Homogenous Teams & The Role of Founders – Week 4

As we discussed in my earlier article, Maintaining Control vs. Maximizing Wealth, founding a business requires the entrepreneur to progressively give up more control of their business as time goes on (in most cases, at least). But what kinds of teams should we choose to create when founding that business? After all, these teams and the individuals that make up the teams will eventually be the parties we relinquish control to. As a result, careful attention should be given to the drawbacks, benefits, and general tradeoffs that are involved when gathering talent for a startup. In this article, we’ll learn the pros and cons of choosing a homogenous team, along with the role that founding entrepreneurs play in not only choosing the original team, but any further talent that the company needs.

So what is a homogenous team? As the name would suggest, it refers to when founders choose people with the same or similar background, talents, and capital types as they themselves possess. While this may seem beneficial as everyone in the team will be “on the same page” with each other and comfortable sharing knowledge from person to person, there are several tradeoffs that need to be examined. In the short term, the founders may indeed have a great time together since there won’t be a variety of different viewpoints involved – for example, if everyone comes from a marketing background, the team will most likely value marketing and get along quite nicely. Yet after the short term happiness, significant problems may arise in the long run as expertise will be lacking in different areas of the business. This is the main downfall of homogenous teams, but as you could imagine, the opposite is true for teams creating a heterogeneous mixture of talent.

But let’s take a moment to identify and summarize three of the main benefits and drawbacks of a homogenous team. The following tradeoffs can be found in Noam Wasserman’s The Founder’s Dilemmas, and I highly recommend reading his in-depth analysis of the topic.

Homogenous teams will often:

  1. Experience less tension and stress between teammates when compared to heterogeneous teams
  2. Lack key human, social, and financial capital since the team is so alike, which could lead to problems as the business matures and grows
  3. Result in plenty of stability, but be short on ingenuity causing the company to fall behind competitors that place emphasis on growth resulting from diversity

As we can see, there are both an upsides and downsides to each kind of team – the homogenous team often recommended to first-time founders, and the heterogenous approach often better suited to the experienced entrepreneur. With this in mind, let’s take a brief look at the role of founders in choosing not only the best founding leadership team, but the best employees to run the business as it grows.

Equally as important as choosing the correct mix of homogenous and heterogeneous founders is choosing the right employees. Often times, businesses will “fill” an opening and then allocate a significant portion of their budget to training in order to turn the employee they hired into a superstar. But as Eric Herrenkohl warns in his book How to Hire A-Players, “don’t try to solve a recruiting problem with a coaching solution. You can’t turn midgets into giants.” Contrary to simply filling positions, a founder must ask themselves where this employee fits into the plan and structure of their company, and the team as a whole. This examination can often cause the founder to adjust the criteria for the job, or even come to the conclusion that the position really shouldn’t exist in the first place.

Finally, it’s worth noting that some of the traditional indicators of who a good applicant may be might not tell the entire story of the applicant and his or her background. Writing on the subject of recruiting top talent, Falon Fatemi stated in her article Recruiting While Bootstrapping: How to Hire Top Talent in Lean Times that a founder should “consider what experiences, attitudes, skills, and values are required, and which are ideal. Think about interests, goals, and career paths as well. As much as ability, this is about fit and ambition.” Her final words here seem to sum up our topic well: in the end, finding the right team members is really about “fit” and “ambition.” Without these, the company will be off to a gloomy start. But with these attributes present in a team, the startup will have a much higher probability of success.


Sources:

Fatemi, Falon (2016). Recruiting While Bootstrapping: How to Hire Top Talent in Lean Times. Forbes.com. Retrieved from http://www.forbes.com/sites/falonfatemi/2016/08/15/recruiting-while-bootstrapping-how-to-hire-rock-stars-in-lean-times/#285b30d0363c

Herrenkohl, Eric (2010). How to Hire A-Players. Hoboken, NJ: John Wiley & Sons, Inc.

Wasserman, Noam (2012). The Founder’s Dilemmas. Princeton, NJ: Princeton University Press

What did you think? Leave some feedback! :)

12 thoughts on “Homogenous Teams & The Role of Founders – Week 4

  1. Hi Austin,

    t is so true that there are always benefits and risks when the founder recruiting and forming a team. Each individual is strongly affect the business at any phase. Your blog brought up the fresh points that the success of the startup is weigh heavily on fit and ambition, besides of the skills, the core keys to building the right team at the first hand.

  2. I’m still trying to resolve Herrenkohl’s seemingly contradictory statements: “you can’t turn midgets into giants” vs. “you want to hire people who are underrated in the market”. Both make sense on their own, but it seems like giants typically won’t be underrated in the market. Maybe he is just talking about trying to find those people who are on their way to becoming giants but haven’t been noticed or appropriately rewarded yet.

    1. Interesting point, Nick. I think you’re right in your assumption that these people might just not have been “noticed” yet, or even recognized for the work that they do. I know it’s very possible that a “giant” could be working in a job that doesn’t recognize or reward their effort and seeks to downplay his or her significance in the firm for political reasons (or simply because that person would make an under-achieving supervisor look bad). But if that incognito giant can be recognized and transplanted to the right environment, they could grow and thrive like never before. This actually relates very much to a personal experience I have had with an employer.

  3. Enjoyed your post. I know that the importance is on A players, but doesn’t a team need some B’s and C’s or “midgets”? It seems within all companies there are people that just want to work and do not aspire to being A’s. Yet they do show up everyday and keep the operation moving with production or service. I ran the concept of A’s by a director at an accounting firm and their response was “we need B’s and C’s to do the blocking and the tackling.”

    1. Hi Cece! Thanks for your comment. Although it seems like having some “B & C” players might also be necessary, I actually think I disagree. Having employees like this may indeed keep the company running on a daily basis, but there is also damage that is being done by these employees and the employer often doesn’t even realize it. I’d highly recommend watching this short YouTube video that I was actually reminded about because of your comment. I’ll probably post a link on BlackBoard for others as well. It’s called “Who’s sinking your Boat?” and here is the link https://www.youtube.com/watch?v=y4nwoZ02AJM

  4. Great article with great view points! I’ve worked at real jobs before where we had a bunch of C players and the entire place suffered from it. Well, this is my view point at least. If you have those people who don’t want to work but are still there, they make for lousy co-workers and eventually all of the A players move up and out!

    I believe that building a business has to have A players to make it grow! So, yes we have to first pick a type of team we want to build and then go find the best team players we can. Do a lot of research, interviews, etc…after all your business is your everything — why wouldn’t you want great employees to work there?

  5. Austin,

    I really liked your post and the article you included. Finding the right people is worth the time and effort of recruiting because the wrong people can cost you more money. Executive recruiters would be worth the money if you don’t have time to do it yourself. I agree that if you find the right people you can always train them, it is more important to find loyal, dedicated, passionate people that are trainable. I like this point from the article you posted.
    “Get your name out there, make vision and culture your selling points, and bide your time. Recruitment isn’t easy or cheap, but it’s a whole lot less expensive than a bad hire.”

    Great Post!

    Thanks,

    Mackensie

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