Startups have disrupted the business world and technology has redefined the game of value creation. Organizations like Swiggy and Zomato do not own any restaurants and only provide services yet are valued much higher in comparison to many well-established chains of restaurants. The story is no different for Big Basket, OYO and the list can go on.
What most of these organizations have done differently is that they have focused on a particular consumer need and used technology and the existing ecosystem to cater to that need. Some of these business models are proven, and some have shown potential, but all are growing at exponential rates. The organizations generally employ young workforce who are ambitious, restless and challenging the current wisdom of doing business.
So, the key questions are: If the business model is different and the mindset of talent running them is different, can we still use the conventional HR approach to support the business?
The answer is big NO…. Startups require HR professionals to play a lead role and not be a mere catalyst in building an organization which is agile, vibrant and inclusive. HR leaders very often may need to play the role of effective coach to young enterprises and be a true brand custodian who needs to think about long term implications and future sustainability of people related decisions.
While it is true that most of the leaders/founders of startups realize the role culture can play in the long-term growth and success of the business, they often only look at it as an additional portfolio. This thinking often is either based on the premise that professional HR leader is required only when they reach a certain size and scale, or that HR leader is important only at the time of building a strong foundation for the future.
The premise related to the scale and size may still hold some value but on-boarding a right HR partner very early in the business can, in fact, alter the future landscape of issues and challenges an organization might face from a people perspective. And hence, some people related decisions come to notice much later and most of the time are not easy to reverse.
Being a right partner for business needs knowledge and understanding beyond technology and size. HR leaders in startups should be willing to unlearn many of the fundamental aspects of great HR functions they have practiced in most of the established organizations.
So, what should one be willing to unlearn as tenets of HR in startups?
- Batch Parity: Equity defined in terms of batch parity is strictly a NO when it comes to startups. In startups equity in startups is defined more in terms of the relevant experience, attitude, perspective and passion. One must acknowledge that this is an evolving landscape and one’s ability to connect the dots and identify the missing links is far more important than the background of that person.
- Growth Opportunities: Job enrichment and growth opportunities have to be at the core of any startup to be successful. But the frequency at which they are given these growth opportunities is a lot more different than larger organizations. The young talent does not want to spend 2-3 years in a given role before they are given something different or more challenging to do. The role changes in startups are also often made as per the requirement of the business at a given point in time. And then ultimately, it is all about alignment and the perceived value the employee seeks through role change.
- Rewards: Rewards should not be a function of the annual cycle and not be constrained by market benchmarking. It is a function of demand and supply on one side and value delivery on the other side. Also, the quantum of reward is to be determined by the growth delivered and the potential one holds to give a further contribution. The concept of wealth co-creation is quite common and is redefining the principal-agent theory of employment. Also, it is very different from the typical LTIP and ESOPs program practiced by the established players of today.
- Job Scope: The changing business priorities and dynamic environment often require the individual to respond in various capacities. Hence, one has to be mindful of the changing priorities and how the role can influence the outcome. Context and situation often determine the job dimensions.
- Technology: The world of startups is all about technology and has a significant impact on business outcomes. Technology is no longer a business enabler, but a key driver of business and outcomes and must be at the core of HR strategy and key decisions without negating the people angle.
- Managing Performance: High-performance culture with a collaborative approach is a key tenet for any startup to be successful and ensure continued support of the investors and its eco-system. One has to identify the right approach to managing performance as conventional performance management could be a challenge for the pace at which priorities and business realities change.
Also, it is important to understand that some of the attributes often considered a hallmark of a great and progressive HR function are only a basic requirement for operating in the startup space:
- Good command over the business dynamics: It is important not only to understand the business operations and have commercial acumen but equally important to have a reasonable understanding of business dynamics as it has a significant impact on shaping HR deliverables and assessing course corrections.
- Agility: The key to success in startup space is quick thinking and execution. One cannot afford not to respond as the matter or issue would need more deliberation. The HR processes like annual workforce planning, Annual Salary Review, and other associated processes would need to be revisited often.
- The culture of teamwork and collaboration: One cannot afford to operate in silos and as an individual player in startups. The key processes need to ensure a spirit of individual excellence and collective brilliance. One of the key determinants of this behavior is how variable pay is structured and paid across hierarchies.
- Risk-Taking: The world of a startup is all about the willingness to take risk and HR cannot be isolated from this phenomenon. HR leaders need to move away from tried and tested methods to try something new and innovative.
- It is all about learning: The world of the startups is all about learning. You have to constantly keep yourself abreast of the changes at the macro level. Be familiar with the factors impacting the economy, technology and external market which could change the very premise of your business or ways things are getting done within your organization.
- M&A and Integration: M&A and integration experience would be quintessential for HR leaders as startup space is expected to see much consolidation given not all can grow and be able to raise capital for growth in the long run. In many instances, the founders may want to sell the complete stake and look at new wealth creation opportunities.
While the world of start-ups does challenge some of the norms well accepted and respected within the HR world, some of the insights from the past are still relevant, and one needs to ensure they are not forgotten and ignored in the wake of the new learnings.
- There should be a method in the madness: One has to acknowledge that building an organization out of startup requires establishing key guidelines to ensure thinking and decision making is aligned especially in an environment where individual’s grapple with dilemmas and issues which can set precedents for time to come. Some of these precedents can be quite difficult to do away or get rid -off. Trade-offs are inevitable, but a good governance mechanism can make them far coherent and acceptable.
- It is not always about an individual: Most of the startups often struggle to establish when being flexible and focused on individual priorities turns counter-productive. It is important to take the hard call before it becomes toxic and starts impacting the overall organizational culture.
- Leaders need to know beyond business dynamics: People dynamics is an equally important part of the scale-up journey and leaders cannot ignore this aspect especially when aiming to build an organization from startup.
- Experts in a managing crisis: It becomes important for HR leaders to help leaders navigate through a crisis which could be a result of any changes in the external environment or could arise from the wrong decision making. It is an important aspect given that many founders don't have prior experience in managing such events in the past and in all probabilities no precedents would be available as a reference for learning.
In summary, the startups of today are challenging the way business is done and would certainly require the right HR support to enable and manage this disruption. One who is determined to handle this side of HR should certainly see this as a silver lining in the cloud and join the bandwagon to make a difference. However, it is not for all and requires a significant change from the tried and tested HR ways. Also, handling the HR function in startups is not everyone’s cup of tea.