Startup companies have always offered a risk/reward
environment for employees. A successful startup can mint many millionaires,
much like Facebook and Twitter have done in the last couple of years. But a as part
of this process, startups are reinventing
the way companies work: Firing people before the ink is dry on their employment
contracts.
Hoping to board a rocket ship to IPO riches
and build the next big thing with a beer in hand, tech-savvy workers are
flocking to fledgling companies. Almost anyone joining one of these upstarts
faces the risk that it could collapse long before minting millionaires.
But there are personal
risks, too. New hires often don't realize just how precarious their job at a
startup can be. Startup managers say they try to let underperformers or poor
fits go within their first three months, but some hires don't last even that long.
In part, that is a
reflection of the "lean startup" ethos described by Eric Ries in his
2011 book of the same name, which urges new companies to stay unsentimentally
focused on moving ahead, repeatedly releasing improved products and eliminating
anything that doesn't serve customers.
New companies let nearly
25% of their employees go in the lead-up to their first birthday, according to
the Bureau of Labor Statistic's most recent survey, which tracked employment
changes between March 2012 and March 2013.
By contrast, job losses
at established companies—which it defines as having been in business for longer
than 18 years—are just 6.6% a year.
Sometimes the skills a
startup sought in February no longer fit into its strategic plan come June.
Twitter, for example, started as a side project at Odeo, a podcasting company.
Often times, once a
startup grows to about 50 employees, employees are needed for more specific
roles, but the organizations aren't mature enough to stick to a single
strategy. The founders of th startups themselves can be the problem. Big
thinkers focused on developing products are sometimes rookie managers with
little or no experience staffing a company.
These leaders often don't
understand what qualities they should seek in employees, or they hire friends
or acquaintances instead, says Susan LaMotte of exaqueo, a consulting firm that
specializes in startup hiring. Ms. LaMotte says one founder she was brought in
to work with had interpersonal friction in his organization of about 40 people.
The founder, who she says hired people based solely on their technical skills,
told her: " 'I don't understand what happened. I hired the best and the
brightest, and now everybody hates each other.' " Employees who jump
from the corporate world often don't move fast enough to suit startup founders,
and then are surprised at how quickly they are fired.
Big companies, wary of
wrongful-termination suits, tend to be slower to fire. Given their longer, and
more onerous, hiring process—weeks of interviews, testing and training—big
companies also may be hesitant to give up on an investment so soon, says Mary
Ann Gontin of human-resources consulting firm OI Partners.
Startups, especially
early-stage ones, experience a lot of turnover, so being fired by one may not
seem as much of a career setback as it would at a big company that rarely
swings the ax.
"Some people say
failure is a badge," says H. Irving Grousbeck, who teaches
entrepreneurship at Stanford University's Graduate School of Business.
That philosophy tends to
apply to startup companies as a whole, "but I think it also applies to
some degree to employees," he adds.
Still, dismissed workers
often don't see the pink slips coming. "People tell you, 'Oh, be careful,
startups can be crazy, they turn and burn,' " says Michael Heist, who
has learned the hard way. His employment at Quirky, a startup that helps people
invent and buy products, lasted four months. "Until you're really a part
of it, you have no clue."
Click here for the
original article in the Wall Street
Journal.