A recent study published by CB Insight indicates a number of common reasons that startups fail. The first and second are not surprising: 42% of startups close because they found no market for their products and 29% because they ran out of money. But the most solvable reason is the third: 23% of startups fail because of an inadequate team. Obviously, these companies didnât put the right people in place to do the job that needed doing
Entrepreneurs set up a company, develop an amazing product which the market is waiting for, raise funding and yet, one out of four startups close because the team was not suited for the tremendous challenges entrepreneurs and startups face. So even while the 3rd most common reason startups fail can be attributed to not having the right team in place, the first two reasons can also be partially attributed to having the wrong people executing those tasks.
Itâs sort of obvious to me. Not having the right team is arguably far more than a quarter of the reason why startups fail. As someone whoâs been involved in both high-tech startups and the recruitment business for more than 20 years, I can tell you Iâd estimate the number one reason startups fail can be either completely or partially attributed to not having the right people in place to do the important work key roles are tasked with doing. Perhaps entrepreneurs are ashamed to admit they failed, personally unable to put the right team in place. Why is this happening so often? Here is what usually happens.
Johnny and Jake, who worked as software engineers at the same company came up with a brilliant idea. They shared the idea with Mary. Then the group brought in Tom, the only one they knew with an understanding of sales and marketing. The entrepreneurial nucleus is ready to go to battle.
The group prepares a business plan and an investor deck with the aim to raise money. The technology development is easy. After all, the team members have technological experience from previous jobs. When things start happening they have to recruit a team in order to execute on their plan. They need more programmers, product managers, sales and marketing professionals and pretty soon they will need someone to head up their new office.
So far there was no problem recruiting new people. Johnny brought Susan and she brought Andrew. A year has passed and our startup has twenty people. Itâs evolved into a small empire ready to conquer the world. But something begins to crack. Bill, who was the brilliant programmer at Jakeâs previous company, finds it difficult to work with Jakeâs team. His attitude is negative and getting toxic. Mary was a really good Product Manager but ever since the company hired a VP of Product she finds it difficult to cooperate with his new process. And worst of all, Tom, who is one of the companyâs founders and its main sales guy, does not deliver anything close to scalable results. The company needs a much more experienced VP of Sales and a far more advanced distribution strategy.
This story repeats itself again and again in thousands of startups. In some cases, the entrepreneurs succeed to overcome these common difficulties and bear the heavy price of losing momentum and opportunity and in many cases this situation results in the disintegration of the delicate human and cultural fabric that is so vital for startups to succeed.
What can be done to prevent these situations? The short answer is that any company, especially startups, must have a realistic understanding of their own personal limitations as well as a well thought out strategy for recruiting key employees. A successful process requires the CEOâs attention and involvement as the main task in building a successful company.
The company needs to decide on its short and long term hiring strategies. It needs to decide what will be developed internally and what can be outsourced. This decision will impact the number and type of people it hires. The company must decide on the ideal mix of people in the company, one that will help create an ideal culture that engenders a sense of purpose and drives the team to work hard and stay, even in times of crisis. Some employees may be capable of meeting their goals in the first year but not beyond. Others may seem overqualified (I hate this term) but can help the company as it grows. And sometimes good people just get bored and need to be put out to pasture for everyoneâs benefit.
These are serious challenges that not all entrepreneurs know how to cope with. As the pressure grows (and it does), personnel problems start to haunt managers and they are more likely to make hiring mistakes like hiring the wrong people for the wrong task or not hiring anyone at all.
Even after a strategy is formulated, the plan is not done. The company must create a structured process for recruiting personnel that can be implemented and measured so that success can be determined and people involved can be held accountable. Budget and resources must be allocated in order to make the process work. Department managers have to decide what happens when hiring is not going as planned. No business can execute on its plan without a great team in place, period.
I meet companies that are unable to recruit employees for key roles for months on end, sometimes even a year or more. Conversely, I see companies that continue to improve their hiring process relentlessly and now understand how to make amazing hires, even in a tight talent market. When a job goes unfilled then something is wrong with someone or everyone in the hiring process. Either the process is wrong, the expectations are unrealistic or no one is being held accountable for the lack of results.
The common argument which goes “there are no good candidates in the market” does not hold water. Good companies recruit excellent people and build winning teams because they make hiring an accountable process internally.
