A founder recently told me HR was his worst business expense. He’d hired a People Lead 9 months earlier, but nothing had changed: attrition was still high, hiring was slow, and managers were still dumping every people-related problem on his desk.
I asked him three questions:
- Did you approve the performance framework she built? No, it sat on his desk for four months.
- Did you let her run the compensation review? No, he overruled her recommendations.
- Did you tell your leadership team to bring people decisions to her? No, he didn’t.
He had spent 9 months actively preventing his new hire from doing her job, then labeled the hire a “bad investment.”
This episode is about founders who invest in HR only to dismantle that investment from the inside. I’m going to cover the 5 most common ways founders sabotage their own efforts, why it’s so expensive, and the exact steps to fix it.
If you're wondering why we’re talking about founder sabotage, it’s because the stakes couldn't be higher.
Research from Noam Wasserman’s book, The Founder’s Dilemma, shows that 65% of startup failures stem from people problems. This includes things like co-founder conflict, poor hiring, or teams that can’t execute together. CB Insights confirms this: nearly a quarter of failed founders point to "not the right team" as the primary reason their company died.
The data is clear: people problems can kill a company. In this episode, I’m going to break down the specific ways founders accidentally cause these issues, and exactly how to fix them.
Behavior 1: The "I can do it all" syndrome
The first behavior shows up early, usually somewhere between 15 and 40 employees.
This is when you hear founders say: "I know my people better than anyone. I hired most of them and I don't need a process for something I can handle in a conversation."
That's true when you have 12 people, but it stops being true with every new hire you make. At 15 employees you might be having 15 real conversations a month about performance, comp, and career growth. At 60 employees, if you're still the person those conversations run through, you're at 60. Every hire adds load to the founder, who also owns fundraising, product direction, and the customer relationships with the top customers.
What happens next is predictable. The conversations get shorter. Then they get less frequent. Then they only happen when something is on fire. By the time you're at 80 people, the founder who was proud of knowing everyone is now the bottleneck on every promotion, raise, and termination. I covered this at length in my episode on what breaks at the 50-employee wall.
There's a second cost that's harder to see. When you're the only person who can make a people decision, your managers never learn how to make one. You're producing a management layer that can't manage, and 2 years later you're frustrated that your directors escalate everything to you. Don’t be, because you built that.
Let’s put this into perspective with some numbers. If a promotion decision waits 3 weeks for your attention, and you're making 30 of those a year, you've added roughly 90 weeks of cumulative waiting across your company. Some of that waiting is harmless, but some of it will be the reason a senior engineer accepted a recruiter's call, because she'd been told a promotion or raise was coming "soon" for 2 quarters and counting.
A similar version of this is the founder who insists on approving every offer. That’s fine when you’re at 20 people, but at 70 people, when your average offer approval sits in your inbox for 4 days and your competitors are moving in 24 hours, that approval step is costing you quality candidates. I'd ask you to check your own data on this. Pull your last 10 declined offers and look at how long each one sat waiting for an internal signature.
Behavior 2: Hiring HR and then overriding every decision
The second behavior is the one from my opening story, and it's the most expensive and damaging of the 5 behaviors.
The pattern goes like this. The founder hires a Head of People or a People Ops Lead. On paper, the role has the correct mandate, a seat at the table, and the right level of authority to make things happen. Then the first meaningful decision comes up, and the founder overrides it.
Within the first 30 days, the whole company knows the People Lead isn't the final word on any decision. Employees start going around her. Managers stop bringing her into decisions because they know the decision gets made somewhere else. As a result, she stops proposing anything ambitious because she's learned what happens to her proposals.
You've now got a senior salary producing junior output, all because of how you’ve sabotaged this person’s decision rights.
Let me be specific about what this costs. Say you're paying a Head of People $160,000 base. Fully loaded with payroll taxes, benefits, and equipment, you're at roughly $200,000 a year. If this person is operating at half of their capability, you're burning $100,000 a year on a capability you've decided not to use. That's before you count the time it'll take to replace her when she leaves, and she will leave, because good HR people don't stay in roles where they have accountability without authority.
Here's the test I give founders. Write down the 5 biggest people decisions made at your company last quarter. Now mark which ones your Head of People decided without you. If that list is empty, you're paying a senior salary for coordination work. Hand at least 2 of those decisions over to them this quarter.
Behavior 3: Holding HR to a different standard than other functions
HR shows up on your P&L under the General & Administrative category. It sits next to legal, finance, and office costs. So anytime HR asks for budget, the default reaction is to scrutinize it more strictly than you would a request from any other department.
When your VP of Engineering comes to you asking for a fourth backend engineer, you don't ask her to build a financial model proving the return. If the budget is there, you just fund the request because you trust her judgement. When your HR lead asks for a recruiter, or a comp benchmarking study, or 3 weeks to build a hiring process, you ask what the return is.
Now I want to add a caveat here, because this argument can be misused. Every budget request at your company deserves scrutiny, and that includes HR. Handing your HR lead a blank check would be irresponsible, and I'll be the first to tell you not to do it. All I’m saying is you need to apply the same standard everywhere in your company.
Scrutinize the HR request. Ask what the return is and what breaks if we wait 2 quarters before doing this. Then go ask engineering, sales, and marketing those exact same questions. When your HR lead gets cross-examined over a $15,000 comp study while another department spends like drunken pirates and barely gets a follow-up question, you're indirectly telling the whole company what you think that function is worth.
This issue deepens when you treat HR as a "cost center" rather than an "investment."
When you treat a department as a cost center, you simply cap its spending based on what’s left over after other teams take their share. But when you treat a function as an investment, you assign it clear targets and a budget designed to hit them.
