Startups fail for different reasons, some within the founders’ control, and some out of their control. When startups fail, the world points fingers at the founders and asks various questions about marketing, product, and compliance. Guess what? People barely probe into the people and HR processes, at least not as frequently as other functions. Quite paradoxical because people drive processes and keep businesses running, right?
According to StartupGraveyard, 12 startups shut down in Africa in 2024, and about 25% of these shutdowns were due to people and operations-related challenges.
The previous year, 18 startups met their demise due to the absence of operational licences from relevant authorities, harsh macro-economic processes, and, of course, scandalous actions by founders due to the absence of HR processes. This data reinforces how pivotal HR processes are to the sustainability of startups, guess what? It is one of the most overlooked roles, or have you not heard founders say, “Is it not just HR?”
As an observer in the tech ecosystem, I have seen different founders make foundational errors when it comes to people processes, and this has gone on to affect how they operate, how well they operate, and the life span of their operations.
The first and most repeated mistake I have seen founders make is hiring shiny talents in the infancy stages. It is one thing to make a senior hire; it is another decision entirely to hire from a big-tech simply for the name, the profile, or the image. Not only does the hire not have the local context, but it also eats deep into the almost meagre funds that affect the business’s runway.
For instance, when the Coinbase-backed crypto startup Mara went bankrupt in 2024, one of the problems the CEO highlighted was that they “paid high salaries to attract talent from well-paying companies like Apple, but they didn’t always deliver.”
An adjacent scenario is when these talents are hired but are stifled from expressing their expertise, where founders rarely allow talents to implement ideas and are turned into “yes-men.”
This is a misuse of scarce resources (and investors’ funds) as the cost of hiring shiny talents will get you two or three excellent local talents who will add more impact.
Another major problem is the absence of a transparent remuneration structure that is scalable and defendable. From Mara to 54gene to Payday, the paucity of a salary structure—with the founders being overpaid and staff earning peanuts—has led to the demise of several startups.
There are a hundred more people operations mistakes Nigerian and African founders make, like scaling the workforce size without proper planning, attributing personal expenses as business costs, and lots more.
The disheartening tale is that these gaffes do not just lead to the end of a promising enterprise; the catastrophe spills over to the members of staff; they leave real people stranded, employees who tied their hopes and finances to a promising vision, only to be betrayed by the spontaneous decisions made by startup founders.
What do we do to reduce the rate at which founders make these people-centric blunders?
Proper workforce planning and strategy: Planning your workforce is important, as building your MVP. You do not have to increase your staff from 20 to 60 in three months just because you raised $3 million pre-seed, nor do you have to hire from Google or Meta if you don’t have the tools and systems required for them to succeed.
Have a transparent total rewards structure: Having built the compensation and benefits structure of at least six startups in the last five years, one of the strong foundations you can lay for your startup is a defined salary structure alongside other benefits. When people know their level, the pay they are on, and what they need to do to get to the next pay band, they are motivated to do good work, and this ultimately adds value to your organisation. Spelling out other benefits like performance bonus, annual bonus, Short-Term Incentive Plan (STIP), and other kinds of rewards also helps steer the psychology of the workforce in the right direction.
Monitor people metrics: Founders are often obsessed with product and growth metrics, and while this is great, it is also paramount that they monitor people metrics. They should ask questions around the cost of human capital, attrition rate, retention rate, engagement rate, and other related metrics that measure people’s contribution to the business.
Be accountable: From using company’s funds to meet personal needs in the name of making the company a better organisation, to declining when members of staff ask questions, having due process for documentation and reporting is crucial to the longevity of startups, and if you are a founder building for the people, then you should listen to people building with you.
A great startup isn’t just about the product; it’s about the people building the product and having the right processes to ensure that people are continuously empowered to do great work in a psychologically safe environment.
Emmanuel Faith is a globally certified, award-winning Human Resource Manager with almost a decade of cross-functional experience across diverse industries. He has spent the last six years in Lead HR roles, building sustainable people processes that help tech companies thrive. He is the founder of HR Clinic, a speed-consulting platform, providing scalable people-centric solutions for Founders who are looking to build the best place to work.
