How to Hire Your First Employee: The 12 Key Principles

Hiring your first employee is one of the most critical decisions you’ll make as a startup founder—it can either accelerate your growth or become a costly mistake. The key is understanding when to hire, who to hire, and how to evaluate candidates effectively. A bad hire can cost 30% of their annual salary or more, while the right hire frees up your time and strengthens your business foundation.

Making smart hiring decisions requires guidance from those who’ve successfully scaled companies from the ground up. We’ve compiled proven strategies from several business and entrepreneurship books to walk you through everything from determining whether you actually need to hire to conducting effective tryout projects that reveal a candidate’s true capabilities.

Editor’s note: This article is part of Shortform’s guide to team-building. If you like what you read here, there’s plenty more to check out in the guide!

Strategies for Hiring Your First Employees

In Buy Back Your Time, Dan Martell writes that hiring the right person will free up your time and grow your business, but hiring the wrong person can be costly. So, how do you ensure you find the right person for the job? These principles will help you hire your first employee as a startup entrepreneur.

(Shortform note: Research suggests that the average cost of a bad hire is 30% of their annual salary, but it can be even higher—ranging from $240,000 to $850,000 per employee. Not only are bad hires costly, but they also damage your company’s productivity, reputation, and culture, which makes it imperative to hire well.)

Principle 1: Don’t Hire Until You’ve Done the Job Yourself 

As a business owner hiring for a startup, Jason Fried and David Heinemeier Hansson (authors of Rework) say you should know how to do every job in your company before you recruit someone else to do it. That’s the only way you’ll know if the position should be full-time or part-time, what questions to ask potential employees, and whether the person you hire is actually doing a good job. 

It may feel uncomfortable to do a job you don’t know how to do, but do it anyway. The knowledge you gain will pay off: You’ll develop a deep understanding of every aspect of your business. 

Principle 2: Don’t Hire Unless You Have To

Only hire an extra employee when you consistently have much more work to do than you can accomplish—when you are so busy for so long that you feel like the quality of your work is declining. Don’t hire just because you feel overwhelmed for a short period of time, urge Fried and Hansson. 

As a corollary, if someone quits or gets fired, don’t replace them right away. If you wait for a few months, you may find that you can get along just fine without someone in that position. 

Ask yourself if you really need to add to your staff. What would happen if you didn’t? Does that job really need to be done, or can you get by without it? Is there a machine or a piece of software that can do the job instead of a person? 

Principle 3: Don’t Hire Just Because Someone Is Awesome 

You might meet someone who you think is brilliant, energetic, hardworking, and just plain great to be around—the ideal employee in every respect. But that doesn’t mean you should hire them. Fried and Hansson encourage you to ask yourself: 

1. Does your company have a genuine need for this person? 
2. Exactly what duties will she be taking on? 
3. Will you have to come up with projects for her, or is there a genuine void that she can start filling right away? 

Define whether or not you have a need for an additional employee, then go find someone great to fill that need. Don’t hire someone great and then try to figure out what they should do for you. 

Principle 4: Consider Rookies vs. Vets

Hiring for a startup is a critical task that can shape the future trajectory of the business. Early employees significantly influence company culture and capabilities. If you make poor hires early on, it can cause cascading failures that may cost your company for a long time. If you make thoughtful hires early on, you lay the foundation for a resilient, high-performing team that can adapt and grow with the business. Therefore, leaders must choose their first hires carefully—and one thing to consider is whether to hire rookies or veteran workers.

According to The Founder’s Dilemmas by Noam Wasserman, some control-oriented founders hire rookies—less experienced (and less expensive) personnel who aren’t likely to challenge the founder’s authority. However, while this approach may preserve the founder’s control and conserve funds, it can limit the company’s access to fresh perspectives and expertise needed to innovate and grow.

