Experience vs. cost: how startup founders struggle with their first hires

Startups: hiring your first employee
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Christopher Goodfellow
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Sift Media
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One of the most difficult challenges founders faces is how to build their team, whether it’s adding a co-founder or making those crucial first hires. And with limited financial resources, runway and time, a mistake in the early stages of a business can be fatal.

Kevin Holler, founder of the now-defunct student job-hunting site Huma, wrote a powerful article earlier in the month, which delved into the brutal realities of making a bad decision.

“Selecting your co-founders, and subsequently your first key hires, is a fine art that takes careful thought and consideration,” says Holler. “If you think of each team member as a wooden block in a game of Jenga, you’ll know it only takes one to go wrong for everything to fall.”

The startups we talked to about this sensitive issue highlighted two key challenges: how to check candidates for fit with company values and work ethic; and balancing cost and experience – will they actually be able to do the job?

Should you hire for experience or cost?

Performance beverage brand TrueStart Coffee has got off to an explosive start, building a logistics infrastructure which can fulfill national retail chain orders in three days and shipping 10,000 units in its first 18 months.

This led co-founders Simon and Helena Hills to search for ways to reduce the time they spent on day-to-day tasks. The decision was made to bring in one sales and two marketing people using relatively vague job descriptions and hiring people who lacked experience.

We totally underestimated the amount of support someone with little experience would need.

“We went along the lines of inexperienced, but moldable – so they could grow with the company,” says Helena, echoing a common approach. “But we totally underestimated the amount of support someone with little experience would need.”

The founders ended up spending more time developing the new hires than their jobs roles were saving. On top of that, Helena’s strong background in enterprise sales and the company’s limited resources meant it made no sense to train someone junior to take on this crucial task.

She is quick to point out the positives – the new team members brought a lot to the company and went on to find “amazing opportunities” – but it became clear it wasn’t working when they truly challenged cultural fit and the three new hires left after a year.

Hiring is essential to a startup’s growth. The difficulty, which Helena experienced, is quantifying the impact a new employee will have.

“Everyone thinks the solution to growing fast is to hire,” says Rob O'Donovan, founder of CharlieHR and board member of startup studio The Eleven.

“Sometimes it is, but it takes three months at least before people start adding value because they have to get into the business and figure out how it works. You have to invest a huge amount of time training them and there’s always this trade-off around skill and experience versus salary.”

It’s the people that have looked for opportunities and are busy. They’ve got fire in their belly.

In spite of highlighting the potential pitfalls, O'Donovan says he’s hired a series of inexperienced undergraduates. Startups need generalists that can take on a range of tasks such as operations and marketing, he argues. Young people are a good fit because it allows them to figure out what they want to do and gives them the opportunity to grow into a specialist role as the company expands.

“It [the kind of generalists that can take on these tasks] is a hard thing to interview for,” he says. “You can tell by what they’ve done at university whether they’re the kind of people that are going to make things happen. It’s the people that say ‘yes I’ve got a 2:1,’ but they’ve also run the kite surfing club and went and raised money for this thing. They’ve looked for opportunities and are busy. They’ve got fire in their belly.”

Are you hiring a square peg?

The catalyst that caused  TrueStart Coffee’s founding team to re-think their approach came in the form of a TEDx talk by Paralympic medallist and Mobiloo founder James Brown.

“People can’t be fulfilled or happy unless they’re living as close as possible to their own core values on a day-to-day basis,” explains Helena, recounting the impact the speech had on crystallising her strategy. “He went on to talk about how to figure out what your core values are. Actually, it’s quite hard.”

So, TrueStart’s team undertook an exhaustive process to define their values and those of the company.

“We now use our core values to to run through every decision we make as a business,” says Helena. Their next hire was an experienced salesperson and they’ve introduced a completely transparent salary structure.

Are you experienced?

Signable founder and CEO Olly Culverhouse had to hire his first staff having never been through the process. He launched the startup straight out of university. The company’s tech allows  businesses to get documents signed electronically, it’ll shortly have eight employees and is on target to deliver £500,000 of revenue this year.

Signable was suddenly it was going to be responsible for mortgages and people's whole lives. That took time to get over.

Culverhouse says the business should have hired nine months earlier than it did, but it took time as a founder to have the courage to do so – and the confidence in its financials.

“The fact that Signable was something that came out of my head and suddenly it was going to be responsible for mortgages and people's whole lives. That took time to get over,” he says, adding the support to build financial forecasts came from Entrepreneurial Spark ( you can read the incubator’s CEO and co-founder’s columns on BusinessZone).

To come up with a hiring process that would reduce risk he turned to Silicon Valley for inspiration.

“We set projects for people coming in to immerse them more into the roles, work out the quality of work, and to find out how they handled deadlines and understood projects. That was picked up from hiring technical staff and developers. In America it’s more common to set programming tasks, for example, solving something on a white board."

Each applicant who got past the initial low-key chat for cultural fit was given a task. For example, one group of five was asked to put together a plan to double sign-ups with X budget or with no budget. Each participant was given £250 to do the work and the business ended up hiring two new employees. This works on two fronts: it helps figures out whether they can do the work; and it gives the business a new perspective on ways they could tackle the challenge.

That said, Culverhouse stresses the importance of culture as strongly as Helena and runs a first-stage interview to check for fit before they use this process.

The path forward

A startup’s original hires will define the way the business culture evolves and grows.

“You first hires in a startup are critical,” as Hills puts it. “You’re basically entrusting them to go out and talk to people: to pitch people that have never heard of Truestart.”

There’s no predefined path to doing it right and every successful entrepreneur seems to have a bad experience, but it’s clear that effective questioning, hiring for cultural fit and considering the impact of inexperience will all help you get there.

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