Four HR Mistakes Founders Still Make in the Age of AI

HR Mistakes That Founders Still Make

Despite the accelerating influence of AI, there are still four key errors that new startup founders make today on hiring and building HR culture:

• Not Hiring for Fit and Culture: Leading to costly turnover and rehiring cycles
• Hiring Fast and Firing Slow: Which means poor culture matches and unnecessary team friction
• Not Building in Proper Legal Safeguards: Which turns early attrition into ownership nightmares
• Delegating Away Culture Building: Which prevents founders from ever building a cohesive team

HR veteran Darlene Harper advises a variety of early-stage startups. She explains that she continues to see founders make these mistakes and offers alternative approaches to prevent attrition and other painful HR problems:

1. Hire Early Teams for Fit (not Friends & Family)

Harper recommends hiring early-stage teams based on:

• Qualifications and Knowledge Level: Do the candidates have relevant experience and education?
• Startup Stage: Have they worked at early-stage startups? What are the largest and smallest orgs at which they’ve worked? And are they the right people today, or for a later stage?
• Intangibles: How well does the candidate work with the startup’s expected culture: Are they adaptable to changing schedules, do they learn quickly, can they manage change?

Harper relates anecdotes she’s heard about founders increasingly struggling with early employee retention. “This seems to be a real issue for founders now. It may seem surprising, but it’s understandable: All of a sudden, founders find themselves with funding. They have to hire somebody, but may end up with someone who isn’t necessarily the best fit for what they need.”

“I recently heard about a startup that got millions in funding and went broke within the next year, in part because they had hired all these PhDs from prestigious universities. People with great pedigrees, and of course, they demanded big salaries, but they weren’t necessarily the people the startup needed right at the beginning. They should’ve been later-stage hires.”

“You certainly want somebody that knows to ask the technical questions, and you want to be able to check their background and references to confirm this person really has done what they say they've done, and that they have the knowledge and qualifications.”

From there, HR experts can ask more-probing questions. Harper notes that asking about the size of the absolute largest and smallest companies at which a candidate has worked can be especially telling, as well as how candidates handle ambiguous situations without necessarily having all the information needed.

“And you do need to be very careful about hiring people just because you know them. Also, if you do have a longstanding relationship, you don't necessarily want to risk losing that relationship because you're bringing them into a business situation.”

2. Hire Slow and Fire Fast

Says Harper, “The cardinal rule is to hire slow and fire fast.” It’s crucial for founders to manage challenging team members out of an org as quickly as possible, whether they’re not pulling their weight or otherwise aren’t a good fit.

“In a small startup especially, everybody else knows it’s not working out. Meanwhile, having a team member that doesn’t fit in your org is poisoning the environment for the rest of your staff.”

The HR veteran cautions that being able to hire slowly and let go of people quickly is also a function of having the correct paperwork and corporate protections in place.

3. Confidentiality/Disclosure and Vesting in Hiring Documents

The HR veteran is adamant that startup founders should protect their startups with legal documentation as part of the hiring process that includes:

• Confidentiality Agreement: An NDA (or similar) to protect IP and customer data
• Disclosure Clause: Part of the confidentiality agreement that protects against unauthorized disclosure of confidential internal information
• Vesting Schedule: Setting a maturity date on options builds a “cliff” that keeps co-founders from immediately walking away with a huge portion of the company

Harper cautions founders to ensure they have the necessary paperwork. “Most important is making sure [new hires] have signed that confidentiality agreement with that disclosure piece. And if you're giving them equity, and somebody doesn't work out, make sure that you've got that [person] on a reasonable vesting schedule.”

“If you hire a co-founder who doesn't work out and they leave after six months, you don't want them taking 20% of the company with them.” The HR expert adds that a 12-month vesting cliff is a good minimum from which to start.

Harper notes that while many startup experts still talk up the “move fast, and break things” mindset, there are certain core pillars of hiring for which you need foundational infrastructure. “If [early hires] have never signed that nondisclosure or confidentiality agreement, then they've got your IP and they don't have anything stopping them as they walk out the door.”

4. What to Own vs. What to Delegate to AI

• Tactical, Repetitive Toil: Very much fair game to delegate to AI
• Building Your Startup’s Culture and Communication Style: Very much needs to be founder-led

Harper suggests that founders should be open to utilizing AI to automate away busywork, citing an example of a current client considering AI to automate social media posts to improve their company’s visibility. “AI can absolutely do a lot of the things (and give you a lot of the information) that you might have needed to get from HR in the past.”

Reports suggest growing adoption of AI in HR organizations for use cases such as drafting job descriptions, optimizing job ads, and sending reminders to fill out various hiring documents. The HR expert concedes that when startups grow to a certain size, they often concern themselves with additional compliance and regulatory tasks that can also be delegated away.

However, Harper notes the foundations of a startup’s culture come from the way its founders communicate with team members, and should never be entrusted to AI. “What I wouldn’t delegate: Founders’ interaction and communication with their employees. Letting teams know what they need from them, holding them accountable, those types of interactions. Anything that comes from AI is not going to be the same as something that needs to come from you, the founder.”

“Teams need you as the leader to say: ‘This is what I want from you. This is how I'm going to hold you accountable. This is what's important. These are the priorities.’ Nobody should be relying on AI to do that because that's not something that AI can come up with. That needs to come from the leader.”