Risky Hires — A How-To Guide for Startups

By Robert McGarvey | Monday, 15 August 2022 | Feature

In Vermont, unemployment is 2.2%. In Minnesota, unemployment is at a record-low 1.8% — the lowest ever recorded in any state. Nationally, unemployment stands at 3.6%.

Here’s what this means to a startup entrepreneur: many jobs are going unfilled. “Help Wanted” signs may be up on the window and posted on LinkedIn, but no one is responding. Experts say 11.3 million US jobs are unfilled. Some industries are especially hard hit: In hospitality, reports say as many as 412,000 jobs will remain unfilled. But just about no industry is unscathed. Even high tech is scrambling to fill open positions: there are as many as 900,000 unfilled jobs right now.

The worse news for you: startups are especially hard hit. “If you are risk averse, you probably won’t want to work at a startup,” said Silicon Valley recruiter Kris Speer, adding, “It takes a certain kind of person to want to work at a startup.” That means many candidates cross off a startup without even shooting off a resume.

Your applicant pool is just smaller than most known, established businesses. Put all this together, and here is the stark, new hiring reality for startups: you likely will have to take chances on hires you never thought you’d take because an empty position does nothing to accelerate a company’s growth.

There also are predictable business life stages where hiring is expected to be brisk. For instance: right after venture capitalists and similar investors put their money into a company, they expect to see a burst of hiring so that their growth ambitions— the why of their investment — will more likely be realized.

The Startup Struggle

Numerous sources report that just about every startup is making hires that, in more normal times, would be considered high-risk. Candidates who are “too old” or “too young,” have too much experience or too little, have been out of work for years and are seeking to re-enter the workforce — all now are getting job offers from startups.

And yet another side of the problem is that the cost of a bad hire almost always is higher in a startup. Why? Simple math. Some experts count as many as 350 vice presidents at Amazon. If one or two are bad hires, it is unlikely the company’s performance will be impacted.

But in a startup with maybe three senior executives, one bad hire could be fatal. Even one bad hire at a lower level in a company of 10 or 20 could have terrible consequences. That’s why executives at startups admit they are making hires that might seem risky — but in their minds, they are also taking steps to mitigate the risks. 

Case in point: Joe Alim, VP of products and operations at Compt, a Boston software-as-a-service (SaaS) startup that develops innovative ways to offer more employees a range of perks and benefits, says he has recently made two hires that might look risky.

In one case, he hired a longtime employee at Verizon who reached out to Alim via LinkedIn. Initially, he shrugged — a legacy telcom with 118,000 employees is not where startups generally expect to find their hires. But “her outreach was very polished — she had thorough and polished communications. She also had worked at an HR services firm.“ He opened a dialogue with her.

For another open position, Alim got an application for a product designer job from a candidate who did not have a college degree in tech and also did not have any certifications. Instant rejection? No. Alim asked him questions, and the candidate came back with very sharp and perceptive responses, much more on target than much of what Alim was hearing from applicants with degrees from many of the storied Boston-area universities.

Alim decided to give both of them a chance and, he says, so far it is working out great.

In his mind, Alim did not in fact think these hires were that risky. The key, he added, is knowing what skills are needed for a particular opening. That skill alignment, he said, is much more important than having the “right” degree or the “right” job experience.

Find a candidate with the skills you need, and you have good reason to give real thought to hiring. Regardless of any superficial shortcomings. Especially in 2022.

Talk to more executives in more startups, and a loud theme comes across: many now are not hiring the predictable, by-the-book applicants, maybe because they are not applying to startups, maybe because they are looking for too much money, and just maybe also because offbeat candidates are shaping up as the best hires.

At We Are HeadStart, a Washington DC area based public relations firm created to help startups tell their stories, company founder Michael Stern said that 85% of the firm’s PR specialists did not come aboard with any public relations background. He says what he drills down for is the person’s passion. If they have it, they just might have a new job.

Stern told about one applicant — a woman whose then-job was as a spin cycle instructor teaching maybe five classes a day. But she had prior experience with a fitness startup and also had experience as a writer. When Stern talked to her, she was on vacation in Aruba, talking from a hotel balcony, but “she had obvious passion for early stage companies, and she had submitted a good writing sample. We offered her a job on the spot.”

A 2022 Hiring Formula

At Hoist, a startup that helps house painters — with or without experience — set up their own painting business, CEO and co-founder John Jacob said, “Small business owners often focus too heavily on candidates’ resumes and not enough on their character.”

How to do that? Jacob elaborated that in interviewing job candidates, he looks for specific personality traits. He ticks off the key traits he wants to see:

• They think for themselves.
• They are accountable.
• They act with integrity.

He warned: “Hiring people who miss any of these traits is one of the riskiest things you could do as an entrepreneur.”

Jacob elaborated that his company is 3.5 years old — it now has 20 employees, and those traits have been his path in staffing up.

He added: “Some of my best hires have been the riskiest. Some of the worst were the best on paper.”

Pick Your Slots

There are smart risks, and there are foolish ones. A startup usually can afford only to take the smart ones.

Ximena Hartsock, a serial entrepreneur, explained: “I have made risky hires. But there are different types of risk. A risky hire for a startup with a high salary can be suicidal. A truly risky hire for me is someone who puts the company at risk.”

Mull on that. Hire a junior computer coder who turns out not to know how to do much useful and that is a very survivable mistake. But hire a chief financial officer with a six-figure salary and lots of job responsibility or a top line sales executive who is given multiple key accounts that he/she proceeds to almost immediately alienate and those are mistakes that can destroy a young business.

Fire Fast

You will still make mistakes in hiring. Especially because nowadays the pressure is on to make fast decisions about applicants. Recruiter Speer said that she sees some companies taking way too long to make the hiring decision, and by the time they are ready to extend an offer, the candidate has moved on. That is a real threat in today's hiring marketplace.

You may hire fast now, but here’s a reality you need to stay aware of: Be ready to fire fast, said Compt’s Alim.

Hoist’s Jacob agreed: “I am ready to fire fast.”

No one is advocating impulsive firing. But face this: with a small employee count, a startup has to be quick to fire when it becomes clear that this new hire just is not going to work out. Do it with kindness and know that in most cases, it really is a kindness to separate an employee from a job they are not doing well.

Besides, in the current hiring employment, they may well have multiple job offers before they get out of your company’s exit. That’s right. Nowadays, most dismissals for lackluster job performance — but not firings for theft or fighting or sexual misconduct — are shrugged off by recruiters. Remember, there are jobs to fill, so giving a failing worker the boot just may propel them into a job that suits them much better. Remember that.

Today is a brave new world for both hiring and firing. Embrace the change. That’s the successful route today.

About the Author

Robert McGarvey

Robert McGarvey, a veteran journalist who has long covered startups and small businesses, created and hosts the CU2.0 Podcast for credit union and fintech executives which is at 120 episodes and counting.