It is no hidden fact that losing an employee has ramifications. And according to a Center for American Progress Report, losing an employee, with a low-paying job, ends up costing the company, 16% of itsannual salary. For executive positions, the cost is 213% of annual salary of that talent. Here is an example to paint the picture – it will cost an organization $213,000 to replace a CEO whose annual salary is $100,000.
How to enable talent?As for startups, they need to be even more wary, because like mentioned earlier, a mis-hire can delay a project, but if a good hire leaves, the whole project derails. This is over and above the monetary losses that are incurred. Thus the key to retaining talent lies in enabling talent. And the purpose of startups is dual – enable talent to go beyond their potential and enable talent to keep it motivated and engaged.
The answer of enablement lies inside the organization culture. It is the culture that enables people, and activities that are a part of the culture actually enable the talent to go beyond and keeps it motivated. What the culture can achieve:
Giving people a chance to grow
The growth curve of startups is usually steep and sharp, and the culture also needs to enable people to grow with the same curve. When embodied with responsibilities, people’s potential can be unleashed. Ankur Warikoo experienced the same when he gave responsibilities to an intern at the start, and he now handles the entire virtual intern portfolio at Nearbuy.
At Qustn Technologies, when someone is underperforming, they are not asked to leave, but the economics is reassessed. Their salaries are revised (cut down) till the time they are able to prove themselves. Once they do, they are moved again. Mrigank Tripathi says, “I have done this twice and both the times it has been very successful.”
Giving people room to make mistakes
Equally, it is important to give people enough room to make mistakes. T9L got a new COO, a young “joiner” with not a lot of prior experience. He ended up losing a client worth $100,000 from the United States. But Fahad, the CEO at T9L, stuck with him. He says, “You have to give room for failures because if you don’t you are simply going to create a culture of fear.” The COO was coached about it and informed about the degree of loss, but for the purpose of learning, not penalizing. Fahad goes on to say, “We did win the customer back and I made sure that my COO was there in the first meeting we had with the customer after getting them back. It was a long term investment, critical for building back his confidence.” He was open to losing the business, because it was more important for him that his COO learns. And since then, “he has performed admirably,” says Fahad.
Creating a transparent culture
Openness is also a great enabler – and openness by no means entails just an open office. Just like entrepreneurism, openness is a state of mind. While none of the interviewees of this cover story were able to articulate the impact of openness in terms of tangibles, the intangible impact observed is of significant magnitude. The workable definition of openness that has been drawn from the conversations with entrepreneurs is that it embodies a culture where communication is open and one can question anyone, a culture where there is no fear, a culture where anyone is approachable, a culture where everybody works to serve each other. And it is reinforced by practices which actually empower that open culture. Qustn Technologies’ has a ‘crib session’ once a month, where anybody can crib about any system, or any individual – anything that they like or don’t like. Everybody comes together, tables all the challenges and they are all solved there and then.
But what happens when you scale up?
Eventually, it is about sticking to the cultural DNA. However, the going gets tough when the size of the organization increases. The common apprehension among entrepreneurs is that scaling up might adversely affect the culture. Sattviko’sPrasoon articulates the pain of a fellow entrepreneur, Kaushik (name changed), Cofounder of a successful mobile advertising company. Kaushik, in a conversation with Prasoon, expressed his frustration with the levels of bureaucracy that have emerged as the business has grown and as the organization’s size has increased.
Most entrepreneurs undergo such a feeling as their business and organization size grows; even Larry Page did. Page infact, got rid of the managers when Google was a 400-people company because of their “annoying nature”, as written by Bob Sutton for First Round . But the strategy where executives directly manage employees is unsustainable as the organization scales up.
To keep it intact, the founders need to stick to their culture and beliefs. Being patient pays off. It did for Larry Page, who had to face a lot of flak from investors for not hiring fast enough, but his focus on hiring the right people at the right time paid off huge dividends. It is now the second most valuable brand in the world , and also the best company to work for.
Getting the custodian of culture
As articulated by entrepreneurs who were interviewed, direct touch with all the people of the organization reduces as the business grows. MrigankTripathi of Qustn is coaching his HR leader, who he has had on board since the initial days. He says, “Sooner or later, I might not have the time to coach the organization myself, so I am expecting her to coach people on my behalf.”Dinesh R., CHRO, Oyo Rooms, reinforcing the argument says, “For entrepreneurs, it is not a capability issue, it is just a bandwidth issue.” Founders have to play the biggest role at the top; they are the source of the culture, but they want HR to be the custodian of that culture.“The HR’s role is to understand the vision, the DNA of the founders and the organization, put that together in a meaningful language – it could be called the organization culture or the employer value proposition, and then look at various means of integrating it in every single people practice of the organization – be it talent attraction, learning and development interventions, performance measurement or rewards and recognition,” articulates Saurabh Nigam, VP-Human Resources, Snapdeal.
To sum up
The journey of startups rests heavily on the ability of the entrepreneurs to create a winning team that consistently gives what is required for the venture to spearhead. And the complexity keeps escalating as the business grows. Creating a team is a task in itself and when it is time for a startup to scale, the challenges associated with putting culture in place becomesdifficult. Some entrepreneurs feel that an HR leader can help in putting the culture in place, some feel it is better to have them from the start to integrate them with the organization’s DNA, and there are also some who do not feel the need and want to continue to be custodians of the culture.
Either way, the first principles of building one’s own team should never be forgotten, whenever facing challenges. Because the first principles have been found to work no matter the stage the venture is in. When searching for talent after Superprofsscaled up, Piyushgot frustrated with headhunters. He had to let go of 4 out of 5 senior people he got through this channel. That made him go back to the way he used to hire talent from his network when he was bootstrapped – he revisited those old ways and found the talent he was looking for.
Next we look at some more anecdotes of how entrepreneurs applied the first principles of teambuilding and outside-in perspectives from HR leaders and Venture Capitalists about what makes a winning team…
The Cover Story is based on exclusive interviews that People Matters took with various entrepreneurs.
References
1. http://firstround.com/review/The-Dos-and-Donts-of-Rapid-Scaling-for-Startups/
2. http://www.forbes.com/powerful-brands/list/
3. http://fortune.com/best-companies/
Also read Part 1 of Travails of Team building: Learning from startups