Leadership in a start up

Here's another article I wrote for SHRM....


As I sat down to write this article, I was wondering where I should begin. The topic of leadership in a start up is so interesting and has so many facets that, for a moment, I was undecided about which aspect I should start with.
Then, I realised that, in some respects, the dilemma I was facing while thinking about commencing the article was the same that a leader faces in a start up. There is one critical question that needs to be answered: Where do I start?
However, if you were expecting me to give you an answer to this question, I am sorry I must disappoint you. The answer is that there is no single place to start. And that is what makes the job of starting up a new company or business unit such an exciting and challenging assignment. There is a whole bunch of moving parts that need to be dealt with and managed, and sequential processing is either not possible or undesirable. Let me explain why.
Most start ups, whether entrepreneurial in nature or as subsidiaries of a large (multinational or Indian) corporation have specific timelines within which the operation has to be established, a high quality team recruited, systems and processes put in place, strategies put together and executed, and, most important, revenues to be generated in order to meet a predefined profit or loss target. If these activities are undertaken on a sequential basis and managed piecemeal, two outcomes are possible.
First, at best, the start up will be delayed vis a vis plans and targets, which will be achieved much later than timelines normally set for such operations. Whether it is a venture capitalist or private equity fund or a large parent corporation that is funding the operation, the investing entity expects the start up to take off and begin generating revenues as soon as possible. A reasonable amount of time is normally accepted as a gestation period, during which critical activities such as recruitment and engagement of a team, implementing processes and putting together strategies can be done. However, my experience is that this gestation period is almost always desperately short of what should be the ideal situation. There is always time pressure. Which is understandable.
Second, at worst, the start up may fail to take off at all.
So, the biggest challenge for a leader in a start up is to confront these circumstances and make the best of them. There is no point complaining about time constraints. They will not go away. So how does one tackle them?
The critical competence that supports a leader in this situation is the ability to manage chaos and build a structure out of nothing. Being able to multi-task is very important, as is the ability to run multiple projects simultaneously without taking the eye off any one of them. And since the environment is dynamic and things are constantly developing, it is a bit like a hunter trying to focus simultaneously on several moving targets and trying to hit each one of them all the time.
Sounds impossible? Actually, it’s not. But if you’re accustomed to working in a large organisation, with established systems and processes and a comfortable support system to fall back on (in terms of HR, finance, operations and administration etc), then it becomes very difficult to adjust to a fluid environment where nothing is certain and anything can happen. I know. I’ve been through this when I worked in my first start up, straight out of a large multinational company where I had an assistant, a large operations team, an established sales team and a strong HR and finance support system at head office. From this comfortable and safe environment I jumped straight into a start up where there was nothing. No office, no assistant, no team. Even financial and HR systems were to be established.
It wasn’t easy. But it wasn’t impossible either, and since then I’ve done it many times over again. The key is to be adaptable and change your mindset. If you are able to let go of the cushy perquisites of working in an established organisational structure, it becomes rather simple. Actually, it is extremely enjoyable and very satisfying once you get down to putting the start up together. You may well ask why? Because, instead of inheriting something that you may or may not like (as most managers do, and I’ve done on occasions), you start with a clean slate in a start up. You can build the organisation the way you want to. You can recruit the people you want. There is no inherited baggage of any kind. Who could ask for more?
So much for the challenge of starting up. The other key competence a leader needs in a start up is the ability to lead people. Notice that I didn’t say manage people. True leadership, of the transformational kind, is required. To begin with, the team in a start up is so small that it is extremely critical that everyone works together and at the same pace. Due to cost constraints, it is often possible that the start up begins by recruiting less people than it actually needs to run at an optimal level. Which means that, like the leader, others in the team need to be willing and able to multi-task. There is no room for development of silos or reluctance to go beyond the official job description. In some sense, the job description only provides a guide to the primary responsibilities of the team member. It does not describe the boundaries or limits to what may be required of the team member.
What does this mean for leadership?
First, the leader cannot afford to stay aloof of the operations and expect to delegate everything. The leader must lead by example and be willing to roll up his/her sleeves and get down to brass tacks. Others will follow. Second, the ability to build strong relationships based on mutual trust and respect is extremely important. In a start up, more than instruction, leadership and guidance are required. If the relationships are strong, people will follow the leader. Third, communication is critical. The leader should be able to articulate and communicate the broad vision to the team, which they will then implement. If a single member of a small team is out of synch with the broad vision and strategy or does not understand or agree with a direction or the need for an action, it becomes extremely difficult to build the business with any degree of success. This does not mean that unanimity is a pre-requisite. It simply means that everyone has to be on the same page where strategic direction is concerned. Getting all team members on board irrespective of their personal opinions is the responsibility of the leader. And communication plays a crucial role in this process.
This competence has important implications for motivation and satisfaction. In many cases, especially in start ups funded by venture capitalists, employees are often hired at lower than market levels of remuneration and compensated through stock options or share of profits. Even if employees are hired at normal levels of remunerations, the time pressures and challenges of putting together a start up are so immense that it is easy for people to get frustrated and for motivation to suffer. This is especially true when the start up is a small part of a much larger organisation. There could be any number of challenges in dealing with the parent organisation. Bureaucracy in decision making and financial or other approvals, political issues in dealing with different hierarchies in the parent organisation, clashes of culture between the start up and the parent organisation (yes, this can happen, especially when the leader consciously cultivates a culture in the start up that is different, because he/she feels that culture is better suited to achieve the objectives of the start up); these are just some of the issues that can stymie the efforts of team members in the start up and lead to dissatisfaction and can affect employee morale.
In such situations, the leader has to be able to handle the issues with the parent organisation in a non antagonistic manner, while simultaneously managing the motivation levels of his/her own team to ensure that they are buffered against any negative signals that may emanate as a result of the issues with the parent organisation. This can be quite a tightrope to walk and the leader’s personal credibility and relationships with his/her team members play a very important role in keeping the team morale high.
There is more to leading in a startup, and one could write a book on this, but for the purposes of this article I hope I have been able to provide a glimpse of what leadership in a start up is all about. It is exciting, fulfilling and challenging to build a business from scratch, but the issues that I have highlighted need to be kept in mind in order to succeed.

