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Start-ups, here's how to manage your employees

By Ankita Rai, Sonali Chowdhury and Rohit Nautiyal
May 04, 2015 11:16 IST
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The survival of a start-up depends to a large extent on the ability of team members.

Read on to know how companies like Jabong and Housing.com are leading by example.

How to manage employees in a start-upIn the early days most start-up founders spend time trying to articulate what the company does and whom it does it for, besides trying to answer the question why the company is in that business.

These are priorities of immense proportions.

As it happens many times, all this leaves little or no time for typical 'HR issues'. And even when they take up HR-related tasks, start-up founders are often caught up in 'tactical' problems instead of 'strategic' ones.

Net net, they gloss over challenges that should command significant attention..

The thing is: the survival of a start-up depends to a large extent on the ability of team members in general and the founders in particular to forfeit short-term returns for long-term benefits.

"The first thing a start-up boss ought to do is separate the strategic issues from the tactical," says the co-founder of an e-commerce company that was struggling to find good people until about two years ago.

"The problem is simple: when we talk about the core HR challenges in start-ups, more often we talk about recruiting, retention and project management.

"These are tactical issues, and stare at companies irrespective of their stage of evolution.

"Getting people, keeping them back and getting a piece of work done efficiently is as much a challenge for me as it is for a 75-year-old company."

So what are the typical human resources challenges facing start-ups and how can they get past these challenges?

People-oriented culture

"In a start-up more than anywhere else, the HR team has to work as business partner," says Ajay Nair, chief human resource officer, Housing.com.

"HR needs to understand the business, the ingredients and skills the business requires and make sure the right people join the organisation." Indeed, the onus of building the corporate culture lies squarely at the door of HR.

In the absence of a strong organisational culture, which is to an extent a factor of vintage, attracting talent becomes a serious issue with start-ups.

"Only 40 per cent of the students one interviews on campus would be willing to work in a start-up environment. The challenge is to identify people who are passionate and are willing to take up challenges," says Kapil Mehta, executive director, SecureNow Insurance, which started operations in 2012.

"Being a technology company, we had to hire people with rich experience and it proved to be a challenge convincing people about the company's sustainability and funding," adds Sumit Gupta, co-founder and CEO, GrownOut.

Not many people are willing to take the risk or deal with the strains that come with the pressures of scaling up fast is a given.

"What you should look at first, therefore, is build a culture that encourages transparency and ensures growth. Once that is in place many other things fall in place," says an independent HR consultant, who has cut her teeth in a technology start-up.

Most start-ups woo young people because getting experienced hands becomes either difficult or unaffordable.

Take Jabong, which considers itself a 'young' organisation not only in the number of years it has been in business but also in terms of the average age of its employees.

With the average age of the employees in the organisation at 29, the HR policies have to be tuned to deal with the specific needs and aspirations of the youth.

"You not only have to empower the employees but work relentlessly to keep them engaged and efficient," says Ashu Malhotra, HR head, Jabong.

Coming back to Housing.com, the average age of employees at the company is 25 and they are typically fresh graduates or with a couple of years experience.

The big challenge with such a young and dynamic workforce is that they expect to see an accelerated vertical career growth.

To address this issue, Housing.com has charted out a 'snake path' of career competency.

This takes them laterally across functions, so they move up gradually.

This ensures they are exposed to cross-functional skills that are of relevance and as they pick up these skills they move up the ladder.

"They are looking for a workplace to exhibit their skills, work as an entrepreneurs of sorts. So we allow them to take full ownership of their functions," says Nair.

Before joining the auto classifieds portal CarDekho as assistant general manager, HR, Jaya Pareek Kapoor worked in the banking sector.

She says, "I chose to join CarDekho last year for its lack of bureaucracy and a dynamic work environment."

When hiring employees for the company, Kapoor looks for the right mix of skills and attitude. The company's HR team has 12 employees who handle compliance and talent management.

Strength in numbers

The second challenge is to create an environment that is conducive for the young workforce to give their best.

"We don't work with rules and regulations - we only have broad guidelines," adds Nair.

"The day we put rules and regulation in a start-up environment, it is no longer a start-up. We need to offer a framework within which employees can ideate, create and work."

If identifying and wooing talent is the primary task for a start-up HR, retention and career growth planning becomes key as the employee grows with the company.

"We have a flat structure and the rules and regulation are designed to encourage innovation and flexibility and enable employees to work across profiles. We not only encourage innovation but also incentivise people for them," says Malhotra of Jabong.

