world.”
A vision, on the other hand, is, “Where are we going with that? How are we going to do it?” It’s action-oriented. The best ones usually also have a timeline and goals that you can benchmark against.
Richard Branson has a great saying: “A good mission statement should fit on a coat of arms.” And that mission statement should not only dictate your hiring decisions, it should also be embedded in your rituals. How you celebrate success. How you decorate your office. What you do with your off-sites. That mission should be everything. And the vision should be, “Where are we going?”
Do most of the companies you study succeed at that?
Actually, no. When my students go in to study startups, the single biggest problem they see is lack of alignment around the mission and vision. We usually look at companies with about 10 people. They’ve done their first round of hiring, and they’re often still in Series A funding. My students go through and ask people, “As a company do you know where you’re going? Do you know how to contribute?” And most employees say, “No, we really don’t.” And you tell that to the CEO, and he or she will say, “Well, I told them six months ago what the vision was.” It doesn’t work that way, especially in startups. Things change so much and so quickly. Six months is forever. You have to keep emphasizing in all your internal communications: “Who are we and what are we doing right now? What is our goal?”
Is building a team something that you can get better at with training?
Second-time entrepreneurs are astronomically better than first-time entrepreneurs in building teams and creating startups that succeed. The number one reason startups fail is people problems, and the second time around, entrepreneurs realize this.
About Scale Finance
Scale Finance LLC (www.scalefinance.com) provides contract CFO services, Controller solutions, and support in raising capital, or executing M&A transactions, to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, business valuations, and other financial management, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. Scale Finance has multiple offices in the Carolinas including Charlotte, Raleigh/Durham, Greensboro, and Wilmington with a team of more than 45 professionals serving more than 130 companies throughout the region.