Human Capital Matters: 3 How-to Questions To Answer For Startup Founders
Like any business, your startup is about people. It’s what makes or breaks it. According to CBInsights, among the top 20 reasons for a startup to fail, two causes are related to human resources:
- Mismatched teams (3rd most common cause).
- Conflicts internally and with investors (12th most common cause).
I have touched upon internal and investor-related issues in my previous articles that you might want to refer to for additional reading:
- What criteria to consider when evaluating the health of a startup? How to choose the right partner for your startup? Things to consider include your business partner’s approach to handling customer complaints, willingness to move fast and ability to take drastic action.
- How to find a reputable investment fund? Who is to be trusted? A good investor is there for you 24/7, is someone who would not invest in companies in direct competition with you and won’t attempt to wrestle control from the founders.
In today's article, I will focus on how to build a strong team and minimize conflicts, ensuring your startup stays in robust health. As a founder, considering these three questions will help you successfully manage people:
- How do I recruit the right people?
- How do I retain top performers?
- How do I let an employee go graciously?
1. How to recruit the right people?
Before you even begin the recruitment process, make sure your vision and mission are clearly defined. Founders often overlook this crucial step and, as a result, struggle to explain the value their company brings – to the job seekers and to society at large.
In fact, it’s such a pressing issue that the very first lecture of Sequoia Capital’s Surge Program for Early Stage Startups focuses on helping founders define their vision and mission. That the world's leading investment fund should give the matter such importance is no coincidence, of course. Having a clear direction will help you avoid all manner of conflict within the organization.
Aytekin Tank, the Founder and CEO of JotForm, agrees that defining your vision and mission should be a priority when recruiting talent. Soichi Tajima, the Founder and General Partner of Genesia Ventures, also believes that the ‘culture fit’ should be one of the defining criteria when making a recruitment decision; meaning that the person’s values must be aligned with your company's culture: vision, mission and core value.
To sum it up, what you want in an employee is a combination of talent and the right vision. But if you can only choose one, it’s better to have someone with a similar value system. This way you will have a long-term partner, as well as a companion who is always actively contributing to and constantly improving the company’s capacity to achieve goals.
2. How do I retain top performers?
Before moving on to the next question, let me reiterate my earlier point: clearly defined vision and mission should be your number one priority, as most people make a decision to stay or leave based on how aligned they feel with the direction you had set for the organization. In addition, top talent seek out companies where they can work with like-minded people and where they have opportunities to challenge themselves and grow. Your job as a founder is to create such a working environment and to provide motivation.
At a startup, salaries and benefits rarely match those of blue-chip companies, but you can still offer some long-term benefits: promotion opportunities or ESOP (ownership of company shares by employees). Offering ESOP to high-performing employees is not only a way to retain them, but also a tool of empowerment that gives employees the incentive to take ownership of their work and become engaged in performing well.
Lastly, it is equally important for the executive team to remain connected to the staff and to be transparent in communication.
Where there is lack of engagement, the feeling of belonging is extremely hard to facilitate. With transparency, if the perception is that decisions are made arbitrarily, with little clarity of fairness, the culture of “disobedience" takes root – one of the main reasons talented people leave.
3. How do I let an employee go graciously?
Letting go of a problem employee is definitely easier said than done. Based on my personal experience and drawing on the recommendations of Maynard Webb, the former COO of eBay, I have put together a few suggestions for the founders to consider before making a decision.The founders should start with some soul-searching and ask themselves if they have created the environment for the employee in question to be successful. If the answer is “no”, then "the employee is not wrong, we are wrong". If you believe, however, that the goals were communicated clearly but the employee is consistently not meeting them, consider giving the associate another chance to improve. If you are committed to this course of action, work out a plan together and stick to it.
If the decision is made to let the employee go, start that conversation with expressing appreciation for the employee’s efforts. Show kindness. Explain your decision and help them find employment elsewhere, if you can. The old adage of treating people the way you want to be treated still rings true.
This reminds me of the deeply emotional note Airbnb CEO Brian Chesky sent out before laying off 25% of his staff. It resonated on a personal level not only with the departing employees, but also with those who were staying, as well as the company’s investors and general public. The letter shows sincerity, heartache and gratitude to the staff as well as laying out humanitarian solutions to his dilemma.
“To those of you staying,
One of the most important ways we can honor those who are leaving is for them to know that their contributions mattered, and that they will always be part of Airbnb’s story. I am confident their work will live on, just like this mission will live on.
To those leaving Airbnb,
I am truly sorry. Please know this is not your fault. The world will never stop seeking the qualities and talents that you brought to Airbnb…that helped make Airbnb. I want to thank you, from the bottom of my heart, for sharing them with us.”
I hope this article helps startup founders become better leaders, communicators and mentors to their teams.
Hoang Thi Kim Dung is the Head of Genesia Ventures Representative Office in Vietnam.
About Genesia Ventures: Genesia Ventures is a Japan-based, Venture Capital firm focusing on early-stage tech startups across Japan and Southeast Asia, with 2 funds and assets under management totaling $100M. Genesia Ventures has actively invested in about 80 startups globally, including companies in Vietnam like Homedy, Luxstay, Kamereo, Manabie, eDoctor, and BuyMed.