February 08, 2010

"People Growth in Startups" - Article by Sanjay Anandaram

The following was narrated to me over the weekend by a Professor of Finance and a former finance industry executive with experience in well known multinationals.

Upon asking his supervisor about his not being promoted even after performing well at his job and being recognized for it as well, he was told that he was asking the wrong question! His supervisor told him “You’re asking the wrong question! You should ask – what should I do to get promoted?” Quite naturally, this confused the finance executive and now Professor all the more. Upon enquiring, he was told by his supervisor that he was undoubtedly very good at his job but hadn’t demonstrated leadership by developing a competent second rung of leadership. “You should make yourself redundant by growing out of your job to be promoted” was the message from the supervisor; else, upon promotion, who would do the executive’s job at least as well as it was being done?!

The executive took the message to heart. In the next 2 years, he was promoted over 4 times!

Is the same promotion philosophy applicable in a startup as well? I believe it is.

A group of energetic, passionate and talented people come together to create a startup to realize their dreams. In the early days of the startup, when there’s ambiguity and amorphousness about the company’s structure, roles and responsibilities, it is understandable when the founders and early team members do everything and anything possible to get the job done right, on time. After a while, as the startup grows, a more formal structure comes into being. Roles, responsibilities, authority and reporting relationships come into being. More formal functions get created eg, finance, vendor management, engineering, product marketing, sales, marketing, human resources, IT and so on. Each of these departments needs dedicated attention within the overall canvas of the company’s charter. Each of these functions in turn grows in complexity commensurate with the company’s growth - sub-departments get formed (eg marketing might get sub-divided into functions such as product marketing, product management, online marketing, brand management, channel marketing, alliances and partnerships and so on); in addition, operations might get further sub-divided into geography, sector and function focused structures.

Each of these functions will need to be “owned” by a competent and capable teams. The initial founding team will need to create space for talent to come in and flower. This requires an honest appraisal of the capabilities of the team. Insecurity and egos can come in the way of allowing this to happen. Can the person single handedly responsible, in the early days of the startup, for generating sales of say, Rs 1 crore be made responsible for creating and managing say, Rs 50 crore in sales, an all India sales team dealing with multiple sales channels funneling multiple products and catering to different classes of customers?

In 1969, Dr Laurence J Peter and Raymond Hull wrote in their book The Peter Principle that "In a Hierarchy Every Employee Tends to Rise to His Level of Incompetence." The humorously written book goes on to state that sooner or later employees are promoted to a position at which they are no longer competent (their "level of incompetence"), and there they remain, being unable to earn further promotions.

One way that organizations attempt to avoid this effect is to refrain from promoting a worker until he shows the skills and work habits needed to succeed at the next higher job. Employees should therefore not be promoted for their efforts but given pay raises. Training is to be imparted to employees to make them suitable for position. In India, it is hard to find experienced and affordable top class talent for startups and so training of existing employees is more important. The onus, unfortunately, therefore is on leadership to discover those individuals with poor managerial capabilities before they’re promoted! It is also important to keep in mind that many technical people may be very valuable for their skills but poor managers, and so allowing a good technical person to acquire pay and status reserved for management requires the creation of a parallel career path.

So, lets work hard to make our selves redundant in our current roles!

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own