40% of high-potential startups fail because of team dynamics

Don't let something so easily improved ruin your business.
75% of venture-backed startups fail. 40% of high potential startups are forced to liquidate their assets.
Failure rates for startups are at an all-time high.

According to Harvard Business Professor Shikhar Ghosh' research, 75% of venture-backed startups fail. 40% of high potential startups are forced to liquidate their assets and if non-venture-backed startups are included, the failure rate is even higher at a brutal 90%. But what are the reasons that 9 out of 10 startups fail? Is it the relentless startup culture or is there more to it?

Research and startup founders agree that the greatest startup killer hides behind the innocent name of Team Dynamics.
What are Team Dynamics?
Team dynamics are the unconscious, psychological forces that influence the direction of a team's behaviour and performance. They are like undercurrents in the sea, which can carry boats in a different direction to the one they intend to sail.
The Importance of Team Dynamics
"Research has shown that 65% of failed venture-backed businesses can be attributed to the dynamics between the founders, or dynamics between the founders and early employees", says Alistair Shephard, CEO of Sabber who has spent a significant amount of his time going through research on startups and developing his own team dynamics predicting algorithm.

Shephard's motivation was to find a way to predict team dynamics. After profiling employees and new hires with common personality tools such as the Myers Briggs, he wasn't happy with the outcome. "You can't predict the success of a company based on a personality test."

Shephard and his team decided to develop an algorithm that took traits relevant to team dynamics into account that were overlooked by common personality tests.

Many organizations have started to go the way of analyzing team dynamics and then working on them with the help of coaches or their Learning and Development department. At Everyday, we believe this is the most effective way to tackle the issue.
Successfully assessing Team Dynamics
Assessing team dynamics with clear methods can support the teams and help investors make more accurate investment decisions.

The quality of a startup team consists of individual level and group level factors as well as team dynamics that make the team more or less than the sum of its parts. The most important individual level factors are skills, experience, and ambition. Group level factors contain role clarity, social capital, and commitment. The essential team dynamics factors are shared leadership, constructive conflict, and psychological safety.

Shared leadership means that each team member inspires others to work better for the common goal. Constructive conflict signifies that the team frequently has differences of opinion about products and processes, but these conflicts never escalate to a personal level. Psychological safety means that team members feel safe to suggest ideas, ask questions and give feedback to others.
Taking charge of Team Dynamics
Since the quality of the team is such an important factor in startup success, startup leaders should consciously make efforts to develop their team. Individual qualities like skills and experience generally develop slowly, but grouplevel qualities and particularly team dynamics can be considerably improved in a relatively short time span, and this improvement may be extremely vital for the long-term success of each team and the company as a whole.

A study showed that team dynamics were assessed as best among teams who consciously worked on their collaboration and personal development. As efforts to improve team dynamics do not take vast amounts of time or resources, they should be a fundamental part of the company culture, continuously followed up by leaders.

The two factors that positively impacted team dynamics the most were regular team meetings and individual check-up conversations with superiors - a clear signal that team dynamics don't have to be the Goliath of challenges when building a startup. The study also found that members of best teams often give each other positive comments, ask questions rather than focus on their own viewpoint and pay close attention to others' opinions. Focusing on these behaviors can thus improve team dynamics significantly.
Out of the three team dynamics concepts, it is recommended to build psychological safety first, since it may help in building the other two.
Psychological safety has also been shown to help in establishing constructive conflict (Bradley et al., 2012), and arguably psychological safety can also help in creating shared leadership, since people feel secure about giving others feedback and support.

Working on shared leadership can be tackled by coaching each member of the team to tackle responsibility. When is it ok take take leadership and when is sitting back and letting somebody else take charge necessary? By outlining roles and responsibilities clearly, shared leadership can be established.

Conflicts are a great challenge for any team and there are many tools out there to support members and leaders through them. At Everyday, we believe that conflict management is one of the key skills that can be trained and developed.
Easier than you think
Team dynamics, when broken down into their parts, can be managed and positively impacted quickly, effectively, and with little resources. Reach out to us to learn about our approach to working on team dynamics.

At Everyday, we believe in giving everyone the opportunity to grow and positively impact the teams and organizations they work for.
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