Wasserman writes that experienced hires, or “vets,” can quickly identify industry patterns, are experienced in navigating the corporate environment, and often boast a network of contacts that can be an invaluable asset. These relationships can open doors to potential clients, partners, investors, or even attract more experienced talent. However, vets also command higher salaries, which may be a concern if you’re a money-oriented founder. Moreover, cautions Wasserman, vets might be more set in their ways and struggle to shift from a structured, corporate mindset to a flexible, fast-paced startup culture. Perhaps most troubling for a control-oriented founder, they may be more likely to challenge your authority.

Principle 5: Hire Employees Who Can Build Relationships

The first team that Peter Thiel (author of Zero to One) built became known as the “PayPal Mafia” because so many early employees established lasting relationships and went on to help each other start great new companies. Among them were seven new companies worth more than a billion dollars each: LinkedIn, Yelp, Yammer, YouTube, Palantir, Tesla, and SpaceX.

Instead of focusing on office amenities, Thiel focused on hiring compatible employees and fostering a strong sense of community and commitment to a goal everyone was excited about. PayPal’s culture, in effect, spread into new companies.

Instead of the professional view of a workplace where employees check in and out, simply exchanging hours for a paycheck, work relationships should extend beyond work and also be long-lasting. In fact, if the considerable time you spend at work doesn’t build longer-lasting relationships, you haven’t used it well. Knowing how to build a new startup team is essential.

Stronger relationships result in better work and help people build successful careers beyond PayPal. Building a startup team also means building a future.

Principle 6: Show Candidates Your Perks

The first few employees in a startup might be attracted by exciting roles or equity. But beyond your first round of hires, Thiel says you must be able to articulate to the 20th candidate why he should want to join your company.

Since talented people have many options, you need to take the above question even a step further: why should they choose your company over others that might offer more pay and prestige? Building a tech startup requires attracting these people.

Most companies would say things like: we offer an opportunity to work with smart people, solve challenging problems, and receive stock options. However, to stand out, your answers need to be specific to your company. They should address two things: your company’s mission and your team

1) Your mission: Explain what makes your mission unique and compelling—what’s the important thing you’re doing that no one else is doing? PayPal’s mission of creating a new digital currency to replace the dollar was unique and inspired job applicants and employees.

2) Your team: Show potential employees that the people on your team are the kind of people they want to work with. Show each recruit how your company is a unique match for him.

But don’t cite your perks—you don’t want people working for you who can be convinced to do so by things like laundry pickup because that’s an indication of superficiality. Your unique mission is what should count.

Principle 7: Hire One Employee at a Time

If you hire a bunch of new employees simultaneously, your workplace will be the equivalent of a politely boring cocktail party, warn Jason Fried and David Heinemeier Hansson. Because your multiple new employees don’t have the trust that comes with long-standing relationships, everyone will try too hard to be “nice.” When the group is discussing problems with your product, no one will take a contradictory or controversial stand. You don’t want to create a culture of appeasement. You want a culture of radical candor. 

Principle 8: Don’t Trust Resumes 

A resume is not an accurate reflection of who a person is. Writing an impressive resume is a skill that has nothing to do with how well an employee can perform in any position: Most candidates have been schooled on how to pad their resumes with action verbs and inflated job titles. Employers have very little means for checking a resume’s exaggeration factor—and the people who are applying to your company know that. 

When reviewing resumes, Fried and Hansson say you shouldn’t be swayed by an applicant claiming “10 years of experience.” In just about any industry, there isn’t much difference between 10 months of experience and 10 years. Once someone gets past a minimal baseline, it doesn’t matter how long they’ve been doing something—what matters is how well they’ve been doing it. 

Also, don’t be overly impressed by fancy academic degrees. Intelligence isn’t necessarily born in the classroom. In fact, too much time in the academic world can actually impair key business skills like the ability to write concisely. When hiring, don’t be afraid to consider candidates who didn’t go to a prestigious university or didn’t even go to college. 

The research: According to a 2006 Wall Street Journal article, of the top 500 American companies, only 10 percent of the CEOs received undergraduate degrees from Ivy League colleges. The other 90 percent graduated from state colleges or less prestigious private colleges (the University of Wisconsin had the highest single school total, 9 out of 500). 

