Hiring Mistakes That Can Kill a Growing Startup

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Apr 15, 2019

If you’re in a startup, you’re probably desperate to free yourself from the 12-hour workdays. But rushing to hire can put your business at risk. The decision to put someone on your payroll is always a major leap, but if you operate in the wildly unpredictable world of tech startups, it could be the one decision that literally makes or breaks your business.

The cost of a bad hire ranges anywhere from 30% of the employee’s first-year earnings to, in the now famous words of Zappos CEO Tony Hsieh, “well over $100 million.” And that’s without even touching the devastating impact a wrong hire could have on your current team’s morale and productivity.

On the flip side, startups have a knack for running lean processes that traditional businesses just can’t seem to master. After all, when Facebook bought Instagram for a cool $1 billion in 2013, the company had just 13 employees.

Look, we know you need help (like yesterday). But if you want to sidestep the costly mistakes made by many a startup founder before you, you need to take a minute to think this thing through.

Mistake #1  —  Relying on a résumé

You didn’t get into this business because you’re the type who loves to follow in other people’s footsteps. Still, many startups fall into the age-old trap of using irrelevant credentials to define what makes a “good hire.”

Basecamp CEO, Jason Fried, is known as a hero in the startup world for his bone-deep commitment to flipping the script on what works at work. And as you might expect, he has a radically pragmatic approach to hiring.

“We basically throw résumés out the door,” says Fried in a 2017 episode of Work and Life podcast. Hiring teams at Basecamp don’t care if a candidate went to an Ivy League university or the community college around the corner, they just want to know if their next hire can do what they say they can do.

For that reason, they put their focus on the strength of the cover letter and ask the candidate to back up their words with a paid sample project.

Because bragging rights are a worthless currency in the cutthroat world of tech startups, the only thing you really need to know about a candidate is whether or not they have what it takes to get the job done.

Mistake #2  —  Hiring an experienced sales team

For growth-driven startups, scaling your sales team is a particularly dangerous exercise. Even if you’ve decided to follow in Basecamp’s footsteps and throw out the résumé, it can be tempting to go for the person with the flashiest track record when your revenue is on the line.

But JumpCrew co-founder, David Pachter, knows better. After years of experience recruiting and hiring top sales performers, Pachter discovered that despite popular belief, less experienced candidates tend to outperform their more traditionally-qualified counterparts.

“In our fast-growth SaaS environment, we learned that recent grads often outperformed sales pros with 10 to 15 years’ experience, Pachter wrote in an article in Entrepreneur. “In hindsight, we were experiencing a transformative moment in the SaaS economy’s influence on productivity. The impact of new sales and marketing technologies had fundamentally altered what creates ‘success.’”

Pachter found that more experienced candidates came to the team with more bias for how their experience should be used, compared to less experienced or even entry-level candidates who showed up hungry to learn.

Mistake #3  —  Rushing into it

This SaaS hiring snafu begets all others. In the words of David Heinemeier Hansson, creator of Ruby on Rails and founder & CTO of Basecamp, “The momentum of growth assumes control of the ship quickly if you don’t dare wrestle back the wheel.”

And when it comes to your people, you do not want to your recruitment strategy to look like a scene from Speed.

So block a day or two in your calendar and dedicate that time to crafting a well-thought-out plan that covers:

  • When you’ll hire — What are the exact revenue and growth markers?
  • Who you’ll hire for each role — Specialist vs. generalist, experience vs. potential?
  • How you’ll know when you’ve found “the one” —  What are your values, systems and processes really screening for?

Yes, you need to invest a little time and energy up front. But this effort will pay back in dividends by simply steering you away from classic startup mistakes such as hiring your BFF (only to end up having to fire them later) or hiring people who aced the interview but didn’t actually jive with your company’s unique kind of awesome.

Are you ready to go for gold? Or are you willing to compromise? When it comes to your people, there can be no in-between.

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