Managing in a downturn: Strategies for Success Part I

The first thing to remember: treat the downturn as an opportunity not a threat; attitude makes all the difference!

As may be apparent from my earlier posts on common mistakes made by CEOs in the downturn, there are a few key areas that CEOs can focus on, as a means to navigate any downturn.

The first relates to talent management.

This area can be managed in four ways. I have dwelt on the first method in some detail while discussing the reduction of headcount as a knee jerk reaction to a downturn. A planned, structured and analytical approach to the rationalization of headcount can help organizations manage the downturn successfully. So, I will not repeat myself here.

The second method pertains to the retention and motivation of the talent that the company chooses to retain after a well structured rationalization of headcount. Closely associated with this is the issue of enhancing productivity, since a rationalized headcount is expected, justifiably, to contribute in a greater measure, especially since the basis of the rationalization is to retain the best talent in the key areas of growth, both present and future.

This can be tricky, but not impossible. Any reduction in headcount causes discomfort, at best; and anxiety, at worst, among the workforce that survives the exercise, no matter how sensitively it is handled or how reasonable the logic behind the decisions. Morale dips. Motivation sags. In such a climate, simply maintaining employee morale is a herculean task.

So how does one go about the added objective of enhancing productivity?

There are several ways of doing this, beginning with the basic task of tackling employee morale and motivation issues. Transparency is critical at this point in time. Employees must know where they stand. Any uncertainty can lead to speculation and guessing games, which not only affects productivity, since employees spend more time in speculation than working; but it also affects morale further, when no clear answers are forthcoming. Honesty and transparency can go a long way in improving morale, by simply settling apprehensions and anxieties.

