MAP Accelerator Program — Week 6
And we are back to a busier schedule. It was good to have a bit of a breather last week. This week’s sessions were all about hiring and employees.
Hiring
I was quite surprised to find out that studies showed that the cost of a mishire is about 15x their annual salary. This seems quite extreme, but as soon as you start thinking about it, this becomes almost obvious. You’ve already spend considerable amount of time vetting and interviewing an applicant, before you have to sort out all the paperwork and start paying them a salary. Now you spend additional time providing them with introductions into your business, come up with things to do for them and supervise them as they attempt to fulfil their role. All this takes time and resources. Then the outcome can be insufficient or harm your business and there is also the opportunity cost: the value you could’ve gotten added, if you had hired an A-player for your open role. It’s no surprise then that a business‘ success depends a lot on a capable and talented team.
A few things to do to avoid mishires are: (1) only hire someone if you absolutely need someone for a specific role, (2) find people that are aligned with your company’s mission since they will be more motivated, (3) find people that match the role you need them for very well and (4) keep watching out for red flags throughout the entire application process.
As for the process of hiring, everything starts with a short and concise job description that communicates clearly to an applicant, why they should work for your company (mission alignment). Any incoming applicant should then be rated, ideally by multiple people, according to predefined metrics important to the role. Mentors can be asked for metrics for roles outside of the skill-set of the founding team (lawyers, accountants, etc). After filtering out the unsuitable applicants using these metrics, it’s good practice to have a 1-on-1 screening call with the remaining applicants, which can be used to spot red flags or allow them to ask questions. For the actual job interview — and I’ve noticed that myself before — it’s important to encourage openness and honesty. Ideally the interview also contains a collaborative task, where you can see in action how that applicant works in the role.
Last but not least, you will always have people that exit your company. If there was no bad blood, it’s good to have a virtual bench for previous employees, which you can contact if you ever need someone for a specific role again.
Employment Fundamentals
To my surprise, the idea of having an intern working for you may be illegal under most circumstances (at least in Australia). There are a few exceptions (like learning only), but the general rule of thumb is: if it looks like employment, you need to make them employees and pay them a fair wage.
The session further evolved a little bit around the technical details, like intellectual property rights, contracts, type of employments, probation periods, payroll tax, superannuation and performance management (which is the process of addressing an under-performing employee). It’s good to have a check-list for these things. There are obviously employee contract templates out there, but it’s worth it to double-check any template for the topics mentioned above.
And of course you cannot talk about a startup and employment without at least mentioning the term “ESOP” once. An Employee Share Option Program is basically a scheme that allows you to pay early employees in shares (or more precise: share options), that when executed by the employee can give them a stake in the company, which can lead to better motivation, improve employee retention for the company and can benefit the employee financially more — provided all goes well with the business. There are also regulations for startups in place in Australia to reduce the tax burden this would have on the employee — usually the difference between the option’s strike price and the share price is counted as income for the receiving person.
This session was quite useful, because it touched on a lot of topics that were already on my mind, but I just didn’t have a good answer for.
Co-Founder Relationships
We’ve also received some advice about the co-founder relationship and dynamics associated with this. A lot of startups start splitting responsibilities into technical and business. Each of them have their own challenges and sometimes it’s hard to appreciate the other’s contribution to the business’ success. However, to have a good professional relationship, it is important to let your counterpart know that you value their contributions, even if you don’t fully understand all the things they do.
Furthermore, it’s important to have someone outside the company to talk to — almost like a therapist. This can be for the purpose of venting anger/stress or just to simply get some dopamine for when things went well, but you couldn’t get recognition from within the founding team.
There are also pros and cons to being friends with a co-founder. One the one hand it might remove friction, because you already know the other person and how to talk to them. On the other hand, being friends might prevent you from showing necessary criticism to your co-founder’s performance, because you don’t want to hurt them. This is a walk on a knife’s edge and has to be carefully balanced.
