New startups are created every day all over the world by aspiring entrepreneurs with big ideas. While some have achieved great success — think Uber, Slack and AirBnb — many end up failing. A study by CB Insights found that seven of the top 20 reasons why tech startups fail are related to the team members and company culture. This makes it crucial for startup founders to design an effective, collaborative team to bring the company long-term success.
The early stages of forming a company are often the most important, so it’s critical for founders to hire carefully, especially when it comes to hiring “star” employees — employees who are highly accomplished and have a successful record of driving innovation in organizations.
In my research, I have found that while star employees can improve firm performance, they can also cause performance to drop if turf wars emerge with other influential players, such as firm founders. In order to ensure that a team will work together effectively, startups should consider the following tips as they begin to build their team:
Establish a clear hierarchy of decision-making
In small team settings, the ability to work together, share ideas, and collaborate is critical. Star employees, though valuable, may have trouble collaborating with founders when ambiguous hierarchies are present.
Star employees may believe they deserve more of a say on company decisions based on their past performance and the value they bring to the team, thus informally placing themselves in a higher position of power. On the other hand, founders derive their influence from their position in the firm’s formal hierarchy and may expect other team members in the team to defer to them.
To avoid such counterproductive outcomes, it is important to establish a clear hierarchy of decision-making in the early days of team formation to avoid confusion and conflict between stars and founders.
Limit direct collaboration between star employees and founders
Since startup teams are often lean, sometimes consisting of only a few people, it’s probable that each team member will work together at some point. However, research has shown that less progress is made in companies where founders work directly with star employees on innovation activities.
Innovative activities are typically tasked to star employees, for they have the background, experience, and knowledge to drive ideas forward. Founders, on the other hand, often take charge of leadership activities and make decisions regarding the direction of the company and the control of resources.
When founders collaborate with star employees on innovation activities, not only does it take time away from founders who could be spending time on managerial tasks that could launch the company to success, it also takes time away from star employees, as they would need to negotiate the best way to approach a task even though it’s likely they are the most knowledgeable expert.
Ultimately, less work is accomplished on both ends when founders try to intervene on innovation tasks. To ensure success, founders should allow star employees more autonomy in matters concerning innovation leadership and product development.
Hire someone with startup experience
Perhaps the easiest way to circumvent the problems mentioned above is to hire a star employee that has experience working for a startup.
Hiring a star is advantageous to a company in terms of potential innovation and product development, but problems may quickly arise if they are not used to the informal culture commonly found in most startups. Conflict is less likely to become a problem if a founder can recruit a star who is accustomed to the working style of the company.
Rushing through the early stages will not bring your startup success
The early stages of building a company can be exciting, exhilarating, and fast-paced, but it can be easy to get lost in all the commotion. A new startup will find success much easier if team members are able to work together efficiently.
Company founders should take time when they begin to recruit new employees. The right person can set a company up for success, and the wrong person can drive a company into the ground. These strategies will benefit startups by helping founders build a team that innovates, collaborates, and accomplishes goals for years to come.
Amrita Lahiri, Ph.D., is an assistant professor in the Carson College of Business at Washington State University. Her research focuses on strategic entrepreneurship and innovation. Photo courtesy the Carson College of Business.