Think about your other departments: Sales has a revenue goal, Engineering has a roadmap with specific deadlines, and so on. Their budgets are built to hit those targets. Now, ask yourself: What specific results have you asked your HR lead to drive?
When I ask founders this, they usually admit they’ve never set any. Yet, 18 months later, those same founders complain that "HR doesn’t drive results." Of course it doesn’t! You never gave it a destination, but you’re still judging it for not arriving there.
Let me demonstrate this with a numerical example. Take a 60-person company with an average salary of $110,000. If you have a 25% attrition rate, that’s 15 people walking out the door every single year.
Gallup says it costs 50% to 200% of an employee's salary to replace them. If we use a conservative 75%, you’re burning $1.2 million a year just replacing people you already hired, onboarded, and trained.
That’s the trap founders fall into. You capped your HR budget at $200,000 to protect your cash runway, but you let $1.2 million leak out the back door. HR costs show up on your P&L as a line item, but turnover costs are invisible. You don’t see them because they don't hit your financial statements directly, but if you run the numbers, you’ll realize that you're spending way more on replacements than on your entire people department.
I went deeper on which numbers to track in my episode on the 5 HR metrics that matter for early-stage startups, and I'd point you there if you want the measurement side of this.
HR spend is visible and its return is invisible, which makes it genuinely hard to put a value on HR. You see that $200,000 salary on the P&L every single month, but you never see the 4 bad hires you didn’t make or the 3 top performers who didn't quit.
The solution is to make the "invisible" return visible before you sit down to talk about the budget. For example, if your company is growing quickly, ask your HR lead to report on these four numbers alongside your revenue metrics every quarter: voluntary attrition (with the dollar cost attached), average days to fill, offer acceptance rate, and the cost of your open roles. When you start tracking the value HR is protecting, it stops being an easy line item to cut.
Behavior 4: Avoiding the difficult conversations
This is the one founders are most private about, but it’s also the one that does the most damage to everyone around them.
You have a manager on your team who isn’t cutting it. Everyone knows it. You know it. But the conversation just doesn’t happen for weeks, sometimes not for a year.
The research backs this up. Nearly half of managers (44%) delay difficult conversations for weeks or months, mostly because they’ve never been trained on how to run them. Even HR leaders admit they only trust about a third of their managers to handle a difficult performance conversation on their own. Founders fall into that same trap, but unlike your managers, nobody is holding you to a review cycle, so you can keep avoiding it indefinitely.
This behavior impacts three groups. It lands on the underperformer, who spends several months more in a role they're failing at without being told clearly what’s expected and where they’re underperforming.
It impacts their team, who watch the standard drop and adjust their own effort to match.
Finally, it impacts your best people, who are watching to see whether being a top performer means anything here. When they conclude that it doesn't, they just leave.
Every month you delay a difficult conversation, you're trading a difficult 30 minutes for another 30 days of somebody's career spent in a job that is not going to work for them.
There's a specific situation that troubles founders the most, and it's the co-founder or early employee who can no longer fill their seat. Employee number 4 ran the supply chain team brilliantly at 5 people and is struggling with 12 people. The founder can see it but won’t say anything because they were there since the beginning and that loyalty weighs on them.
I'd tell you to separate those two things in that conversation. Loyalty to the person is permanent and you should honor it, but the job they occupy belongs to the company. Those two things can both be true, and the conversation gets much easier when you go in offering a different role rather than an exit. Some people will take it while others will decline it and leave, but that's still a better outcome than another year of a team that lacks effective leadership.
These conversations seem like an ambush if you haven't been talking to your team all along. If you’ve been documenting what good looks like every quarter, then the final conversation shouldn’t be a surprise. It’s just the logical conclusion to the talks you've already had. If you need a framework for that, check out my episode on building a performance system your team trusts.
Behavior 5: Buying the tool instead of building the practice
This is the most common behavior I’ve seen in the last two years. You buy an HRIS, a survey platform, or some fancy AI performance tool, and you think, "Great, problem solved."
But all this fancy HR software won't make decisions for you. If you plug a performance module into a company with no clear definition of "good work," all you’re doing is creating very expensive, very organized noise.
Don’t get me wrong. I’m all for automation, and if you've been following me for a while, you know how pro tech I am. But you have to define how your HR practice runs, then buy the tool to make it run better and faster. Buying the best HR tech in the world won't create a process that doesn't exist.
What to do instead
Now that we’ve covered the 5 behaviors, I want to give you actionable steps for how to dig yourself out of them:
- Write down the decision rights. List every recurring people decision at your company such as hiring approvals, comp changes, promotions, terminations, and org changes. Next to each one, write the name of the person who decides and the one who is consulted. If your name is in the decision maker column more than 3 times, you're the bottleneck. Move at least two of those to your HR lead or your managers this quarter, and tell the company about it so they start going to those people instead of coming to you.
- Commit to the override rule. When you disagree with your HR lead, have the discussion in private but accept that sometimes you will lose the argument. I recommend giving yourself an override cap per quarter (no more than 2) and align with your HR lead on that. When you override a decision or a proposal, say why in writing and explain what would have to change for you to overturn your decision.
- Apply one standard. Stop playing favorites with your budget. If you’re grilling HR on costs but letting Engineering spend freely, you’re signaling what you actually value. From now on, ask every department head the same three questions: What’s the ROI? What breaks if we delay this 6 months? And who’s taking ownership of the outcome?
- Schedule the conversation you've been avoiding. You know the one. Put it on the calendar within the next few weeks. Before the meeting, write down three specific examples of what’s not working to drive the conversation.
- Define before you buy. Stop shopping for HR tools until you are crystal clear on how you will run your HR operation. Before you buy another piece of software, write one page on what process it supports and who’s going to own it. If you can't articulate that, you aren't ready to buy.