A good way to retain people is to focus on training and by training we do not mean conducting 'fun at work' sessions or 'gamification'.

It is also important to understand that long work hours at start-ups can lead to fatigue.

Says Gurprriet Siingh, country head, YSC India, "In such a situation an informal conversation or some career guidance is all a diligent employee needs. This may sound idealistic, but works mostly." Agrees Nilay Khandelwal, regional director, Michael Page India, "We have observed that in early days, start-ups see a churn when there is a communication gap between promoters and employees."

The retention strategy must keep in mind the fact that the demands for rapid growth might create an environment of volatility and uncertainty within the organisation. Hence, founders have to be actively involved with employees to allay fears and have to come across as serious and committed to their businesses. It makes a big difference to the employees looking to build a career in a start-up.

"In many start-ups the variable pay component is larger than the fixed component; but often it doesn't work. It is better to offer fixed pay and make sure that you pay on time," says Kapil Mehta of SecureNow Insurance.

This also ensures that the employer brand becomes strong and gets respected.

Working in a start-up has its own advantages in terms of the exposure the employees get -- they get the opportunity to work with the founders and learn the ropes of the business in a flexible environment. This is something start-ups need to drive home when they go out to recruit.

"The focus of the start-ups is to get started and most organisations are in a hurry to grow; so there is a lot of ambiguity in the roles employees are expected to play," says Shanthi Naresh, India business leader, talent consulting and information solutions, Mercer.

This is an issue that needs to be addressed at the earliest if a company hopes to scale up fast. So the HR needs to put in place a career framework for employees -- such as, what are the key result areas and the key performance indicators of the employees, how a person can move from one role to another and so on.

"If it is not clear, it might lead to high attrition, low productivity and therefore higher people cost for the start-up," adds Naresh.

Also, as the company grows it is also necessary to create strengthen the bench so that there is no crisis when an employee leaves.

One might have to take some hard decisions along the way.

Maintaining and improving the working environment in a small team is crucial and managers should make the hard decision to let go of people who negatively affect the team morale or the evolving company culture.

Since most start-ups in their early stages are formed by a team of acquaintances, the decision to let go of people is harder but as they say, one has to do what one has to do.

In the real world, no matter how aligned an employee's intentions are to the overall vision of the company, once she feels she is no longer growing in the organisation, chances are she will jump ship.

This is part of the growth story of an organisation and managers should not take it personally or take it against an employee who has made up her mind to leave the company.

It is better to allow a pleasant and gracious exit than a morale-damaging and public wrangling that continues to fester even after the employee has left. Such conflicts do not go down well with people who are left behind.

Evidently, for a start-up building a brand is not a day's job. That said, good people and great planning can go a long way in separating the men from the boys.

According to Shatrunjay Krishna, director, Talent Management and Organisational Alignment, Towers Watson India, the typical issues that face start-ups fall under three heads: first, organisational issues, second, talent issues, and third, transition issues.

Organisational issues 

Start-ups typically move from the seed to the angel to the VC funding stage.

Through this stages and even after they have reached the VC stage, they are still entrepreneurial, everybody pretty much does everything. But this is a very inefficient way of doing things . That is when they reach a level where they face, what we call, a crisis of leadership.

At this point, the start-up would have reached a stage when it needs to be functionally designed.

They have to buy certain skills from outside. Yes, the founders have ideas, they know how to innovate, but now they need some other critical talents.

So the second issue they must address is attracting the right kind of people.

They have to attract functional experts, who share the vision and who are willing to take the risk.

This is a difficult challenge for start-ups that are still young -- they may not get the best people around, and have to settle for the second best.

The good news is that the start-up ecosystem is quite well-developed now and there is no dearth of talent.

Once the start-up grows, functions within them are operating well and mature.

At this stage they need to look at the signs of impending crisis of autonomy.

The founders have to build a process-driven organisation to move away from too much of functional specialisation.

If there is too much specialisation, market-facing units find it difficult to deal with internal facing units. But the management has to be aware and strive to reach the next stage.

Attraction-retention challenge/talent issues

For start-ups this is probably more critical. If you are in a new business arena you need people who are willing to learn new skills and are willing to take risks along the way.

There might be those critical 8 to 10 roles that power a start-up and you need absolutely the best of breed.

Transition issues

There will be many changes in quick succession, some people will face a sense of loss of power and so on.

So you have to plan ahead, to engage people, retain them, but these would be problems facing even the older and bigger companies.

Lead image used for representational purposes only

Photograph:Reuters

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Ankita Rai, Sonali Chowdhury and Rohit Nautiyal
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