Hiring for startups

DARE.CO.IN

issues/manpower

Hiring for startups Startup ventures find it very difficult to get key employees on board. There are a number of things they can do to get the right people to join them /Vimarsh Bajpai

W

hen Dhruv Agarwala and Kartik Varma set out to realize their dream of starting a financial planning business a year ago, there were challenges lined up for them at each step of their entrepreneurial journey. From registering the company – iTrust – to grappling with skyrocketing real estate prices, it was more than just a bumpy ride for these Harvard graduates.

After setting up a modest office in Gurgaon, the duo soon discovered that getting the right people on board to help drive their dream was even tougher. “We have had instances of people who have come to this place, and called

76

Things That Work 1. Referrals 2. Help from your investors 3. Stock and profit sharing 4. Association with a credible brand 5. Discuss the dream threadbare. Get them to share your passion 6. Offer autonomy and growth opportunities 7. Be upfront and honest about challenges

the headhunter and said, ‘I don’t want to interview, I don’t like the place,’” says Agarwala. A swanky office was not the only thing that prospective employees were seeking. Salary expectations made things more difficult. “Most people looked for about 25-40% jump in salaries even if they were changing jobs after just three months,” says Varma.

Some, who did turn up for initial interviews were apprehensive whether “we are going to get funded or not.” Thus the hunt for the CTO took about three months, still not that bad by any standard. Many startups go through much longer time and interview cycles before they find the right people.

DECEMBER 2007

Hiring key people.indd 76

12/4/2007 1:19:45 PM

DARE.CO.IN

issues/manpower

Entrepreneurs should be sensitive to employee needs and also ensure that rewards are proactively disbursed during the employee’s tenure with the organization.

— MADHU BHOJWANI, CEO, EMMAYHR SERVICES In a country where even established hotshot employers are finding it difficult to attract and retain talent, it is no wonder that startups are finding the quest even harder. For instance, a top retail chain, looking for its head of merchandising with 10 years of experience, had a hard time getting a matching profile in India. It had to finally recruit from Southeast Asia.

The issues for all startups are similar—untested idea, simple office, minimal support systems, modest salaries to offer without the icing of perks, and zero brand name, not to count unknown promoters who are yet to line up funds.

Talent crunch is hurting companies badly and startups are no exception.

Analysts believe there is not enough talent available to keep pace with the requirements of one of the world’s fastest growing economies. “With the gap between demand and supply for talent widening, candidate expectations have changed dramatically, with employer brand visibility and market benchmarked compensation taking centrestage,” says Madhu Bhojwani, CEO, EmmayHR Services.

However, Gita Dang, Senior Client Partner, Head Global Technology Markets, Korn / Ferry International feels that it is erroneous of startups to feel that they are in competition with established big-brand companies. “The profiles of people who aspire to join startups are typically those who don’t want to be part of an established bigbrand company. In fact, the real competition for a startup is from other startups, which have the ability to attract and retain these candidates.”

There is also another angle to this story. Top managers in big-brand companies usually baulk at the idea of moving to startups, possibly due to their low appetite for risk having got used to comfort zones, be it as small a thing as someone to carry your bag into office, or five star hotel rooms and airport pickups. Even if they finally get ready to take the plunge, and when it comes to discussing compensation, they try to hedge against the perceived risks. “People in big-brand companies do not want to take risk. Even if they do; they demand higher compensation to protect themselves in any eventuality,” agrees Animesh Dasgupta, Prac-

tice Head, Executive Access. “Compensation is essentially a risk-reward combination. Many people in large, established organizations have a need for predictability—they have a low risk-reward profile,” says Dang.

So what do people who have joined startups have to say? Most of whom we spoke to, cited boredom as the biggest reason for switching over from established companies. A need for change was also mentioned by many; change not only of organization, but also of industry and even specializations seem to spur people to join startups. Anil Kumar (name changed on request), currently sales and marketing head with a software startup, says that boredom and frustration at the previous job made him open to hear an offer that was routed through common friends. He came from a completely different industry.

"But after meeting the entrepreneur, “I was able to see the dream and see myself as part of it. When we met, we were able to connect," he says.

Things That Work Material things first! One of the biggest carrots for prospective hires is the

People who join startups typically have a greater risk-reward appetite which converts to their looking for a reward which is commensurate with the risk they perceive.

— GITA DANG, SENIOR CLIENT PARTNER, HEAD GLOBAL TECHNOLOGY MARKETS, KORN / FERRY INTERNATIONAL DECEMBER 2007 77

Hiring key people.indd 77

12/4/2007 1:19:45 PM

DARE.CO.IN

issues/manpower

Startups should give their employees assurance of continuity – sign a three/four year contract, bring them close to the family, pay them variables more than the salary and employ spouses.

— ANIMESH DASGUPTA, PRACTICE HEAD, EXECUTIVE ACCESS promise of future rewards, including stock in the company.

“A startup has many attractive features such as faster growth opportunity, autonomy and speed in the decision making process, proximity and exposure to core management team etc,” says Bhojwani. As startups work on tight budgets, these points “could offset the disadvantage of offering comparatively lower compensation levels.”

Agrees Dang. “People who join startups typically have a greater risk-reward appetite which converts to their looking for rewards which is commensurate with the risk they perceive,” she says. Such people would settle for a decent compensation, so as to not negatively affect their lifestyle; “and, they would expect a certain level of increase or a share in the rewards later on—in the form of sweat equity.”

The commitment and passion of founders can be a big positive when it comes to hiring key people. “I strongly Dhruv Agarwala (left) and Kartik Varma, Founders, iTrust

78

believe that people get attracted to a company if they like the person who talks to them. If the CEO of a company is conducting an interview, the prospective employee evaluates him just as much as the CEO evaluates the interviewee,” says Gowri Shankar Subramanian, CEO and Co-founder, Aspirant Systems. “Commitment levels and reputation of the people behind the setup is important. Mindtree and Sun Pharma are classic cases of committed groups attracting talents,” says Dasgupta.

No matter how much you are committed to building a successful organization, if you fail to sell the road map to prospective employees, you stand the risk of losing the best candidates.

“A startup company clearly needs to highlight and effectively communicate the positives such as faster growth opportunities to prospective employees,” says Bhojwani.

When iTrust finally hired their CTO, they laid out their idea and “got him

to do the roadmap of what he thinks technology should look like.”

Perceptions about your startup are very important. “Establish that level of comfort with people by associating yourself with things that lend stability and credibility to your venture,” says Varma. iTrust, has a weekly TV program on personal finance, which gives them visibility. Dang believes that startups should associate themselves with recognized brands including their investor, advisory board and business partners.

Most startups get desperate after been turned down by the people they want to hire. So much so, they stand the risk on hiring the wrong person.

Even established companies take many months to find the right fit at senior levels.

Some believe that too much of a process-driven individual may not have the temperament to work in a startup.

“Their requirement is to develop all systems and processes in place and then push the ‘operate’ button. So look for a growing individual, who knows the value of doing business with somebody else’s money,” adds Dasgupta.

A year down the line, iTrust is 50people strong and hopes to have 200 people in the next 12-18 months. The founders no longer face questions on their business plan or future prospects when hiring! Obviously, the initial days were harder.

Finally, if you are in a startup phase, it just helps to keep your eyes open all the time. You may just be meeting a potential hire, for in startups, key employees, more often than not, come DAR E from non-related industries.

DECEMBER 2007

Hiring key people.indd 78

12/4/2007 1:19:46 PM