Photo: iStockphoto
Photo: iStockphoto

Why start-ups need a recruitment process

The quality of employees can make or break a start-up. Here's how to make sure you don't end up with bad hires

When the co-founder and chief executive officer (CEO) of Bengaluru-based start-up Log 9 Materials, Akshay Singhal, needed to recruit a senior researcher, the company brought in someone on the recommendation of its head of development. There was no formal interview process to vet the candidate’s suitability to work at the three-year-old graphene research and development company. A key team member vouching for the person’s expertise was considered enough. Exactly 22 days later, this senior researcher was fired for being indiscreet about company information.

Singhal has since resolved not to hire any personnel without an official interaction or proper background check.

The challenges a start-up faces in its formative years are manifold. But whether it’s finding a product or service that meets a critical need, developing a business model, raising and managing funds in order to scale or managing and motivating employees, the one thing every entrepreneur needs is the right set of people. “Ask any investor or second-time entrepreneur and they will tell you that 90% of an early-stage start-up’s success is about the team and just 10% can be attributed to the quality of the idea," Shradha Sharma and T.N. Hari write in their book Cut The Crap And Jargon: Lessons From The Start-up Trenches.

Ironically, this very aspect is often neglected. Without a formal procedure for recruitment, and, in some cases, the absence of a human resources department, many early-stage start-ups end up hiring people mainly on the basis of references. This type of quick, informal decision making doesn’t allow them to realistically gauge whether the person is suitable for the job. As a result, they’re often left in the lurch when candidates, who appeared great on paper, quit abruptly. “In the first one year, our attrition rate was almost 30-35%," says Manav Jeet, managing director (MD) and CEO, Rubique, a Mumbai-based financial technology company. Jeet says employees hired on the basis of their skill set and past experience were unable to adapt to the start-up culture.

What to look for

Hiring for an early stage start-up is very different from recruiting for a corporation. “In an established company, you can boast about the salary, perks, work-life balance, swanky office, provident fund, leave policies, unlike in a start-up, where you boast about vision, learning opportunity and ownership," says Tamanna Dhamija, co-founder of Baby Destination, an online maternity and parenting lifestyle management start-up.

The first 10 hires in a start-up are critical because this core team will set the tone and culture of the organization. “At this stage, interviewing people, writing the job description, etc., should be the founder’s responsibility," says Ganesh Krishnan, a serial entrepreneur and investor who has worked with over 15 start-ups. Only after scaling to a certain size should start-ups consider outsourcing recruitment of key positions.

“One must see if the candidate has any record of being a risk taker, fast riser in his/her career, the ability to take on more responsibilities than his/her own job," says Dedeepya Ajith John, associate director, Knowledge & Advisory, SHRM India. She adds that entrepreneurs must also carefully consider whether they want to hire for potential, not experience, in this sector. “Be wary of people who have a sense of entitlement or do not want to work hands on," says Subodh Kumar, co-founder and CEO, Liv.ai, a Bengaluru-based speech-recognition start-up.

Set up a recruitment process

In a start-up, every employee exit has the potential to disrupt the workflow, or even leave the company’s operational plans in disarray. The situation is exacerbated by the time and effort that goes into hiring a replacement. Which is why it’s imperative for start-ups to evolve a formal recruitment policy, even in the early stages.

Droom, a three-year-old online marketplace for buying and selling used vehicles, has put together a list of core competencies and values expected from employees, including key aspects such as customer centricity, passion, energy, frugality, learning from mistakes, strong work ethic, and humility. The company has also devised a 2/2 metric system that assigns a point each to the deliverables of the job and whether they are a good cultural fit for Droom. Anyone who doesn’t score on both metrics doesn’t make the cut.

Sandeep Aggarwal, founder and CEO of Droom, explains, “Since candidates come from different educational backgrounds, age groups, regions, and work in different functional areas, we felt the need to have a common thread to bind this diverse workforce to build a strong institution, and hence came up with these core values."

After its bad experience, Log 9 Materials has introduced a one-month probation period that gives new recruits space to experience the company culture. The company, in turn, gets time to evaluate employee performance. Singhal says the system is working for them. “We have retained 60% of the people hired in the last year, and I believe that is the most dedicated and passionate lot I could have got."

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When it’s time to let go

So you made a bad hire and find yourself dealing with a challenging employee. How do you know when it’s time to part ways? In ‘Cut The Crap And Jargon: Lessons From The Start-up Trenches’, authors Shradha Sharma and T.N. Hari share two tips:

■ Underperformers are easy to spot. But employees who are on the cusp of underperformance, especially if they report to you or are in key roles even two levels below you, can weaken the foundation of your start-up. Keep a close eye on them. To see improvement after feedback but later be faced with the same issue again can be frustrating. In such cases, it’s important to take a quick call.

■ Accusations of discrimination are particularly hard to disprove in start-ups, as they are unlikely to maintain documentation that can withstand scrutiny. It can be particularly damaging if your start-up is in the midst of a fund-raiser, as such allegations can scare off investors. Side-step any potential drama by setting up a continuous process of feedback. It should be delivered in writing and include actions agreed upon and timelines.

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