5 Fatal Mistakes Entrepreneurs Must Avoid
By Derek Lidow, inc.com, 21-11-2014
Research on the causes of entrepreneurial failure is often confusing
and contradictory, but most investors and successful entrepreneurs agree
that five common mistakes are potentially fatal:
Poor hiring. In young and fragile companies every hire is
crucially important, yet also potentially dangerous, as
many hires do
not perform as expected. Bad hires waste money, disrupt projects, and
degrade rather than enhance performance. Yet few entrepreneurs have
experience in hiring. Nevertheless, there are three things that can help avoid bad hires:
First, precisely define the skills you are seeking in a candidate and
create tests for determining actual - rather than claimed - levels of
mastery. A skill is an ability to perform a prescribed task, usually
under some level of stress that denotes the extent of mastery. Laying
out home pages is a skill, as is selling, as is creating and managing
hiring processes. Since most entrepreneurs lack experience in skill
identification and testing, they need to ask for help and advice.
Second, don’t hire the first or second person you find who might
possibly fit your need. Put thought and effort into making a concerted
search. There is no excuse for endangering your enterprise by filling a
critical position with a mediocre candidate. Third, coach and train all
new employees, irrespective of their experience and skill level, to
operate successfully within the constraints and expectations of the
culture.
Poor firing. You must also fire
as effectively as you hire. You can never test perfectly someone’s
skill level and cultural fit, and everybody changes with time, as does
every job. Yet many entrepreneurs find it painful to fire people. But
mediocre or incompetent performers hold back the enterprise, and firing
them is ultimately in everyone’s best interests, including the person
who must be let go.
Consensus team leadership. Most of the value in modern enterprises is created via teams. Successful entrepreneurs must lead,
coach, and inspire their teams to meet very high expectations if they
are to create superior solutions. Otherwise, you will simply achieve
lowest common denominator (LCD) consensus. Team leadership skills come
naturally to few people but they can be learned by almost anyone. They
include relationship building, motivating others, and change leadership. No
special traits are required to master these skills, although a trait
like fear of confrontation makes mastery more challenging for some
people than others. By demonstrating your own team leadership skills,
you can justifiably set high expectations of superior non-LCD solutions
for everyone else who will be asked to lead teams.
Ineffective transition from startup to growth. Startups
begin life as one big project - finding some initial customers willing
to buy a prototype product or service. Then you must deliver the
product enough times to make sure such customers are genuinely happy
with it and that many more potential customers can be persuaded to buy -
thus confirming the business model. You must then lead your team to
install robust, efficient, scalable, and flexible processes to perform
the repetitive tasks required to reliably grow the business. Many
entrepreneurs naively think they have the skills to design and implement
world class processes, though they do not; or they assign those
responsibilities to others who also lack the skills. This naiveté, or
pigheadedness, brings down many startups and causes many entrepreneurs
to be forced out of the companies they founded. The good news is that
people who have the requisite process design and implementation skills
can usually be found to work for fast-growing enterprises with savvy
leaders who are good at hiring (and firing).
Failing to control the chaos associated with growth. Even
after hiring a team of seasoned process designers and managers,
entrepreneurs are often unable to align and control the hundreds, if not
thousands, of activities that must be synchronized to efficiently
operate and responsibly lead a fast-growing enterprise. Distributing
clear responsibilities through all levels of a fast-changing
organization requires all of the essential team leadership skills -
relationship building, motivating others, and leading change - as well
as project and process management skills. To maintain control, you must
invest considerable time, effort, and skill to align expectations and
responsibilities with each of your direct reports and with their direct
reports. Then you must set the expectation that each of your direct
reports will do the same with the people that report to their reports -
in other words, another level down. Once expectations and
responsibilities have been set for everyone at all levels, you need to
confirm that the lowest level is working on tasks and projects as
expected and that any misalignments are identified and fixed. Many
entrepreneurs find this expectation-setting process boring, yet in its
absence you cannot understand how your enterprise really works. And
then chaos ensues.
These common fatal mistakes are all preventable, requiring only the
humility to admit ignorance of processes like hiring or scaling the
business, the willingness to seek people who are expert in such matters,
and the determination to acquire the leadership skills that ultimately
lead to the creation of the value.
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