Process has a bad rap among early-stage startups. Time and money are short, things are constantly changing, and you’re focused on hiring and product.
Yes, startups are chaotic by nature, and your team doesn’t need dozens of tools and checklists. But done right, process pays for itself. The problem is, the cost of chaos is hidden in places no one knows to look.
Have you lost revenue from an outage? Lost a sale due to an inexperienced rep? How long do you need to invest in new hires before they’re fully productive? You won’t find out from looking at your balance sheet. Here’s an example of how this plays out:
A Depressingly Typical First Day
Jane takes an offer as a backend developer.
She’s excited and a bit nervous when she puts in her notice. When her new employer goes dark, it feels off, but Jane chalks it up to the “fast-paced environment” they kept mentioning and shows up at 9am on her start date.
When she gets there, she finds out the office doesn’t open until 9:30. After orientation, Jane gets 5 minutes with her boss before a late-night release nukes the database, sending everyone into triage. She eats lunch from a food cart at her desk while wiping her laptop of the previous owner’s data. Finally, she checks out the projects she was hired to maintain—all written in a language she’s barely even used.
6 weeks later, Jane takes an offer as a backend developer.
How Lack of Process Harms Your Business
People Get Frustrated and Quit
In BambooHR’s survey of 1,000 employees, 170 reported having left a job within 3 months. 75 of those cited “clear guidelines on responsibilities” or “more effective training” as things their employers could have done differently. And CloudFlare famously lost 15% of its staff over 3 months after a botched attempt at a flat org structure with no HR.
“In the beginning CloudFlare’s founders proudly—and vocally—proclaimed that they would build a completely flat organization, with no hierarchical titles or HR function… In the three months ending in July 2012, five of the firm’s 35 employees quit, some citing the lack of a clear midlevel reporting structure and the nonexistent HR practices.” — HBR
Most startup CEOs work hard to promote flexibility and individual achievement, and think those will be stifled by bureaucratic control. But taking the opposite approach leads to confusion, frustration and, all too often, premature turnover.
New Hires Take Longer to Ramp
A 2015 study by the The Sales Management Association found a structured process for onboarding cut 3 months off an average 9-month ramp for sales reps. And Sales Benchmark Index found a 7-month gap in ramp between the best and worst-performing teams.
“Some of the best ways to reduce Ramp Time To Full Sales Productivity include an effective new hire onboarding process, a CRM/SFA solution packed with historical sales intelligence, adequate sales support resources and a mentoring program.” — Sales Benchmark Index
Early-stage startups are always told to hire independent self-starters and let them figure it out. But when everyone has their own system and new people are left to sink or swim, getting up to speed up takes a lot longer than you expect.
Diverse Hires Suffer the Most
A 2007 study of Silicon Valley startups found clear evidence that following a standard process improves employment prospects for women in technical roles.
“When you’re in early stages of organization and there isn’t any clear process of promotion or any clear standards, often the promotions are based on who likes who.” — Motherboard
The same environments that foster loose, informal collaboration are a mine field for more diverse employees. Does your team work late? Parents can’t pull all-nighters. No code of conduct? New people might not appreciate every joke. Lots of drinking? Not everyone has the best relationship with alcohol.
Early Mistakes Can Derail Success Later
Even the most successful startup may not weather a sexual harassment scandal, class-action lawsuit, or government investigation. Tinder, Nasty Gal, and Zenefits all saw their CEOs step down after scandals caused by sink-or-swim cultures with little to no process.
“Working with your friends at a startup is amazing because it allows you to power through the hard times. But the lines got blurred, the boundaries should have been stronger.” — Sean Rad, former Tinder CEO
But when it comes to their people, startups don’t give much attention to long-term risk management. And since founders are mostly irrational optimists—one 2014 study even found they consistently overestimate earnings and hold more stock compared to non-founders—they usually think a little bit of process is enough to prevent disaster.