Avoiding negative pressure is another way of enhancing productivity. No one--including you and me--likes to work under negative pressure. It is easy, in a downturn, to be negative. Criticism, doubts about performance and commitment, fault finding and passing the buck are common occurrences when things start going wrong. And all of these have an immediate and perceptible impact on employee morale and motivation. What is required at this time is the ability for senior managers to be calm and composed. The downturn cannot be wished away. But it can be managed. The recognition of this simple truth can help. Managers should consciously steer away from negative communication. Positive feedback, encouragement, proactive support and appreciation, all go a long way in enhancing morale and motivation.

And the best thing is, if managers are honest and positive with their teams, the natural corollary is that employees will reciprocate. This creates an all round climate of transparency and positivity within the organization.

In fact, involving employees in the decision making and planning process while strategizing for the downturn is a great way of not only improving productivity, but also of getting new ideas. First, employees feel great about being involved. It gives them immense satisfaction in contributing to the organization when it is facing difficulties and also gives them a sense of value. Second, it gives them ownership of the final strategy, which always enhances productivity and performance. Third, you’ll be surprised at the ideas employees can come up with when asked…all you need to do is involve them! One great way of doing this is through coaching and I’ll dwell on that in a bit.

Increments is yet another way of managing morale and productivity. Most organizations freeze increments across the board in a downturn. What if organizations were to be creative about this. For example, the hardest hit by an increment freeze are the staff at the lower levels of the hierarchy. Suppose the organization were to give them nominal increments, but freeze increments at the managerial levels, where the pinch is felt less? How do you think that would go down with employees?

Stop here for a moment, and go back to the methods I’ve just described. Do you see a pattern emerging? Put yourself in the shoes of an employee who is managed thus. Do you see your morale and motivation improving? And I hope that by now you would see how this has a direct and tangible impact on productivity.

There are many methods to improve productivity. But I would I like to spend some time on yet another very powerful method of enhancing productivity, albeit one that comes at a cost. And that is: coaching employees. Coaching is not about giving advice. It is not about counseling them on their performance. It is about helping employees find their own solutions to enhance their performance or achieve specific job related goals. It is also not meant so much to fix problem behaviours. It is more to help valued employees find solutions to enhance their own performance and contribution to the organisation. Coaching believes in the potential of each employee to deliver the goods on their own; and the coach simply facilitates the way, invisibly and silently. Coaching employees, especially key team members who have a significant impact on the business, can go a long way to improve performance and productivity.

The third method of talent management relates to the training and development of existing talent. This is also a method that enhances productivity. A downturn, where employees may not be fully occupied, is a great time to enhance skills and learning, along with self development. I will dwell upon this in a bit more detail when I write about preparing for the upturn.

The point about training and development I would like to highlight here pertains to managers, especially senior managers. The present downturn is unprecedented. A synchronized downturn of this nature has not been seen since the Great Depression. However skilled, competent and experienced a manager may be, and irrespective of his/her level within the hierarchy, there is no manager in the world today who has experienced a downturn of this nature. Which means that the skills to manage the present downturn are woefully inadequate. But this blog is about any downturn, and hopefully in the future there will be fewer downturns like the present one.

Some managers ride high with the good times, during which time their strengths are highlighted and, indeed, put to good use for the growth and gain of the organization. But along comes the downturn and their weaknesses are exposed. This is not to say that they are incompetent or that their usefulness to the organization has been outlived. It is simply that their skill sets do not include skills to manage the downturn. It is critical to identify such managers and equip them with the skills necessary to successfully navigate the storm. It is not such a difficult task. And coaching, as I have mentioned earlier, is a great way to create self realization about the way forward.

The fourth method of talent management is the redeployment of skills. This is also closely linked to enhanced productivity. With employees being more productive, they may have time to look at other areas that they may be able to manage, but have not had the time or the inclination to focus on earlier. Profitable redeployment of skills is possible and has been successfully implemented by many organizations.