Fire Fast: Why Startups Let So Many Employees Go
BY Laura Montini
New BLS data found that startups are much more likely than corporate companies to fire employees. Here's why.
Startups fire nearly 25 percent of their employees within the first year of the company's existence, according to a recent survey from the US Bureau of Labor Statistics. This compares with the 6.6 percent of employees who are let go annually by larger, more established companies.
This comes as no surprise to many, as the startup community mantra goes: "Hire slow, fire fast."
"We've gotten into this world of 'fail fast.' But I think when it comes to hiring it's a little different. People's lives are at stake." John Greathouse, a partner at venture capital firm Rincon Venture Partners, told the Wall Street Journal.
Greathouse isn't the only one who has concerns about the philosophy. However Danny Boice, co-founder of conference call company Speek, takes issue with the "hire slow" part. "No matter how you spin it, as a startup we have between 6 and 12 months to live … For an early-stage startup founder, doing anything slowly is simply not an option," Boice wrote.
In a recent article, the Wall Street Journal looked at some of the reasons why many startup employees tend to have such short stints at these companies. Four trends were evident:
Startups' needs change quickly. Often the skills sought in the beginning of the year aren't needed six months later when the company's strategic plan has changed.
First time founders lack hiring experience. When staffing a company for the first time, rookie founders might have no idea which qualities they should really be looking for in employees.
Employees from the corporate world can't adjust. These hires don't realize how quickly they're expected to move on projects, since they might have been used to a slower pace at their corporate job.
Getting fired is viewed as not such a big deal. Since it's well known that turnover at startups is high, getting fired from a startup is not perceived as a career-ruining moment. This might be how some startups morally justify letting lots of employees go.
LAURA MONTINI is a reporter at Inc. She previously covered health care technology for Health 2.0 News and has served as an associate editor at The Health Care Blog. She lives in San Francisco. @lmmontini