Trends and challenges in startups

The increasing number in startup ventures by young entrepreneurs can be attributed to the availability of venture capital. These companies, however, must not merely concentrate on better profitability; but also nurture leadership skills at their middle management levels.

 

Almost till the early part of 2000, people in general carried a different notion for the term "Startups". It HR TRENDS was a term they would associate with the coming about of a new plant in a newer location by any manufacturing industry. These plants were in need of land, Capex and more importantly, the workforce to be hired and trained for deployment on the shop floor.

 

The Advent Of The Startup Specialists

 

This paved the way for the emergence of a certain category of business leaders who were also termed as "Startup Specialists". These leaders were not merely good in project management skills; they were also excellent in dealing with ambiguity, uncertainty and various other aspects that hindered decision making. The best part was that these so called startups had an organization to back them up.

 

Zooming into the present day, the views and perceptions about startups has become completely different. It is being started by young mavericks who view the world in a completely different light. They come up with technology backed solutions for any given problem.

 

The younger employees in various companies can be seen sitting in their respective canteens with hot coffee mugs and feverishly discussing the ways and means of coming about with a startup venture of their own. The newspapers and media are replete with stories about startup ventures to such an extent that even ten year olds are aware about the existence of startups. Several successful startup ventures have a line of VCs keen to make an investment.

 

The Role Of Venture Capitalists

 

Venture capitalists (VC) are tirelessly evaluating hundreds of startup proposals before short listing and finalizing the most suited ventures for their investment. It becomes a completely different ball game once the startups get the required funds through Venture Capital. While one section of the startups believes in the game of evaluation, others believe in acquiring the utmost share of the market in the shortest possible time.

 

 

This leads us arrive at the conclusion that there are going to be more and more startups coming our way in the days ahead. Though technology is at the centre for most of them, the common raw material they are in need of is "Human Talent".

 

It is highly visible that most of the CEOs of these startups are in their 20's and 30's. We also read that several of them acquired their education at IIT's and IIM's. However, given the fact that the startup industry has just about seen its emergence, the question remains as to how they would procure the required talent.

 

I have some friends in the "search business" and they tell me that since there is hardly any talent in their relevant industry for them to hire. Therefore, they look up to the talent coming from IT, Financial Services, FMCG, Telecom and even manufacturing to meet their requirements. Compared to the traditional methods of hiring where past experience in relevant industries is all that matters now they look at talent from a different perspective during the process of screening.

 

To Deal With Ambiguity

 

The ability to deal with ambiguity, uncertainty is always at the helm of things. This is further coupled with the ability to foster an innovative mindset within the organization along with leading large teams and scale management. While there is no empirical data that would suggest if this is working well or not, early indicators suggest that everything is moving in the right direction.

 

While this might be the story at the top of the house while hiring leaders in the organization, similar practices are adopted at lower levels as well. While everyone might say that large scale hiring is happening towards technology development, a careful look at many of these startups show that they are managing a mini logistics company and they have complex challenges to handle as far as the supply chain is concerned.

 

Often when organizations are in the build phase, the core focus is on returns on investment, cash flow management and aggressive hiring and they happen to completely neglect talent development or talent management as an agenda. Most startups are not planning for the way forward for the talent beyond the next two - three year horizon. Some human resource departments might get lucky with a shot in their arm of the VC funding where budgets need to be consumed to keep the investment flowing.

 

The Lack Of Talent Nurturing

 

While the HR leaders might want to spend that money in a meaningful manner, the unprecedented growth that these startups are experiencing puts all other agendas onto the back burner. But for most of them, the reality is that talent development is not a priority agenda. For these young organizations this is the first tipping point. The lack of focus on people development has a dual effect.

 

First, the middle-level leaders are the cornerstone between the organization's strategy and its execution. The increasing span of control, massive generational shift, globalization, changing technology, and new strategies to meet the changing market dynamics imply an enormous pressure on midlevel management. These leaders balance operational needs with a future focus on your business.

 

Second, these organizations will soon be facing a unique shortage at the middle level of the organization. The gap between the senior leaders and the people below will be so wide that it would not be practical for these organizations to groom leaders from within. This causes breakage in the talent pipeline and does not guarantee a consistent flow of talent from one level to the next.

 

Recommendations

 

We always believe that your organization talent pipeline is only as strong as your weakest link. And to ensure that the chain does not break, here are some recommendations.

 

I. Talent Pipeline development strategy lacks a strong link to the Business

 

I am tired of hearing this debate "HR should not have a seat at the table, but set the table". I would say "Earn the strips". We as HR professionals are often guilty of using too many jargons from the HR world. And the fact is, no one understands that, but HR. Business often feels that HR does not get it, they don't understand our business.

 

The fact is that HR leads this frontier as an HR professional and not as business professionals. HR Leaders who have made that transition are more likely to work on the business strategy plan along with the CEO's and CFO's and the good news is Talent plan is an integral part of the business plan and NOT a document that flows later.

 

HR needs to learn to link their talent initiatives clearly to the business plan so that talent pipeline building is not part of their KRA but part of the job for every leader in the organization.

 

II. Identification of potential

 

Do not confuse this one. History suggests that strong performance is rewarded as potential for the future. Performance can be a qualifier, but definitely not a deciding factor .

 

There is a huge confusion in understanding "Performance" (what you delivered in the past years in your current role), "Potential" (a probabilistic element that will decide if you can grow into future roles) and "Readiness" (preparedness to start performing in the future role in a finite timeline).

 

III. Organizations fail to recognize the difficulty of leadership transitions

 

This is a tough one; our research suggests that leaders across the globe rated leadership transition at various levels as the most stressful experience. Startup organizations need to split this into two parts.

 

(A) Develop leaders for leadership behaviours necessary in their current roles.

 

(B) Develop high potential leaders against the leadership behaviours necessary in their next role movement.

 

So now the million dollar question, "In a fast pace startup organization like ours, how do I do it?" I would like to close by saying "I would rather train a leader even if they might leave me; but imagine if he stayed with me untrained".

 

 

 

 

Amogh Deshmukh is Managing Director at DDI India, a leading talent management company. He has a Masters Degree in Marketing Management from the Jamnalal Bajaj Institute of Management Studies, Mumbai University and has acquired a Green Belt training from Six Sigma.

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