A recent study published by CB Insight indicates a number of common reasons that startups fail. The
first and second are not surprising: 42% of startups close because they found no market for their products and 29% because they ran out of money. But the most solvable reason is the third: 23% of startups fail because of an inadequate team. Obviously, these companies didnât put the right people in place to do the job that needed doing
Entrepreneurs set up a company, develop an amazing product which the market is waiting for, raise funding and yet, one out of four startups close because the team was not suited for the tremendous challenges entrepreneurs and startups face. So even while the 3rd most common reason startups fail can be attributed to not having the right team in place, the first two reasons can also be partially attributed to having the wrong people executing those tasks.
Itâs sort of obvious to me. Not having the right team is arguably far more than a quarter of the reason why startups fail. As someone whoâs been involved in both high-tech startups and the recruitment business for more than 20 years, I can tell you Iâd estimate the number one reason startups fail can be either completely or partially attributed to not having the right people in place to do the important work key roles are tasked with doing. Perhaps entrepreneurs are ashamed to admit they failed, personally unable to put the right team in place. Why is this happening so often? Here is what usually happens.
Johnny and Jake, who worked as software engineers at the same company came up with a brilliant idea. They shared the idea with Mary. Then the group brought in Tom, the only one they knew with an understanding of sales and marketing. The entrepreneurial nucleus is ready to go to battle.
The group prepares a business plan and an investor deck with the aim to raise money. The technology development is easy. After all, the team members have technological experience from previous jobs. When things start happening they have to recruit a team in order to execute on their plan. They need more programmers, product managers, sales and marketing professionals and pretty soon they will need someone to head up their new office.
So far there was no problem recruiting new people. Johnny brought Susan and she brought Andrew. A year has passed and our startup has twenty people. Itâs evolved into a small empire ready to conquer the world. But something begins to crack. Bill, who was the brilliant programmer at Jakeâs previous company, finds it difficult to work with Jakeâs team. His attitude is negative and getting toxic. Mary was a really good Product Manager but ever since the company hired a VP of Product she finds it difficult to cooperate with his new process. And worst of all, Tom, who is one of the companyâs founders and its main sales guy, does not deliver anything close to scalable results. The company needs a much more experienced VP of Sales and a far more advanced distribution strategy.
This story repeats itself again and again in thousands of startups. In some cases, the entrepreneurs succeed to overcome these common difficulties and bear the heavy price of losing momentum and opportunity and in many cases this situation results in the disintegration of the delicate human and cultural fabric that is so vital for startups to succeed.
What can be done to prevent these situations? The short answer is that any company, especially startups, must have a realistic understanding of their own personal limitations as well as a well thought out strategy for recruiting key employees. A successful process requires the CEOâs attention and involvement as the main task in building a successful company.
The company needs to decide on its short and long term hiring strategies. It needs to decide what will be developed internally and what can be outsourced. This decision will impact the number and type of people it hires. The company must decide on the ideal mix of people in the company, one that will help create an ideal culture that engenders a sense of purpose and drives the team to work hard and stay, even in times of crisis. Some employees may be capable of meeting their goals in the first year but not beyond. Others may seem overqualified (I hate this term) but can help the company as it grows. And sometimes good people just get bored and need to be put out to pasture for everyoneâs benefit.
These are serious challenges that not all entrepreneurs know how to cope with. As the pressure grows (and it does), personnel problems start to haunt managers and they are more likely to make hiring mistakes like hiring the wrong people for the wrong task or not hiring anyone at all.
Even after a strategy is formulated, the plan is not done. The company must create a structured process for recruiting personnel that can be implemented and measured so that success can be determined and people involved can be held accountable. Budget and resources must be allocated in order to make the process work. Department managers have to decide what happens when hiring is not going as planned. No business can execute on its plan without a great team in place, period.
I meet companies that are unable to recruit employees for key roles for months on end, sometimes even a year or more. Conversely, I see companies that continue to improve their hiring process relentlessly and now understand how to make amazing hires, even in a tight talent market. When a job goes unfilled then something is wrong with someone or everyone in the hiring process. Either the process is wrong, the expectations are unrealistic or no one is being held accountable for the lack of results.
The common argument which goes “there are no good candidates in the market” does not hold water. Good companies recruit excellent people and build winning teams because they make hiring an accountable process internally.
