As the economy has slowed down and demand continues to be supressed, there is a very real concern regarding jobs; on not enough jobs being created, on layoffs and on how soon demand will pick up. All this time, in the start-up world a thriving ecosystem continues. New ventures are launched each day, new investors attracted by ideas and innovation (in addition to the outsized returns) are entering the ecosystem and the idea of becoming a job-creator as opposed to a jobseeker is slowly but surely gaining ground. And it is this ecosystem that will drive innovation, discovery and home-grown solutions which is the only way to achieve double-digit growth targets.Yet when it comes to talent, there is a catch-22 situation. Jobseekers are reluctant to take up assignments with start-ups while new ventures find it a challenge to attract talent. For
jobseekers the risks are considered too high, the failures many and stability is ever-elusive. But for folks looking to accelerate talent development, there could be no better place than a start-up. Seven reasons why this is the case:
Productivity: One of the core tenets of the business model of start-ups’ high productivity. It is not uncommon to have businesses with a turnover north of one crore with the entire planning, management or other functional teams consisting of only 5 – 6 folks. In such lean setups – each team and each member has to carry their weight. Everyone is out on the floor and in the trenches. There is little bureaucracy to bog one down and thus the intensity, sharp focus and ambitious timelines force productivity. The setup, by its very nature, demands high productivity and creates highly capable managers who can replicate the success elsewhere. Self-selection: A key challenge with organisations is teamwork and getting diverse individuals aligned towards a single goal. Most organisations fail at this because of complacency, culture and costs. There is a tendency to pawn off issues to the human resources department or simply re-assign work. This then becomes acceptable and is replicated over the years impacting the overall culture.
Compare this to a start-up. The work culture and environment demand doing more with less. Simply because by their very nature resources are limited. This forces creativity, frugality and innovation. Due to the demands on productivity as highlighted above the unproductive talent just self-selects itself out till a right match is found.
Empowerment: Organisational functions often have competing and conflicting goals. For instance, marketing and sales may want increased ad-spends and discount product to boost sales, while finance and revenue management may have goals to cut spends (to force movement to direct channels) and ensure minimal discounting. In a start-up, simply by virtue of its size, it forces people to come together; to have these difficult conversations; and to make decisions. The empowerment forces teams and managers to develop a holistic understanding of how different functions have to work towards a common goal. It creates leaders. It develops a mindset that has the conviction to attempt to shape the future.
As legendary investor Peter Theil so aptly states in his book
Zero to One, “A start-up is the largest endeavour over which you can have definite mastery. You can have agency not just over your own life, but over a small and important part of the world. It beings by rejecting the unjust tyranny of Chance…” Cash-flow priorities: The all-important nature of cash-flow is critical to any venture but especially to start-ups. Indeed research across many start-ups indicates that ‘ran out of cash’ is a key reason for failures.
Most start-ups don’t have the luxury of engaging in esoteric loss leadership strategies or asset grabs which may be profitable in the future. Each product has to generate sustainable cash-flows or the losses made up with funding that has been secured. This again helps develop managers who are very sensitive to decisions and impacts on cash-flows.
Adapting to change: Start-ups have to be adept to change. There is often an iterative approach taken and the nimble nature of new ventures allows for decisions to be tried out (after intense planning, discussion and debate) and if decisions don’t work, it allows for changing tactics and even and entering and exiting new markets. This helps create a cadre of managers who are quite adaptive, flexible and have an intuitive understanding of the nature of change. Integration of technology: For older and established businesses technology is an enabler that helps with processes. On the contrary, for majority of start-ups technology is at the core of everything that is done – to drive down costs. In this manner, they force managers to understand the integration of technology into processes, into optimisation and in daily routines. Resilience: It is rare to come across organisational setups that help build resilience in managers. However, start-ups are a rare breed that do just that. Whether they fail or succeed. Whether it is capital allocation, or negotiation, or attracting talent. Whether it is
technology-driven or otherwise.
The philosophy of doing more with less is so integral to low cost setups that it builds talent that is not willing to take ‘no’ for an answer. It develops highly resilient individuals.
Satyendra Pandey is the former head of Strategy at a fast growing airline. Previously, he was with the Centre for Aviation (CAPA) where he led the advisory and research teams. Satyendra has been involved in restructuring, scaling and turnarounds. Read Satyendra Pandey's columns