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:
- Experience less tension and stress between teammates when compared to heterogeneous teams
- Lack key human, social, and financial capital since the team is so alike, which could lead to problems as the business matures and grows
- 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.
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