Hiring 101: How Entrepreneurs Can Make Their Best Mistakes
Besides the vision of the founders and the idea, the only ‘’tangible asset’’ many startups have is the team. A good team having relevant industry experience is likely to be capable to take the company to the next level. It comes at no surprise that angel investors and venture capital funds investing at an early stage look closely at the team. Who these people are? Have they worked together before? Do they have relevant industry experience? Are they resilient problem solvers or likely to step back the moment they face negative user response?
Most founders understand the importance of their team and go on a hiring spree the moment they secure funding. However, excitement often plays against them as either they are eager to build a team quickly or ready to hire people who are enthusiastic but not experienced enough. Hiring mistakes are costly both in terms of money and time wasted. However, some hiring mistakes can later turn out to be the best decisions entrepreneurs have ever made.
As an angel investor, when I invested in Transformify HR Software & Freelance Platform, I already had experience managing big teams as CFO of Skrill and Director PTP Europe at Coca-Cola-Enterprises. On top of that, Transformify is an HR tech company so no one expected me to face any challenges on the hiring side. Still, I made many hiring mistakes. However, later on, some of these mistakes helped us to grow the company super fast.
When it comes to hiring, European entrepreneurs make mistakes no matter how experienced they are. Turning these mistakes into success drivers is what matters.
Then, how to recognize a hiring mistake and turn it into a success driver?
When working on your MVP (minimum viable product), it makes sense to use the services of an outsourced partner. At this stage, most startups have very limited funding as a prototype is often required to raise venture capital funding. A good outsourced partner has a team that can be utilized on a time-and-material basis thus providing all the competences at an affordable price.
Imagine hiring full-time a project manager, product owner, graphic designer, web designer, copywriter, SEO expert and at least two developers for a limited period of time. It’s almost impossible as skilled experts are looking for long-term assignments and stable jobs. Additionally, a team that has just been hired takes months to get up to speed. Having in mind all of the above, an outsourced partner looks like the obvious choice for developing an MVP but is it always the case?
Initially, we trusted our MVP to an outsourced partner and the issues were there almost immediately. From unmet deadlines to poor quality of work to more hours billed than actually worked out, we had seen it all. After endless discussions, we managed to remedy the situation and received a good quality MVP.
This initial experience with an outsourced partner was priceless later on as we had a checklist, we used each time we were considering a third-party provider. Even listed companies use the services of professional marketing and design agencies or big data partners. It is rarely possible for all work to be done in-house. Asking the right questions and having stringent vendor selection criteria ensures that you work with the right partners who deliver high-quality work within deadline and budget.
When your brand is still unknown and the startup has just been founded, it can be difficult to attract qualified candidates who have relevant industry experience. The budget is also limiting the choices you could make as a hiring manager.
After interviewing a number of candidates for a digital marketing manager role, I eventually stumbled upon a candidate who was a fresher, having just one year of experience after graduating from university but whose enthusiasm and sharp mind were more than impressive. I hired her, and initially, it took time to train her and explain where to find relevant information and which blogs to read to enhance her skills. In three months, our inexperienced digital marketing manager was governing the relationship with journalists the world over and providing guidance to our affiliates on how to earn more affiliate commission and promote Transformify to their audiences. The time I invested in training her paid off as she was bright, eager to learn and had the potential.
Hiring inexperienced enthusiasts who have a big potential is a good decision as they develop their skills quickly and can grow with the company. On the other hand, if there is no one internally who can train freshers, the disaster is near. A startup needs to grow fast to succeed and stay in business and not having enough resources and expertise on board is likely to result in a slow down and extra costs. Inexperienced candidates demand lower salaries, but entrepreneurs are likely to pay more overall to compensate for missing skills, lost revenue, etc.
We’ve built Transformify relying on freelancers and we still have no employees. This set up allows us to have all the skills we need at any point in time while keeping the costs under control and cutting overheads to the maximum. The gig economy is growing at a high pace, Industry 4.0 continues to cut jobs and more people work as freelancers either to earn extra cash or to secure a primary source of income. To many, freelancing is not a side activity but a small business of their own which is completely under their control. Being fired is no longer something freelancers fear of as it is within their control to secure more clients and deliver quality work.
Working with freelancers is the right choice when there is not enough workload to hire employees on a full-time basis or too many versatile competencies are needed at any point in time. At Transformify, we need various competencies and prefer to work with industry experts rather than with people who have some experience but are not true experts in any field. Due to this reason, we’ve built a pool of freelancers we work with over and over again. Now it’s a very smooth process but it wasn’t like that at the beginning. Managing freelancers and assigning freelance jobs to them requires robust processes and communication channels. That’s where many startups fail. The project manager needs to have visibility on who is assigned a project, what is the payment due, when it is due, what is the progress and who is likely to fall behind the deadline. In addition, most freelancers are working for more than one client and may shift priorities if not reminded of the deadlines.
On the other hand, managing freelancers is a great experience and results in clear policies and procedures early on. Some startups relying on internal teams only may not have handbooks and processes for years which results in low productivity, work done twice and higher costs. The same processes and communication channels that ensure high efficiency when managing freelancers are applicable to managing employees.
Experience With Big Business
It’s tempting for entrepreneurs to hire candidates who have worked for Google, Apple or IBM. Those candidates have seen how work is done in a corporate environment and the perception is that they will be able to contribute to the growth of the startup. In reality, this is rarely the case. Having experience with big business is great if the company the candidate is about to join is already established and has at least 5 years in business. Otherwise, it will be hard to apply the knowledge on a much smaller scale. Startups have different dynamics and adjusting to it proves impossible for many candidates who have built their careers in the corporate world.
When is it good to hire senior executives having experience in the corporate world?
Normally, when the startup is already a scaleup and has at least USD 10 million of revenue per annum, it is time to hire ‘’C’’ level executives who have experience in the corporate world. At that point in time, a senior executive having big business experience can contribute a lot to the growth of the company. In addition, seasoned managers are seen as an asset by investors and may have a positive impact on the valuation or time to close the next funding round.
Hiring mistakes are inevitable in the startup world. Turning those hiring mistakes into success drivers is what distinguishes successful entrepreneurs from all the rest.