Insights: The Perils of Having Employees

Story by Ben Dyer


Readers: we occasionally share interesting posts from the local technology community, and are sharing another great article from Ben Dyer, Entrepreneur in Residence at the, Cockrell School of Engineering, University of Texas at Austin. The article is reposted from his blog. If you'd like to contribute your own article, please contact us!

Earlier this week my post dealt with how managing your startup is dramatically affected when you actually have paying customers. For most businesses, the commencement of revenues also leads to an increase in headcount. You move beyond the comfort zone of your trusted founding team and must learn to accomplish things through people of varying skill sets and motivations who are mainly interested in a paycheck.

Here then are ten considerations that come into play at the employee milestone in the life of your startup. Note they have exactly the same headings in the same order as the previous ones for customers:

1. Delays: New employees don't magically appear when needed, particularly in hot startup areas like Austin and Atlanta. There's no annual draft as in pro sports. You have to allow an unpredictable amount time to define the skills you are looking for, then interview and qualify the candidates who appear. Sometimes the one you choose needs to give notice and isn't immediately available (a good character trait). Then once you've brought that person on board, there's the inevitable training time, acclimatization, and learning curve. And, chances are that after all that the new person won't be nearly as fast and proficient as are all of you on the well-above-average founding team.

2. Message Control: Adding a workforce to your company adds an equivalent number of mouthpieces, double that if you count their spouses or significant others. You likely have them sign standard employee agreements concerning confidentiality, but they'll just naturally share things at a bar or on the golf course, and whatever they say will make its way around. You no longer control the story about your company. Your investors, partners, and customers will have other sources from this new grapevine. A long time ago I ran a chain of retail hardware stores. I quickly learned that I could go to any competitor's store and ask a cashier or clerk what their daily sales were; I never failed to get an accurate answer that helped me gauge my own performance. My cashiers probably gave away just as much information as I gathered, but you get the point.

3. Social Media: This once again is a corollary to #2 above in that your message gets spread to larger connected networks, and the tone and content evolve outside your control with each subsequent repetition. If things are going great, that can be good. If things aren't going as expected, that can get on the Web in a heartbeat and is not good. I saw exactly that in a blog comment just this week where some routine personnel decisions at a fast growing company got reported as mass layoffs. What if a potential hire sees those before you have a chance to make your sale to that particular candidate? You can't exactly use your own social media to deny unfounded rumors; that just tends to validate them.

4. IT Issues: When you start growing, particularly as you get to dozens of employees, you have to pay a lot more attention to security of your data and your customer data. You can't just allow your employees to shop for IT and mobile gear without some orchestration of the process. Folks will resign from time to time, and you want them to leave behind a standardized work environment that you control and can secure tightly, and one on which the replacement person can get up to speed quickly under your standard training practices.

5. Support. There's the issue that your new employee may be the face of your company in providing whatever level of support is your norm. That person has to shield you from your pioneering customers that have you mobile number and know where you live. That's more than just technical skill, it's a matter of the right temperament and interpersonal skills to assume the mantle of authority and allow you focus on scaling the whole business. There's another issue that your company has to support your new hires with the correct training, processes and tools to do their jobs. You won't succeed if you give them too many excuses; they're rather dependent on you to equip them for battle.

6. Modifications. Often you may have to fit your workflow to the employees you can find. Whatever league your business is in, you will be best served by recruiting employees who are really close matches for your style of operating. But, maybe you don't yet have multiple recruiters on staff, and the best you can do is come close to finding correct matches for your needs. In those cases, you may have to divide up tasks differently, rearrange jobs and processes, and make other modifications to proceed with the team you build. (If you watch pro or college football coaches interviews, insert clichés here.)

7. Versions. Just like you want version control in your product or service offering, you want to treat all your employees equitably. However secretive you may try to be, employees pretty quickly all seem too know what everyone else in the company is getting in the way of cash and equity, benefits, dispensations for child care or family emergencies, reserved parking for the Tesla, etc. Everyone you interview is likely to try some negotiation with you, and it's easy to let that process lead you astray in maintaining orderly personnel practices. Just beware.

8. No Turning Back. Once you have employees, it's very hard to stop, even if you are running on fumes for a while or face other unexpected obstacles. You may have the option of just going out of business, but odds are you will have developed personal relationships with your employees and their families and that you don't want ever to let them down. Once you've set your business in motion, you can't just turn off the switch and go home without some emotional repercussions. You will have to fire people from time to time, and from my experience that never gets easier no matter how many times you've done it and no matter how clear the cause for termination. You take those actions in the best interests of our company, and the remaining employees will respect you all the more for doing so; they know who the slackers are.

9. Operations. The complexity of your daily operations seems to increase with the square of the number of employees. Pretty soon you have multiple layers of management, and you don't even know everyone's name beyond your direct reports. As a founding CEO, you have to constantly keep selling your employees on your company, keep them excited about the mission, and try your best to retain them. Turnover is a huge drain on any growing company – two steps forward, then one back. Somebody on the founding team has to assume the mantle of supreme leader and run the show, or else you need to add that talent to your executive team before you have a chance to make a mess of things by trying to learn this in real time.

10. Money. Money is the root of all paychecks. Oddly enough, most people expect to get paid on time, with consistently accurate calculations, proper handling of benefits, and attention to all the details. You should never allow any of this procedural stuff to become a distraction from the tasks at hand, so once again this is a talent needed on your executive team. Usually you begin with a CFO, and somewhere along the way you add a more focused HR type, either on staff or outsourced to a PEO. You have enough big decisions to occupy your date and don't want to get mired in tending the purely administrative matters.

Ben Dyer is a technology veteran, investor, and blogger who publishes TechDrawl, which promotes technology business across the South, is Entrepreneur in Residence at the Cockrell School of Engineering at the University of Texas at Austin, and is best known as the founder of Peachtree Software. He originally posted this on his blog, TechDrawl, and gave us permission to reprint it here.