As a startup founder, you wear many hats, including recruiter-in-chief. Assembling a team of high-achievers is crucial, but you won't always get it right. Knowing when and how to part ways with under-performers is a vital skill that you need to learn for the long-term success of your startup.
Startups are a labour of love, and the early team members are often close to the founders - either as friends, previous colleagues, or as people who've been deeply involved in the formative stages of the venture.
This emotional attachment can make it exceedingly difficult to assess and act on under-performance objectively. If you're wracked with guilt, try to think about it this way:
"Keeping someone in a job where they are unlikely to succeed could be thought of as an act of cruelty ... letting them go, to find something more suitable, is an act of compassion."
The Domino Effect on Company Performance
In a lean startup, every employee counts. Under-performers can consume a disproportionate amount of resources, hindering progress. Whether it's missing development deadlines or failing to hit targets, the effects of under-performance ripple through the company, affecting everyone's workload and the startup's ability to execute its vision. At seed or Series A level, finances are usually tight. The cost of retaining an under-performing team member goes beyond their salary; it also includes the opportunity cost of not having a high-achiever in their place.
The Morale Quagmire
The problem is usually visible for all to see, and its persistence can lead to resentment among team members who are pulling their weight. If you don't act, the rest of the team will lose respect for you - even if the person in question is their friend. The added stress of managing someone who is struggling can detract from your focus on core activities such as product development and fundraising. Tolerance for underperformance sets a precedent that can dilute your company culture and values over time.
When to Say Goodbye
Always give underperforming employees a chance to improve. Clearly communicate what needs to change and set a timeline for reassessment. After the stipulated period, assess the performance and make a call. If there’s no significant improvement, it's time to part ways. Make sure you consult a legal advisor to ensure that you are complying with all laws and regulations when letting someone go.
How to Let Go
When it comes to pulling the plug be honest but compassionate - share the reasons for the decision without berating the individual. Offer support - whether it's severance pay, career advice, or offering to serve as a reference for future opportunities that better match their skills, try to support the individual in their next steps. Address the situation with the remaining team members without divulging confidential information. This clears the air and resets the collective focus on the company's goals.
Learning to let go of under-performers is an essential skill for startup founders. While emotionally challenging, the failure to act jeopardises your startup’s mission and undermines your team’s morale. Mastering this aspect of leadership ensures that you're nurturing an environment where everyone - your startup, your team, and even those you have to let go - has the best chance to thrive.