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Turn HR into Your Startup’s Competitive Advantage

After 15 years of working for someone else Mikaal Abdulla finally got smart and started his own company. He is the co-founder and CEO of 8 Securities and his journey has taken him through Silicon Valley, New York, London, Dubai, Mumbai, Singapore and now Hong Kong.

human-resources-pickA lot of factors will determine your startup’s success. Product innovation, consumer adoption, and competition are of course critical factors but get too much ink in the startup press. What is often only given lip service, but is in my opinion the most fundamental determinant of success, is the people you hire today. I have been very vocal in conveying the challenges that startups in Asia face, particularly in building teams beyond the founding members. I outlined some of the key structural, cultural, and societal challenges we face as entrepreneurs in a post I titled ‘There is No Glamour in an Asia Startup’. I want to focus this post on solutions.

My co-founder and I are old men in this startup game. We both came from a 4,000 person company called E*TRADE which was once a startup darling born in Silicon Valley. We both agree that the most valuable lesson we learned before leaving to start our own company was how to lead an organization through both good and bad times and how maintain an execution-focused culture . At the peak of the business at ETRADE we managed a team of 500 people across 15 geographies. Some of those local businesses ultimately succeeded and some failed. In almost every case it came down to people on the ground and the quality of their conviction and execution. People, not your product, will be your greatest long-term asset. As you build your team my plea is that you build your startup for what you want it to be and not for what it is today.

When you are a small team of founding members you are full of enthusiasm for your product and the opportunity ahead of you (as you should be). Hopefully your idea will gain traction and you will be in a position to raise money or reinvest positive cash flow to drive growth. One of your first investments will likely be in hiring your first non-founding member. As you move to hire employee four, five, and six you will likely see that they are unable to match your level of enthusiasm. At first you won’t understand why they can’t be as emotionally invested as you but take a step back and think about it rationally. People work for any number of reasons and have their own ambitions and motivation. It is arrogant to think that every individual that joins should share yours. Don’t dismiss an individual because they don’t want to drink Red Bull with you and write code until 4am. This lack of motivational alignment absolutely does not mean they can’t be a great fit for your startup. The best people I have ever worked with have two clear qualities. They were self-directed and execution oriented. If you want to be a growing company you are simply going to need to anticipate and accommodate the diverse motivations of your team. Furthermore, enthusiasm can manifest itself in different ways.

So how do you turn HR into a competitive advantage for your startup? In Asia, we are typically not fighting a talent war with other startups, as is the case in Silicon Valley. Instead we are competing with large companies that have the perceived benefit of security and a long-term career. When you launch a startup these naturally won’t be the easiest selling points for you. On the basis that you hire people on a foundation of trust and respect, you can really push the envelope. Here are some ideas.

• Consider killing the idea of a vacation policy

vacationWhen we launched 8 Securities we decided to use our size to our advantage. We started with vacation days. Statutory vacation in Hong Kong is 14 days so we decided to offer 25. Quality is not measured in days or hours but in execution. Hire execution-oriented people who will deliver what you ask of them and you don’t need to worry if they take an extra day off here or there. I am tempted to kill the vacation day policy all together and not track it. Really, I don’t care. The day we cease to be more focused and productive than our competitors is the day I will rethink this approach. I don’t see that happening anytime soon.

• Don’t be frugal when it comes to your team’s well-being

The next thing we did was implement a very generous medical benefits program including maternity coverage. Your health benefits are likely going to be between 5 percent to 10 percent of your compensation costs and I don’t think this is the area to be frugal. Your employees well-being and security should be on the top of your agenda. You may be 24 and a model of good health but the rest of your team probably does not feel invincible. This is one of the most important investments you can make that shows your team you are serious about building a company for the long-term.

• Don’t be a big brother (leave that to your competitors)

Give your team the freedom to balance their life and work. If someone has to go to the dentist for an hour, don’t keep tabs. Let people have some downtime during the day to engage their social networks, go out for a coffee, or surf the internet. You do it so why can’t they? Nobody can be productive from morning to night. Without small mental breaks productivity is killed anyway and we find ourselves staring blankly at a screen. This is probably the environment at your bloated competitor who is too busy wasting their time running ridiculous reports on their employees habits.

• Build a diverse environment

human-resourcesDiversity of experience, nationality, and gender is a powerful weapon. Diversity across these lines breeds diversity of thought and opinion. Without this diversity of thought your innovation and edge will suffer. We were fortunate that we managed a very diverse global team in our previous career and that instilled in us the importance of bringing that culture into our startup. We have six nationalities represented in our team. The majority of our staff are females which is unheard of for a financial services company. Finally, we have made a real effort to recruit outside of our industry to bring in new ideas. You need diversity to shake up very traditional industries that look within themselves for ideas. This is precisely why they don’t innovate and you have a real chance.

• Transparency rules

I think it is critically important that when building a team you are transparent about the risks and not just the rewards. Don’t take for granted that every employee may not be as well versed as you when it comes to market and financing risks you will surely face. It works to your advantage to be transparent because anyone that does not have a certain level of risk tolerance does not belong in the startup world. Try to mitigate the perceived risks with facts and always be honest. You are after all dealing with someone’s livelihood and everyone should enter the relationship with eyes wide open. I also am a big advocate of being transparent with business progress, both good and bad. We display our key real-time metrics across four ceiling-mounted plasma screens in our office. Withholding information breeds uncertainty and I would rather everyone feel unified and secure that we are all in this together.

• Equity, equity, equity

One of the biggest disparities between Silicon Valley and Asia is the lack of equity culture in Asia. Beyond the founders you will find people are much more concerned about their salary, heath benefits and security than with long-term equity. Just because employees may not ask for equity it does not mean you should not grant it. My suggestion is to tie it to a concrete goal that everyone on the team can get behind. For us, the goal is the first full quarter of profitability. Once that is achieved we will issue stock to all of the employees and have stipulated that in our shareholders agreement with investors. I don’t think its especially helpful to grant equity up front as it has unclear value (so employees will not value it all) and it should be used as a tool to reward real achievement and loyalty.

I leave you with this thought. Building and motivating a team will be the hardest work you do. Again, build a foundation for what you want your company to look like in the future and not what it is today. Your product will take you only so far and it is your people that will be the ultimate factor in success or failure of your startup. As always, good luck! I am pulling for you.

[Image credits: Shutterstock]

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