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Startup businesses are often founded on leaps of faith and developed on the basis of hunches and snap decisions. But when it comes time to hire staff, acting on impulse often leads to blunders that can be costly setbacks for budding companies, human resources experts warn.
Here are five common rookie gaffes to avoid:
Hiring without a plan
Probably the most common mistake is not developing a business plan and a clear idea of what kind of employees they will need, says Antoinette Blunt, president of Ironside Consulting Services Inc., in Sault Ste. Marie, Ont., and director of the Canadian Council of Human Resources Associations. That can lead to bringing friends or former business associates on board who may not add value to the company.
Entrepreneurs should start by preparing a written job description of the technical skills needed, as well as expectations about how they will perform and add value to the organization. They should use this to come up with questions that will help determine whether a candidate is likely to be comfortable in the role, has the talent to succeed and will be motivated to stay and grow with the organization.
Online resources can help rookies develop a hiring plan, she suggests. An Internet search can also determine a salary scale.
Trusting gut reactions
Many entrepreneurs who haven't hired before mistakenly believe they will instinctively know a good candidate when they meet one, says Joanne Royce, principal of the HR consultancy Royce & Associates in Oakville, Ont.
"So many times when I ask founders of startups what competencies the person they want to hire for a position should have to succeed, they say, 'I have it in my head what I need; I'm a good judge of character,'" she says.
But all too often that preconception leads them to favour someone who is just like them. "The entrepreneur may have been educated at a particular university and only want to hire people from that university. Or they're impressed by someone who has the same decision-making style," she explains.
"That leads to knee-jerk decisions and can shut out prime candidates who don't fit their stereotype. Not only can it lead to complaints of discrimination or unfair hiring practices, it's likely to lead to hiring someone who duplicates their abilities rather than expanding the range of capabilities in the organization."
Not checking references
Entrepreneurs by nature are typically prone to act quickly. That tempts them to save time and effort by not bothering to check references and details on résumés. "A lot of entrepreneurs feel that as long as people are personable, their verbal assurances are good enough," says Debbie Timperio a human resources manager in Peterborough, Ont., who has seen this happen repeatedly in small businesses with which she has worked.
"Often they're hiring someone they've worked with in the past and they assume not much could go wrong."
But lack of screening can scuttle plans even at big companies that should know better. This summer, Yahoo chief executive officer Scott Thompson left the company after just four months into the job after inaccuracies were discovered in his résumé.
Big companies can bounce back, but when you've got a small budget for payroll, making a mistake in hiring could end up being a fatal setback and will certainly result in extra costs and lost opportunity, Ms. Timperio says.
Letting ego trump quality
Another common pitfall is entrepreneurs' fear of hiring someone who might have stronger qualifications than they do. Or they resist ceding too much authority to someone who is hired to take on a managerial role, says Frances Kampouris, executive coach with leadership consultancy Redville in Toronto. "It can be difficult to let go of things that you think you do well. You have to be able to step back and let them do what they do well," she says.
"I've seen too many cases where people are hired to do marketing and people don't let them do their job because they think they know better and they keep meddling. To allow the business to grow, you have to stop thinking of the company as your baby. Let go of the emotion and the impulse to be the hovering parent and pull back and become the leader."
Holding on to bad hires
Out of fear of admitting having goofed, startups can end up keeping people on the payroll far too long, Ms. Timperio says. She advises setting a probationary period of three months. "But remember that in small organizations there often isn't much orientation or training, so people are expected to just move in and do the job. It's important for the entrepreneur to ensure people get the support they need to succeed."
If it's clear the employee isn't a good fit, it may not be easy to let them go, but making the decision early will save costs and avoid missing opportunities down the road.
"It's never easy, but if it's not the right fit nine times out of 10 the employee knows the job isn't meeting their expectations either, and it's the right decision to move on."