5 Ways to Weed Out Start-Up Saboteurs
The start-up’s board asks you to take over the 50-person venture, as its investors write a $20 million check to help it get to the next level. After conducting due diligence on the start-up’s finances, customers, partners and management team you decide to take the job.
After several meeting with the founder, he agrees to stay with the company as chief technology officer (CTO). You decide that a critical next step for the venture is to win a government contract that would customize the product - leading to thousands of orders.
Since he understands the product better than anyone else in the company and he has expressed an interest in helping the company grow to the next level, you ask the CTO to take the lead on writing a proposal for the contract and making sure it gets delivered to the procurement officer in six weeks.
Every week thereafter, you meet with the CTO and he tells you that everything is proceeding smoothly. Six weeks later, the CTO announces that he is leaving the company to start his own competing firm. You call the procurement officer for that government contract and discover that he never got the proposal that the CTO assured you he had delivered before the deadline.
Suddenly, what had looked like the greatest business opportunity of your career is falling apart before your eyes.
Unfortunately, the world is full of liars who could sabotage your start-up. Here are five things you can do to protect yourself.
1. Screen, screen, screen.
When you’re hiring new employees, go the extra mile to make sure they’re honest. You should do the obvious things - see if they have a criminal record, look at their credit reports, find out why they left their previous job, verify the details on their resumes, talk to their current and former landlords - if any, check at least five references and don’t accept pat answers, and check their social media presence.
But you also have to find ways to see whether they are honest through the interview process. For example, do they show up on time for the interview? Do they tell each of the people who interview them the same story about their career? Do they look you in the eye when they answer difficult questions?
Through all this checking, you have a good chance of weeding out the liars before they start collecting a pay check from your company.
2. Give people an opportunity to earn your trust.
But in most cases, you don’t have a chance to hire every employee. If you’re like the CEO we met above, you are inheriting a predecessor’s hiring decisions. And while you want those people to feel that you trust them, you must protect yourself from the possibility that there might be a few liars on your staff.
One way to give people an opportunity to earn your trust is to design and execute some experiments. For example, you can ask your direct reports to give you some ideas about which of their people ought to get a promotion and which are not performing up to snuff.
Once you get those lists and the reasons for the ranking of those people, you can meet informally with them. Talk to those people about the things they’ve been doing, their aspirations, and their assessment of their boss.
If their answers to you jibe with what your direct reports told you about them, then your direct reports have passed an initial test of trustworthiness. If there are big gaps, for example, between what your VP of Engineering said about her staff and what you learn from your meeting with that staff, you may wish to investigate the possibility that you can’t trust your VP of Engineering.
3. Make integrity a core value.
You ought to create a strong culture in your start-up. That starts with clear and deeply-felt values - backed up by memorable stories about how people put that value into practice and powerful incentives that reward people who act according to those values.
And one of those values should be integrity. There are many ways to measure integrity - but one memorable one comes from venture capital firm, Andreessen Horowitz (AH). Its co-founders decided to start a venture firm that would better serve entrepreneurs - instead of making them wait 45 minutes to see a partner, AH wanted its venture capitalists to treat entrepreneurs with respect.
So AH decided to fine its employees $10 for every minute they were late for any meeting. The idea was that making a promise to meet at a specific time and keeping that promise was a critical value. And by fining people who do not keep that promise, AH reinforced the importance of that cultural value.
Your start-up ought to make integrity a core value. And don’t just fine people who violate the value; use it as a way to figure out whom to hire, whom to promote, and whom to manage out of the company.
4. Trust but verify.
Even if you’ve done all these things and you think you can trust everyone, you can’t be sure. And often there are polite ways to verify the actions of people who generally think that you trust them.
For example, that unfortunate CEO we met earlier could have asked the CTO to send him copies of the emails he said he sent to the procurement officer. Moreover, it would have been fine for that CEO to have called the procurement officer - perhaps three times:
- Setting the stage. When he initially assigned the CTO to work with the procurement officer, the CEO could have called the procurement officer to tell him why he had asked the CTO to work with him.
- Progress check. Three weeks into the process, the CEO could have called the procurement officer to find out if he had any questions or concerns about how the start-up was handling things; and
- Due date conversation. Six weeks later, the CEO could have called the procurement officer to see whether he was satisfied with the start-up’s application.
Needless to say, had the CEO done this, he would have learned about the CTO’s treachery in time to take remedial action.
5. Dismiss liars with extreme prejudice.
Once you can prove that you have a liar in your midst, you should terminate that person immediately and do not offer to provide a reference.
While there are limits about what you can tell the rest of the organization, you should find acceptable ways to make it clear to everyone else in the company that you demand complete integrity in your communications soon after you dismiss the liar.
In a start-up, one person you can’t trust can send your venture up in flames. These five tactics can help protect you from that.
Strategy consultant, startup investor, teacher, corporate speaker, pundit, and author of 11 books, Peter Cohan has invested in six startups, three of which were sold for a total of $2 billion. Before founding Peter S. Cohan & Associates in 1994, he worked with HBS strategy guru Michael E. Porter.