Startup culture, especially in fast-moving sectors such as tech and IT, is notorious for poor HR and workplace practices that are less than ideal. Many investors may be inclined to overlook this, focusing instead on the company’s growth and financial returns. However, some investors do pay attention to the people management aspect of startups, and they take an interest in whether the company is hiring and retaining people well.
People Matters approached one of these venture capitalists, Singapore-based Jeffrey Paine, whose firm, Golden Gate Ventures, focuses heavily on Internet and mobile startups in Southeast Asia. Golden Gate is a participating investor in the People Matters TechHR Startup Program for the second year.
A former Silicon Valley entrepreneur himself, Paine is highly active in the startup ecosystem around the region: he heads the Singapore chapter of the Founder Institute, the world’s largest pre-seed startup accelerator. He has said before that startups need to take care of their people so that the business can take care of itself, and People Matters asked him for his thoughts on how this can happen in today’s startup workplaces. Here are the highlights of the conversation.
We seldom hear much about the importance of taking care of employees in startups: startups often seem to get a pass on people management, even if they have obviously poor practices. Can you shed some light on why this is the case?
It may be an issue of perception, in the same way that people, rightly or wrongly, perceive big corporates as being slow and rigid but also stable and profitable. Startups are subject to a different kind of stereotype. For startups, the default state is death. You are climbing a hill with obstacles strewn in your way; you have to disrupt established organizations, who are trying to disrupt you right back.
Startups have a certain mentality as a result. They have to be ready to break existing patterns, to charge ahead, to move very fast. And this affects the way the business works; the way people in the business work; the expectations of the people in the business. Look at job scopes in startups, for example. You have one job description, but you might actually be doing five jobs.
I think this issue is most noticeable to people who join startups from corporates. They are shocked by the pace, how chaotic the structure can be. Often, they cannot take it and they leave.
When investors examine startups, they usually look at financials and business models, and hardly ever consider the people aspect. It’s only recently that VCs such as yourself are beginning to think of people as part of the business model. What does this approach involve?
Certainly when we judge startup founders, one of the aspects we look at is whether they know how to hire the right people at the right time and then retain them. And whether they know how to get rid of people fast. There are some cultural differences. American companies are good at it. Japanese and Korean companies are more likely to take the attitude that if you join me, you’re with me for life. Singapore is somewhere in the middle: culturally speaking, it’s still difficult to get rid of people.
So startup teams really need to know their own values, how they work best, and they need to hire based on that self-awareness. With a startup, the first 10 people are critical, because the next 10, the next 20, the next 200 will follow the pattern that this first team establishes. That includes the hiring pattern: if they somehow hire people who are of lower caliber than they need, they will end up continuing to hire that same caliber moving forward.
How do you, as an investor, help startups that appear to be having trouble with their hiring?
When they are small, they don’t have any resources, and many founders don’t have a HR background. They usually come from a product or engineering department. Very few have MBAs, and if they do, they’re usually fresh. So we try to introduce them to consultants who can help them develop their culture and values. We try to get them to establish a sound hiring process that includes the post-hiring follow-up.
I think the HR part of the business tends to get forgotten when they are small. But once they get bigger, reach a headcount of maybe 50 people, they will realise that they need a hiring manager. And from that realisation, they will also move on to making sure that they have processes in place, that there is training and performance management, coaching, salary and bonus reviews. And that in turn leads on to having the tools, the software to track the workforce.
All this does not come easily to people who do not have a HR background. To get them in place, the team has to come to the realization that certain things are needed, and then take the first step of getting a consultant in to set the stage.
Are startups usually receptive to this advice?
Yes. They know very quickly when they have made mistakes: hiring too fast, hiring someone with the right skillset but the wrong culture, letting something get out of hand so that the company culture suddenly becomes toxic.
Many founders don’t like to do a lot of hiring or firing, especially in Asia. So after they have to fire someone for the first time, they often sit down and start thinking very hard about how to avoid hiring the wrong type of person again. Hopefully, they are able to do that at the start, before they arrive at the stage where they have to take drastic action.
What are the signs that a startup might be getting into trouble with their workplace culture or people management approach?
The first sign is how the co-founders talk to each other: are they getting on well, are they civil to each other? Then there is the workplace itself. As investors, we have the access to go on office visits, and we can gauge the vibe of the place. We also do a reference check, where we can approach senior team members who have left and ask them about their reasons for leaving. And of course, we can look at Glassdoor reviews—although we do take those with a pinch of salt.
Sometimes, as investors, we go in with our eyes open. We may already be aware that the CEO is a person who can rub others the wrong way. For such startup founders, we try to help them understand their own strengths and weaknesses and build a team that can balance and complement them.
What do you think startup founders need the most to help them manage their teams better?
Running a company—managing people, leading a team— is like a sport. You need a coach. But we never think of that in the world of business. We always rely on the boss to teach us. But for startup CEOs, they are the boss. And there is no one to coach them. All the best startup coaches are in America: if you look around Singapore, there is no one person who has that depth of expertise in coaching startup CEOs, who can spend one hour a week visiting CEOs and talking with them, helping them work through the issues they face.
And so as the company grows bigger, the CEO becomes weaker: they become lonelier and less certain of themselves. Things like how to run a meeting, how to communicate with direct reports who are 20 years older than themselves: they are scrambling to acquire soft skills, but they are way too busy on a daily basis to actually sit down and figure it out themselves.
We try to connect them with other people, encourage them to find someone whom they can talk to every now and then. Sometimes we try to be a listening ear. But realistically, they need professional support. Hopefully that support will become available here one day.