“You are fired!”: Lessons in Management for Entrepreneurs

“You are fired!” so say Donald Trump from the famous reality TV show, “The Apprentice”. In reality, one of the most difficult challenges that most startups face is the hiring and firing of personel. A long time ago, my business mentor made a comment that still resonates in my mind till today, “As an entrepreneur, whether you like it or not, someday, you might have the unfortunate reality of firing your friend. If that day comes, you have to be ready for it.” So, in this short blog entry, we share some thoughts about the hiring and firing of people.

There is a saying among venture capitalists and angel investors that goes along the following lines, “The A-Team will hire the competent and best people, the B-team will get the above average and the C- and D-team will get the worst people.” No matter how you want to argue this, a good team supercedes all other things in the formation of an enterprise. Most enterprises start off with a passionate team, dedicated to a common cause. Of course, working with your friends can be a double-edged sword. Of course, the aim of this blog entry is not to tell you to fire your friend, but to provide some advice so that you can take a step back in times of crisis and conflict.

Here are some lessons which are either my own experiences or hearing from people who have gone through many trials and tribulations with their enterprises:

• Managing Growth and Expectations: At the start, people band because of a common passion. Once the enterprise is formed, a few things will set in. The first is that you will get business mentors, investors and partners all breathing down your necks. Then you will have to start to adjust to the working styles of each other in the team. Do not believe that everyone can live with that common passion. Growth and expectations are intrinsically related and people only work for their self-interests. You have to remember that the value proposition changes as times move on. Later, money enters into the equation and it will complicate things for you and other fellow founders together with the first group of employees. Hence it is always important that you must use some simple system not just to evaluate, hire and motivate people to work, but also grow them. A lot of startups fail because the key people left after realizing that there are no growth opportunities. A win-win mentality needs to be established.
• If you allow for one, you have to allow for all: Lately, perhaps, because of my experience with my startup and currently with my workplace (which is a major corporation), there is one lesson which I often extract from the senior management. Suppose you give some kind of incentive for one group, the rest of them will demand the same treatment to be given to them. For a startup, life is easy because there are no walls around people. However, as your startup grows into a company of 50 people with different departments, things start to change, i.e. rules and regulations enter into the equation. By relaxing the rules and regulations for one group, you are inviting trouble from the rest. Before you decide on bold initiatives that might result in you losing confidence because you over-promise, do think of this rule. It seems to be the bane for most managers.
• Firing and hiring people are not simple things to do: An entrepreneur once made this comment, “If you fire someone, there are only two reasons: one, either the person is really useless or two, bad leadership on your part.” There are two perspectives to approach this and you can draw some positives from it. First, you can be the type who is the ruthless and totally devoid of human emotion, you fire someone because of incompetence. Another way of looking at the same coin, is that you are unable to lead and make this person work for you. Most of the time, when such failures happen, it is crucial that the manager examines the pitfalls and advantages of firing someone. Hiring is the same thing as well. When you are in a hiring spree because you need people to do the work, you must also think of the situation where you might get incompetent people. It is important that you must at least try to figure a way to test the individual on various fronts, for example, “is he a team player?”, “does he or she fit in with our company culture?, or “can he or she be trusted?”
• Never tolerate bad and dishonourable behaviour: Recently, if I did not recall wrongly, one of the ex-CEOs from Boeing was fired because of an affair with his secretary. Of course, for Boeing, they do not tolerate infidelity and that was part of their board room culture. The same can be applied to startups. It is important that as the entrepreneur, you must not tolerate dishonourable behaviour such as stealing and actions that cause the company to get a bad reputation. That is perhaps the part why my mentor told me that it is difficult to fire your friend.

Managing people is a pain in the ass. However, it is a part of any enterprise. So, if you are beginning your journey, you better start to understand the people you work with and think about how to manage them. Otherwise, you are on a fast track in getting your company to close down.