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Why Startups Fail: The Overlooked Role of People Processes
In the fast-paced world of startups, especially within the booming tech ecosystems of Africa, failure often arrives stealthily, hidden behind mismanagement of human resources. Startups fail for various reasons, but an alarming number of these failures stem from overlooked people processes. It's time we bring attention to this critical area because people, after all, are the lifeblood of any organization.
The Startling Statistics
According to StartupGraveyard, 12 startups shut down in Africa in 2024, with around 25% rooted in people and operational challenges. This data is not just a metric; it serves as a wake-up call for founders who often overlook the importance of solid HR strategies. While many focus on product development, marketing, and compliance, issues related to people remain largely unaddressed.
The Cost of Hiring Trendy Talent
A common pitfall for many founders is the tendency to hire 'shiny talents' from well-known tech giants. For instance, the failed crypto startup Mara admitted that its high salaries to attract talent from companies like Apple ate into their financial runway. Hiring for prestige rather than fit can stifle innovation and agency among team members, turning credible experts into compliant followers.
Importance of a Transparent Remuneration Structure
Another significant contributor to startup failures is the lack of a transparent remuneration structure. Startups like Mara and 54gene have seen the detrimental effects of wage disparities. Founders may be overpaid while their teams earn scant salaries, leading to discontent and, eventually, talented employees departing. Establishing clear and scalable salary structures is essential to fostering both trust and sustainability.
The Ripple Effect of People-Focused Strategy
Failures in people-centric strategies do not just affect the startup; they reverberate through the entire team. Individuals who invested their hopes in a promising venture find themselves stranded, all because of avoidable mistakes made at the top. Hence, it is not only about building innovative products but nurturing the very souls behind those products.
Strategies for Sustainable Startups
So, what can be done to reduce the odds of these pitfalls? First, conducting proper workforce planning is as vital as building a product's minimum viable version. Avoid the temptation to rapidly scale your team in reaction to funding. Instead, focus on hiring local talents who understand the market landscape. This brings both cost efficiency and contextual relevance—key ingredients to a sustainable startup.
As we navigate through Africa's tech evolution, we must remember that the foundation of any thriving startup lies as much in its people processes as in its technological innovations. More than simply a back-office function, effective HR strategies can provide startups with the edge they need to not only survive but thrive.
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