Instead of reading resumes, read cover letters. That’s where you’ll find out if the applicant can communicate clearly and in full sentences, whether or not she knows anything about your company, and whether or not she might fit in with your company. 

Principle 9: Hire Doers, Not Delegators 

Hire people who do the work rather than delegate the work. A lot of time management books advise people to manage their time by delegating tasks to others, but in a small company run by a small team, every employee needs to be hands-on. 

Additionally, when hiring, Fried and Hansson recommend looking for candidates who have managed their own projects or run their own companies. You have a company to run, so you want employees who set their own goals and figure out ways to meet them—employees who don’t need or want to be managed. 

Principle 10: Hire People Who Have the Right Skills and Then Some

Whether you need to hire a programmer, marketing guru, or mechanic, make sure that person is a great writer. Writers think clearly and keep their audience in mind. They make sure people can understand what they’re communicating. Since much of today’s business happens via email and instant messaging—not by phone or face-to-face—solid writing skills matter now more than ever. 

Dan Martell recommends you define the specific requirements and responsibilities of the position. This way, you can hire people who excel at the core tasks of the position and avoid getting distracted and hiring someone who has other appealing but less relevant qualities.

(Shortform note: In First, Break All the Rules, Gallup Press recommends you think about your past and present employees when determining the requirements and responsibilities of any new position. This allows you to clearly define the talents that make a candidate ideal for the role. Think about the qualities of your best employee in that role or in a similar one, then use those qualities to guide you when writing the job description.)

Next, look for candidates who have the skills and traits you’re looking for. Martell suggests you have candidates upload a short video answering several basic questions. This can help reveal their personalities, communication skills, and ability to follow directions. You can also use profile assessments or personality tests to gain insights about a candidate’s traits and how they might perform in workplace scenarios.

Principle 11: Hire Regardless of Geographical Location

Remote work is the new normal, so Fried and Hansson say you should hire the best people no matter where in the world they live. To ensure the efficiency of your remote team, make sure that for two to four hours each day, everyone works simultaneously (regardless of time zone). Also, hold an in-person meeting every few months. When everyone is in the same room, you can discuss big-picture concepts and get to know each other a bit better. 

Principle 12: Give Potential Employees a Tryout Project 

Since interviews provide an extremely limited view of who someone is and how well they’ll fit into your company, hire the top candidates to do a small project, perhaps something that will take about 20 hours. You’ll get a better picture of their potential. Dan Martell recommends you give minimal instructions: This will provide candidates with an opportunity to showcase their problem-solving skills and work style.

(Shortform note: What if you can’t afford to give candidates a paid test project? In The Making of a Manager, Julie Zhuo says you can glean helpful insights about a candidate’s skills and problem-solving abilities by looking at their past projects. Look for completed projects that are relevant to the work you intend for them to do at your company.)

Finally, when you’ve found the right person who has passed the tryout project, shift your effort toward convincing them to join your company. Highlight the opportunities and growth your organization offers and clearly communicate how the position aligns with their career goals.

(Shortform note: In Who, Geoff Smart and Randy Street argue that you must not only convince your candidate to accept the job offer during the interview but also keep them engaged for their first 100 days of employment. Many people reconsider their decision within that window, so the authors recommend you tackle common concerns, which typically include the following: a disconnect between the role and their goals, a negative impact on loved ones, limited autonomy, inadequate compensation, and an ill-fitting work environment. For example, if your candidate has to move to a foreign country and they’re concerned about the work environment, you might offer an introductory foreign language course to address this concern.)

Model for success: The airplane manufacturer Cessna creates a workday simulation for prospective managers. Each candidate has to handle imaginary customer service issues and respond to other fictitious company problems. 

Explore More About Hiring Your First Employees

To better understand how to expand your startup with new employees, read Shortform’s full guides to the following books:

• Buy Back Your Time
• Rework
• The Founder’s Dilemmas
• Zero to One
• First, Break All the Rules
• The Making of a Manager
• Who