December 04, 2010

What to Hire and Pay For? - Article by Sanjay Anandaram

The CEO had been in conversation with several potential senior hires for his startup. At least 3 recruitment firms were on the job for him. Somehow the “right” candidate hadn’t yet crossed his radar. He was getting, quite naturally, frustrated. If a candidate had the right experience, he didn’t have the right attitude. If another had the right attitude, then the competency was deemed inadequate. If both attitude and competency seemed right, compensation became a stumbling block!

Most companies, and especially, startups have an immensely challenging time finding the right talent. India has a large number of people, but a small number of appropriately qualified people. “Qualified” not by way of being able to brandish a degree, but in terms of having the right mix of experience, competencies, skills and attitude. Given that the India growth story is just unfolding across multiple sectors of the economy, it is natural that a critical mass of trained and experienced manpower has yet to emerge. The pitiable state of the education system no doubt significantly contributes to this issue. So what’s a startup to do?

First, one must recognize that finding the right candidate is going to be tough. So what are the compromises to be made? What are the absolutely non-negotiable characteristics and attributes, eg. integrity and character, a proven record of building and leading teams, a minimum number of years of experience.

Second, look outside the narrow boundaries of your industry. Are there more mature industries and sectors which have qualified candidates? Which other sectors require similar management capabilities to yours? For example, a transaction intensive credit card business could throw up very good operations executives while the hospitality industry could present good candidates for the customer service functions. It is important therefore not get straitjacketed into thinking only in terms of the “ideal” candidate, since that is a mythical creature.

Third, invest in training and skill development. It is far cheaper (and not just monetarily) to continuously invest in upgrading the capabilities of the team. Regular in-house training programmes (eg stressing aspects of the company’s origins, industry trends, competition, culture, values), customized programmes eg team building, interviewing skills, process improvements, time management and general programmes such as branding.

It is not for nothing that the old adage “hire for attitude, train for skills” holds true. Attitude in this context means being adaptable, open to learning, taking feedback, ability to handle ambiguity, diligent, honest, team player, willing and able to get his hands dirty, and so on. These attributes take a long time to inculcate as they’re a function of one’s genes and the environment. Very few companies and certainly not a startup can spend the time, effort and money required to effect changes in an individual’s attitude. It is far more effective to hire a person with the desired attitude and then train for skills and competencies.

Fourth, compensation can be sticky. Should one pay very high salaries for the rare talent?

The unfortunate answer is that it depends. Paying one individual a disproportionately high compensation can negatively impact the startup’s hitherto low cost culture as well as the mindset of the other team members (“Are we not good enough?”). On the other hand, without the right talent, the startup could take a longer time to grow. Managing investor pressures and market expectations of growth in such situations can be hard. In my view, paying high compensation to attract and retain top talent in a startup isn’t appropriate. Philosophically speaking, people start or join a startup not to retire on their salary incomes. The sheer thrill, freedom and joy of company creation and building to address a market opportunity with a bunch of like-minded team members is a major reason for the startup’s existence. The (serious) money making occurs when the company actually fulfils its dreams when value is created via the appreciation in the stock price of the company. If the startup fails, the journey would’ve been the reward and the experience invaluable. Great entrepreneurs never do it for the money, that’s just a very attractive by-product of the fulfillment of their aspiration to make a difference.

The (arguably?) most iconic entrepreneur behind the most iconic company today, Apple’s Steve Jobs put it best when he said “I was worth over $1m when I was 23, over $10m when I was 24 and over $100m when I was 25 and it wasn’t that important because I never did it for the money” “…. Being the richest man in the cemetery doesn’t matter to me … Going to bed at night saying we’ve done something wonderful…
that’s what matters to me.”

So, what will you hire and pay for?

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.