Are you Pushing your Start-up Team out the door?

November 19, 2009

It takes a lot of effort to find the right employee and integrate them into the company, so how do you keep them from leaving the company? And what if that “right” candidate turns out to be the “wrong” employee?

Contrary to the expected, the number one reason people leave a company is not monetary, it’s because they don’t feel their work is appreciated and valued. Start-ups are so focused on meeting milestones that management sometimes neglects these simple acts of praise.

A common mistake I see is the founder or CEO inability to let go and empower the employees to do their jobs. Most start-ups are small. Start-ups thrive and succeed because of the experienced people in the company. If a CEO or founder treats everyone as if they are mere assistants and must approve of everything done in the organization, it’s a recipe for disaster. It’s simple, but I’ve seen it happen a lot in start-ups. Experienced employees don’t like to be micromanaged. Particularly today since funding is limited, start-ups are less than 20 people, and start-ups may have people working for free or only for equity. A company can’t grow and achieve greatness this way.

A popular method of retaining people is known as the golden shackles, offering the employee more options on an extended vesting schedule. While everyone has a price, it is not necessarily monetary. I’ve seen many people resign for a company despite the stock options left behind.

Initially, start-ups hire from outside the company because there are few people to promote from within. Unfortunately, this practice often continues for too long. As the company grows and more opportunities are created, a start-up company’s inclination is to continue hiring from the outside. When they do promote from within, it’s usually a means of last resort because they could not find a suitable candidate available in the job market. This is the point where the early team members leave the company – the financial gain is dwindling and they are not given the opportunity to grow professionally as the company grows.

Anyone who has ever been involved in selecting and hiring candidates will eventually hire someone they regret hiring at a later time. Bad hiring choices cannot be avoided all together. There is always a small percentage that passes through the filtering process. The real question is what the management team will do about it. More than not, most managers prefer not to confront the situation, but let it continue. . I have rarely seen anyone fired in a start-up. Letting people go is stressful for both the employee and the manager. Performance issues are more difficult because they are subjective, like beauty is in the eye of the beholder. Other members of the staff do not necessarily see the performance problems. The problematic employee is viewed by coworkers as the personable guy they chit chat with in the break room. Firing one employee will be unsettling for the rest of the staff. They start to wonder how management perceives them and whether they are the next to go. It may take weeks to calm the organization and return to business as usual.

In my personal observation, the initial start-up team has about 18 months of exuberance for the product and the start-up company. The next wave of new employees has at most 12 months of enthusiasm before they lose their excitement and their new jobs become routine. If members of the current staff develop a negative outlook towards the company, new staff members will lose their enthusiasm even quicker. As a result, people will not be a productive as they should be. Management needs to address the negativism before it spreads throughout the organization.

As the company grows larger so changes the personality of the new employees being added to the staff. The initial team is a completely different breed from those people joining the company with a hundred or even thousands of employees. As a company matures, it becomes more reserved, more bureaucratic, more process oriented, and attracts more 9to5 employees – and more traditional means of retaining people become more effective.