A recent study published by CB Insight indicates a number of common reasons that startups fail. The
first and second are not surprising: 42% of startups close because they found no market for their products and 29% because they ran out of money. But the most solvable reason is the third: 23% of startups fail because of an inadequate team. Obviously, these companies didnât put the right people in place to do the job that needed doing
Entrepreneurs set up a company, develop an amazing product which the market is waiting for, raise funding and yet, one out of four startups close because the team was not suited for the tremendous challenges entrepreneurs and startups face. So even while the 3rd most common reason startups fail can be attributed to not having the right team in place, the first two reasons can also be partially attributed to having the wrong people executing those tasks.
Itâs sort of obvious to me. Not having the right team is arguably far more than a quarter of the reason why startups fail. As someone whoâs been involved in both high-tech startups and the recruitment business for more than 20 years, I can tell you Iâd estimate the number one reason startups fail can be either completely or partially attributed to not having the right people in place to do the important work key roles are tasked with doing. Perhaps entrepreneurs are ashamed to admit they failed, personally unable to put the right team in place. Why is this happening so often? Here is what usually happens.
Johnny and Jake, who worked as software engineers at the same company came up with a brilliant idea. They shared the idea with Mary. Then the group brought in Tom, the only one they knew with an understanding of sales and marketing. The entrepreneurial nucleus is ready to go to battle.
The group prepares a business plan and an investor deck with the aim to raise money. The technology development is easy. After all, the team members have technological experience from previous jobs. When things start happening they have to recruit a team in order to execute on their plan. They need more programmers, product managers, sales and marketing professionals and pretty soon they will need someone to head up their new office.
So far there was no problem recruiting new people. Johnny brought Susan and she brought Andrew. A year has passed and our startup has twenty people. Itâs evolved into a small empire ready to conquer the world. But something begins to crack. Bill, who was the brilliant programmer at Jakeâs previous company, finds it difficult to work with Jakeâs team. His attitude is negative and getting toxic. Mary was a really good Product Manager but ever since the company hired a VP of Product she finds it difficult to cooperate with his new process. And worst of all, Tom, who is one of the companyâs founders and its main sales guy, does not deliver anything close to scalable results. The company needs a much more experienced VP of Sales and a far more advanced distribution strategy.
This story repeats itself again and again in thousands of startups. In some cases, the entrepreneurs succeed to overcome these common difficulties and bear the heavy price of losing momentum and opportunity and in many cases this situation results in the disintegration of the delicate human and cultural fabric that is so vital for startups to succeed.
What can be done to prevent these situations? The short answer is that any company, especially startups, must have a realistic understanding of their own personal limitations as well as a well thought out strategy for recruiting key employees. A successful process requires the CEOâs attention and involvement as the main task in building a successful company.
The company needs to decide on its short and long term hiring strategies. It needs to decide what will be developed internally and what can be outsourced. This decision will impact the number and type of people it hires. The company must decide on the ideal mix of people in the company, one that will help create an ideal culture that engenders a sense of purpose and drives the team to work hard and stay, even in times of crisis. Some employees may be capable of meeting their goals in the first year but not beyond. Others may seem overqualified (I hate this term) but can help the company as it grows. And sometimes good people just get bored and need to be put out to pasture for everyoneâs benefit.
These are serious challenges that not all entrepreneurs know how to cope with. As the pressure grows (and it does), personnel problems start to haunt managers and they are more likely to make hiring mistakes like hiring the wrong people for the wrong task or not hiring anyone at all.
Even after a strategy is formulated, the plan is not done. The company must create a structured process for recruiting personnel that can be implemented and measured so that success can be determined and people involved can be held accountable. Budget and resources must be allocated in order to make the process work. Department managers have to decide what happens when hiring is not going as planned. No business can execute on its plan without a great team in place, period.
I meet companies that are unable to recruit employees for key roles for months on end, sometimes even a year or more. Conversely, I see companies that continue to improve their hiring process relentlessly and now understand how to make amazing hires, even in a tight talent market. When a job goes unfilled then something is wrong with someone or everyone in the hiring process. Either the process is wrong, the expectations are unrealistic or no one is being held accountable for the lack of results.
The common argument which goes “there are no good candidates in the market” does not hold water. Good companies recruit excellent people and build winning teams because they make hiring an accountable process internally.
Gal Almog is a veteran entrepreneur and the co-founder and CEO of Talenya, a technology based recruitment company. www.talenya.com
