Hiring and firing at startups

  • Columns
  • Monday, 27 Apr 2015

If you’re afraid of firing someone, you shouldn’t be an entrepreneur in the first place.

Startups, being small setups, need to move quickly when it comes to hiring the right people and removing those who aren’t carrying their weight.

There’s an old management saying in the West that tells people to “Hire Slow, Fire Fast”, but this idea has become outdated in Silicon Valley and other startup ecosystems in the world. At startups, we cannot afford to lose good talent to another job offer and neither can you keep those who aren’t pulling their weight, so the mantra is “Hire Fast, Fire Faster.”

In Malaysia, however, most companies tend to “Hire Slowly and Fire Slowly.”

If you’re a solo founder, try to find a co-founder. Two heads are always better than one in the early days. It keeps you accountable and keeps morale up when things are rough because you have built-in support from your co-founder.

Three co-founders is a good number, too, as you commonly hear the trifecta model for co-founders being the “hustler, hacker, and designer.” Meaning one wears the business hat, another wears the technical hat and the third wears the design hat.

Four or more is probably too many, and a startup could end up getting stuck in indecision or risk a co-founder dropping out later. If you have four, you also only own a maximum 25% of the company off the bat, which isn’t a lot, considering this will get further diluted once you raise money from investors. All co-founders should be on a four-year vesting schedule with a one-year cliff.

When do you make your first employee hire?

You start hiring only after you’ve validated your product with early customer traction and proven that you’re creating real value. This means you should be able to afford to hire them – either because you’ve raised some angel/seed funding, or you’ve bootstrapped and made enough revenue to pay for someone’s salary.

Otherwise, don’t even bother hiring a full-time person. Continue to bootstrap with your co-founders, or hire freelancers and outsource help so you can remain flexible and keep costs down.

Before you hire, it’s important to determine what each co-founder’s “superpower” is, and what other skills your business needs to fill in the gaps. For example, in the trifecta model, if you already have three co-founders with business, technical, and design expertise, then perhaps your first hire needs to be very specific – like a head of sales, if you’re an enterprise startup, or a digital marketing specialist, if you’re focusing on acquiring users online.

You should also always hire for “culture fit and personality first,” and skills/experience second. No matter how qualified or smart the person may appear on paper, if that person isn’t humble or is unwilling to learn or work hard at a small startup, then you’re certainly hiring the wrong person.

I’ve also learned that trust, respect, dedication and humility are crucial cues in a candidate. Everything else, including a domain expertise or even resourcefulness, can be taught. But ingrained character and attitudes are very difficult to change.

When you find a good candidate, and it feels right in your guts, then don’t hesitate. Hire within 24 hours because good people are very hard to come by.

Firing at startups

In my career as a founder and CEO, I’ve fired no less than five people. While I do not take any pride in letting someone go, I can comfortably say that I’ve never regretted the decisions. In fact, on many occasions, I’ve regretted not doing it sooner.

If you’re afraid of firing someone, you shouldn’t be an entrepreneur in the first place. No startup has any spare capacity for an employee that isn’t productive or positively contributing to the company.

You can usually tell in about four to eight weeks if someone isn’t going to work out. We usually give ourselves excuses like “Let’s give him a few more months to improve himself” or “I can’t afford to lose this person now.” Unfortunately, things often don’t get better. More often than not, the unproductive employee is going to end up affecting your other employees with unhealthy vibes the longer you keep the person.

Delaying the inevitable will only tie up the budget you have for someone better in your organisation. So the only answer when you notice a problem is to fire fast. At the end of a few extra months of procrastinating on the decision, you often wonder, “Why didn’t I do this three months ago?”

As a founder, you have to trust your intuition.

When the time comes, don’t be indecisive. Don’t make up fake excuses about why they’re not working out. Give them honest and constructive feedback. Give them specifics so they can improve. Give them suggestions for how they might think about the situation differently at the next company. Chances are, they already knew it wasn’t working out and will appreciate your candour.

Most companies in Malaysia hire slowly and fire slowly – the exact opposite of best practices for startups. But if you’re running a startup, take risk on people who you think will be a good fit. Don’t look for perfect, but trust your gut and intuition. And when you are wrong, move on quickly. It’s okay, you’ll recover.

Treat people with respect and professionalism. Be open and transparent about why they’re not working out or why they don’t fit in culturally. But move fast and don’t delay the inevitable.

However, there is a caveat to firing in Malaysia since the labour law here strongly favours and protects the employee. Look out for my next article where I will present more facts about the Malaysian labour law, so you have a better understanding of what you can and cannot do when it comes to hiring and firing in the country.

And remember: When in doubt, always check with your legal counsel.

Cheryl Yeoh is the Founding CEO of the Malaysian Global Innovation & Creativity Centre (MaGIC), which was set up in April 2014 to nurture high growth startups in the country. Prior to MaGIC, Cheryl was an entrepreneur in Silicon Valley, where she sold her company to Walmart Labs, and was recognised with many awards within the industry.

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Metro , Central Region , Cheryl Yeoh , startup , hiring , firing


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