Learn more about Jonathan Lowenhar at ETWadvisors.com.
Not all of startup life is strong coffee, nap rooms, funding rounds, happy hours, and hackathons. Sometimes startup life sucks. And I’m not talking about the obvious low points; practically every startup founder has suffered the cold sweats of dwindling capital, unengaged customers, and indifferent investors. No, I’m talking about the sad team moments. A cherished contributor leaves. A founder chooses to move on. Someone gets hurt, sick, or worse: the loyal early employee hits the ceiling and does not get promoted.
They happen to us all, so let’s get them out in the open for the world to see…
With honey dripping from your lips, you sang a sweet song of market pain, product novelty, and eye-popping economics. You courted, you inspired. And you won. She joined your team. And for years, it was a joyous pairing. Her attitude and work ethic were infectious, and the impact on the culture was palpable. Then one day, she asked to see you. With visible emotion, she shared that the company was not the same, or her work no longer moved her, or more mundanely, she was moving to a new city. Your star was leaving.
While the emotions of her choice are hard enough, the business implications can be downright scary. Single points of failure are common in a company’s early years.
For a young company, any exiting employee leaves a huge gap.
How to deal:
The only thing you can do is wish her well while preparing like crazy for the gap in your team. Give the rest of your team the space to ask questions, grieve, and have them witness the grace with which you wish your former star well. Then get to work (preferably during a transition period) to identify how her responsibilities will be addressed (at least in the immediate term) and then over-communicate at every turn.* The risk beyond the lost productivity is the false narrative of a company on the decline. So be clear about why someone is leaving, why the company will be ok, and who will own what tasks, and don’t hide from the sadness of the moment.
*Most companies fail at this, but a simple punch list of key partners, colleagues, services, login information, and shared folders reduces transition pain dramatically.
When you start your company, convincing someone to join is a momentous feeling. Typically, you have very little evidence that your journey will be fruitful. You have a prototype or a demo, not a dollar of revenue, and minimal (or zero) funding. Yet despite the long odds, some eccentric spirit chose to join your cause.
Now, four years have passed. You’ve launched the product, revenue is growing, and the team is quickly expanding. Seemingly endless new roles, responsibilities, and management opportunities arise. People are being promoted, raises distributed, and bonuses paid for everyone that is but your early hire.
They’ve hit their ceiling at your company. The Peter Principle is a real thing. We all have our limitations. Some of us are aware of them; others are not.
How to deal:
2 scenarios typically play out.
In one of them, the early hire knows that they’ve hit their ceiling. They are in the right job, they know it, and they’re content. Over time, they’ll see people promoted and hired above them. But as long as the early hire is paid fairly and the new hires are good teammates, things will be fine.
In the 2nd scenario, the early hire sees a multitude of people passing them on the company ladder. They face a hard choice — be content with their current role or leave (see prior paragraph about departing employee). As a leader, your priority is to be lovingly honest about the gap between the employee’s skills versus the role they wish to attain. If you genuinely see a path for development (courses, mentorship, special projects), offer it.* Great early employees hold enormous institutional knowledge and embody the company culture. If you can find a path forward together, try it. If not, handle the inevitable exit with grace.**
*What not to do — mislead them about future opportunities and/or avoid the hard conversation. Frustration for being passed over can turn to contempt, and suddenly a relationship that was productive for years will turn toxic and mutually destructive.
**Even worse — DO NOT promote just as a means of saving the relationship or avoiding the hard discussion. The pain of someone promoted beyond their skill set will reverberate across your entire company.
This one can be brutal. Founders are unique creatures. They are infinitely capable. The best ones demonstrate critical thinking, healthy paranoia, relentless optimism, and a heroic work ethic. They can master a market and rally a team. They can sell a dream yet acknowledge risks. Founders are unique because they can do it all.
But they often don’t want to… The technical founder wants to build products, not do performance reviews. The sales founder wants to engage customers, not study metrics.
To have sustained success in a role, three things need to be true.
The founders who lift their seedling businesses onto their shoulders often find themselves struggling to fit in as the business matures. So what happens? They leave (or more sadly and all too common) and are asked to…
How to deal:
It’s counterintuitive, but in some ways, this is easier to address than the departing employee. The founder will have the equity incentive to leave the right way, often can provide longer notice, and can put her/his tireless considerable skills towards making their role redundant. In other words, the moment you learn that the founder wishes to leave, I suggest focusing on how a smooth ending might be reached. Founders love startups, but if they succeed, the result is a company that no longer feels like a startup. While emotionally trying, a departing founder often is a data point that the once nascent company is ready for its next stage of growth.
I remember this one employee. He was immensely talented — piercing mind, unrelenting work ethic, and passion for days. There were no shortcuts. Excellence or bust in all things. But here’s the problem. He was a dick. He often was the smartest person in the room, and he relished letting everyone know. Teamwork was for other people. Tact was a waste of time. Empathy was replaced with narcissism. And I saw it all. It was maddening. He did the work of four people and produced results few could match. But his scorched earth style was a disease that infected not just other co-workers’ morale but also how they, in turn, treated each other.
How to deal:
Welcome to what I like to call the Two Letters Approach to employee motivation. We presented the employee with two letters. One was a re-articulation of his job description, complete with a listing of our company’s core values (teamwork and empathy, among others). The second was a resignation letter. We told the employee he had a choice. Sign one of the letters and follow the instructions. Either live up to the job description from that day forward or resign.*
*He cried, owned his poor behavior, signed the job description, and then promptly reverted to his prior awful form. We fired him two weeks later. Over my career, about 30% of the 2 letter recipients reformed their behavior.
Her name was Erin. She was a tremendous contributor. She showed up every day (and a lot of nights) to push our young company forward. She volunteered for special projects, mentored new hires, and exemplified the best of our culture. Then her mom got sick. Really sick. Erin was an only child and her dad long had left the picture. Erin loved our company. She (rightly) loved her mom more. She tried to balance both. She moved back to her hometown and worked for us remotely. She cared for her mom day and night and did her utmost to meet her work obligations whenever she had a moment to breathe. But Erin wasn’t Sisyphus; she deserved better, and we both knew it. Our young company could not survive if any of our folks were unable to pull their weight. We knew this relationship had to end…
How to deal:
First, just say a little prayer. Even if you’re not religious, do it anyway. But the sad reality is that if your team grows sufficiently, this is going to happen. Someone on your team is going to suffer a tragedy that impedes their ability to contribute. As for Erin, we spoke many times. We helped her find a new job, local to her mom with the right combination of income and freedom. It was the best we all could do.
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