II.Building a team and a culture
A lot of the things mentioned before also ring true when hiring your first employees. Choosing your first hire is a huge commitment and the first hires will also create the basis for the company culture, which can be hard to alter later.
It's always a good idea to keep the team as small as possible. A small team communicates better and is more agile. Every new person you add to the team can potentially upset the team’s personal chemistry. You should try to find people who are genuinely interested in the job and who know what they should do – or can learn it quickly.
Your dream team
The dream team has many different skills and, ideally, all team members can quickly upgrade their skills as needed. The ideal startup worker is a particularly well-versed generalist in something. For example, a game designer who also does phenomenal code or graphics – not just a coder or a graphic artist. In fact, finding such miracles is really difficult, and a startup must offer something really interesting – an existing team, mission, product, or reputation – to recruit these kinds of people. In the technology field, even finding skilled coders is difficult.
Another feature that unites startups is constant pressure. A startup is really not just about partying and having fun. People who come into the industry looking for mere startup buzz will soon be out of the game. Working for a company that in the worst case scenario has only two to three months of runway requires nerves of steel and high resistance to pressure. While hiring the first employees, you should try to find out if they fit in a startup role. All your first employees should have an entrepreneurial mindset and work as intrapreneurs. Prior experience from startups or even being a startup founder are helpful, but people can acquire entrepreneurial qualities from other settings as well.
Making your startup attractive
So how do you get these people to work for your company? Jumping to a startup from a stable job is a huge risk. Startup salaries are always lower than market price. Generally, key employees are given stock options in order to incentivize them to come to work and do their best, as they will benefit from an upside as well. But this might not be enough and you will need to sell your vision to the potential employee and make them as excited as you are.
As the first hires are important in terms of culture, there are a few things worth considering. Your hiring choices will affect future hires as well, so for example the level of professionality you choose will stick with you. First hires create a sample of what kinds of people you want in the team and any future hires and culture is formed around that. Some things can be done artificially to create the culture you want, but if you want a diverse team building your product, it's a good idea to pay attention to that in the beginning.There is also always the chance that you make a bad hire and need to let that person go, which can be difficult if they are also a part of the stock option plan. So these first choices are quite important. Lastly, don’t hire people you don’t need.
The board of directors in the company is the ultimate stakeholder with direct responsibility to the shareholders. The board oversees the activity of the organization and is in charge of the most important strategic decisions concerning what the company actually does, which markets it serves and how its value base is formed. Typically all these decisions involve also at least the CEO, and well-managed companies also have the employees contribute to strategic considerations, for example through workshops or queries. In short, the board has the ultimate decision-making power on where the company is headed and carries the largest responsibility in addition to the CEO if things don’t work out the way planned.
The board works typically by meeting at set intervals, for example monthly or quarterly. In a typical board meeting, the CEO reviews the present situation of the company, sharing up-to-date data about financial performance, key performance metrics of various company functions and other issues, as well as flagging strategic issues if such have arisen within the company. Given that the board has limited visibility into the day-to-day operations of the company, the board members should normally refrain from making operative decisions, unless there is a very pressing reason to do otherwise. The largest impact the board has on a company’s daily operations is through nominating the CEO, who then will actually run the company operations with the executive team. The board members themselves are, in turn, nominated by the shareholders, based on majority vote.
The board ultimately decides by vote, although usually arriving at mutually agreed decisions is likely to be a better route, and voting often may lead to factions and rifts within the board, which may be detrimental to the board.
The Chairperson of the Board typically has special rights in two ways. First, the Chairperson has agenda setting power – in other words they may direct the discussion in the boardroom by choosing agenda points that they think are most relevant. Second, the Chairperson typically also has a light veto right, which is only applicable in case of ties in voting. In a sense, the Chairperson has two votes to every other board member’s single vote to make sure the board will never be deadlocked in decision making.
In general thinking and in the media, the role of the Chairperson is often seen mistakenly as a kind of a “top Chief Executive” in a company, but in fact the Chairperson normally has only these two differences to a normal board member. In fact, an experienced and professional Chairperson would normally be the most silent and passive participant in an actual board meeting, directing the discussion and ensuring that decisions are made in a proper fashion. The only time when the more typical media image of the “Big Boss” would be accurate would be in the case where the Chairperson is the sole owner of a majority in the company, and would therefore also have the power to dissolve the board. Otherwise, the strategic decisions are made through the board as a whole, and the Chairperson’s main responsibility is to ensure that decisions get made.
The board is the nerve center of the company. It’s vital to the success of the company that there are people on the board who understand why the company exists and are able to make decisions that contribute to its success. It’s not advisable to choose just anyone for the board. Usually in the early stages of a growth company, the board consists of only the founding team. Often the first external member of the board of directors only comes in at the time when an investor wishes to be a board member (in connection with their investment), such as an angel investor or an early stage fund.
Occasionally, having an outside advisor on the board may be helpful, but you may want to consider incentive schemes, for example, owning shares in addition to being on the board of directors to ensure the necessary incentives. However, it is not advisable to have any members who do not bring a clear benefit to the company. In the worst case scenario, additional board members can complicate decision-making and make the life of your business more difficult. In general it’s good to keep the board small.
Advisors and mentors
Advisors and mentors can play a crucial role for a startup. Advisors can be as simple as people you occasionally have informal chats with over coffee and lunch about your startup’s acute issues.
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