Why Early Startups Need to Be Quick to Fire
Sometimes founders start off with great friends who make lousy employees
Last week, one of the founders I’m advising cleaned house. She let almost everyone go and put the few who remained on a different compensation and equity plan. The thing is, her startup wasn’t in trouble — in fact, it was financially sound and growing.
She recognized that her company and her vision had outgrown her initial team, including a co-founder, and it was either toss them overboard or watch the ship go down in a long, slow, painful way.
The wholesale overhaul of an entire team — or even just the booting of one or two early employees — isn’t the kind of thing that’s openly talked about in startup circles. It doesn’t have a catchy name or acronym. But it happens frequently enough that it is its own phenomenon. And while I hate it and most of the time I will disagree with it and recommend against it, I also understand it.
Should you be slow to fire or quick to fire in the early days? It’s a tricky question and the right answer depends on some thorny subjects. So let’s talk through it.
Is it the team or is it you?
The obvious — and correct — counter: Wait a minute, you’re just pissed off and you’re being incredibly rash with some important and life-altering decisions. Take a step back.
And I’d say about 80% of the time, when the leader of an early-stage startup brings up letting go of one or more of the early team, it’s because all of the other negatives and stress and mistakes and bad breaks are piling up on them. In fact, there’s one startup in my past where one of my side duties early on was to keep the CEO from firing three specific individuals, which nearly happened almost every month.
Unless you are made of money or have lucked into a treasure trove of early funding, you’re not going to have perfect people in perfect roles for quite some time. Imperfection is something you have to deal with as a founder and a leader, and it’s the shitty leaders who can’t make this early period work without a rock star in every position.
But on the other hand, sometimes people just aren’t right and they’re killing the company. It can be incredibly hard to balance checking yourself against checking your people.
Why we start with the wrong people
Let’s face it. Sometimes, when we get this bold, crazy idea for a new company, we want to keep everything close to the vest. So to find people to help us work on making the idea a reality, we turn to those we already trust. We start working with friends, with others we’ve worked with before in a different context, or with anyone who happens to be close by and interested.
Leading a startup is hard and it takes a lot of courage, so it’s easy to lean on people who are close to us to help us through the difficult, scary times. But while those people make great friends, confidants, maybe even co-conspirators, they usually make lousy employees.
Before I got into startups, I almost had a career in music. This comes from my dad, who had a career in music his whole life. And he told me pretty early on: “Don’t make a band out of your friends, make friends with your band.” That stuck with me when I made the switch over to tech and got into startups.
Entrepreneurs tend to put too much value on passion, and not enough on cold-blooded hard work.
Another reason we end up with the wrong team is that we tend to find plenty of smart people who are in love with our idea and want to quit their job to work on it — especially early on and especially if our idea is really good.
More often than not, however, those people don’t necessarily understand what a startup really is. Working for a startup can itself be a crap job for quite some time, and if you’re not prepared for that, you’ll become a liability pretty quickly. Given the choice, I’d always rather have someone on my early team with startup experience in a completely different field than someone with a career full of experience in the field we’re disrupting.
In any case, entrepreneurs tend to put too much value on passion, and not enough on cold-blooded hard work. Then we look up one day and we’ve got a team full of fans, not a team full of employees.
Why we keep liabilities around
Ugh. I hate using the word liability to describe a person, but it’s the softest term I can think of. Let’s agree that this means people who are actively playing defense against the success of the company.
Why are they so hard to let go of?
First of all, it’s never easy to fire anyone, no matter who they are, whether or not they deserve it, or even how much it will help them down the road.
But it’s not just the act of terminating someone that makes it so difficult. In startups, early teams are made up of people who, at least at one point, believed in your idea. They took a chance on you when no one else was lining up. It hurts to seemingly reward that belief with termination.
And finally, there’s always going to be that little piece of us that feels like maybe if we were wrong about this person, firing them implies that we might also be wrong about everything else. Maybe it’s not them, maybe it’s us, our leadership, our startup, our idea.
How to let them go
I’ve got some cold advice for you. It’s never going to get easier letting someone go from your startup than it is at the beginning. This is the only time you’re going to be able to make wholesale changes to your team and survive. If you have to clean house at 25 or 50 people or more, it’s because things are going horribly. And if it isn’t, you’re about to make things horrible by doubling everyone’s workload.
If you’re weeding out single individuals this early, it’s likely because their output has dwindled down to nothing. Once your company gets further established and takes on its scaling share of customers and market and recurring business, losing a person means losing dedicated ownership of a lot of moving parts, regardless of how poorly that person is moving those parts.
So as with any mistake, you need to get out in front of it, admit to it early, clean it up, and fix the damage. The longer a founder delays the inevitable, the harder it’s going to be.
But let me make it clear that just because you’re getting it over with earlier rather than later doesn’t mean your startup will survive. I’ve never seen the loss of one or more early team members happen and seen the remaining team, especially leadership, not get overloaded in a manner they were prepared for. Yes, you will almost instantly see and feel some gains, but that won’t make the next few months a picnic.
Finally, this is up to you, but I’d leave them with some equity, even if it’s just a token piece, and I’d do everything in my power to help them land someplace where they fit better.
I should say that in my opening example, my founder did just that, and in fact didn’t act until she had everything lined up and all the paperwork cleared with her board. Everyone is still on good terms.
There are alternatives to firing
You can still be slow to fire and minimize the damage. Sometimes it’s not a matter of having the wrong person on board but rather it’s having that person in the wrong role.
Maybe you’ve got people too high up in the chain, and now you’ve got a 20-year-old CTO. In that case, a demotion might be called for, but do it before you bring in the more experienced CTO, and have the kid help with the hiring of that person.
Maybe what was the right function for an employee then isn’t the right function now, so now you’ve got a product manager from when your product was mostly vaporware. Maybe that person is a better marketer, they might even shine in sales.
Or maybe it’s just time to take that person out of the office for a couple hours, buy them a fancy coffee somewhere, and just talk through how the company is changing and what they need to do to keep up.
I mean, it might be you after all. You may be a great leader and a visionary entrepreneur but a lousy communicator. Maybe they just don’t know what they’re supposed to be doing. Make sure none of that is the case before you cut people loose.