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Re-Engineering HR [Part 2] — How to Manage Your Human Capital, Reduce Talent Gap, and Sustain Your Startup through the Growth Phases

Extensively Budget Training and Development

I’ve already discussed the inflation model for scaling businesses where scalability becomes intrinsic to your startup team. This involves continuously empowering your original team members through training and development programs, and utilizing all those newly instilled skills as abilities to complete various tasks, and as a result making them amenable to agility and mobility.

Mike Zammuto appearing on Varney and Company on behalf of Reputation Changer in 2013

Mike Zammuto appearing on Varney and Company on behalf of Reputation Changer in 2013

According to the WorldatWork report that surveyed 20 fast growth companies in the U.S’s West Coast, all surveyed leaders believed that offering training and development opportunities to their employees, decreased turnover rates, empowered them to take initiatives, and increase work engagement. These trainings (just to un-limit your budgets) also included sponsoring advanced degrees (Master’s and Ph.D.s) apart from work related skills such as customer service, new products, and technologies.

The simplest reason why training and development programs should be an integral part of your HR strategy is because you have to keep your talent pool market competitive.

BECAUSE, even in the ideal scenario where you have somehow recruited the most loyal talent in the world — one that would never leave your company no matter how stellar the deals are from other companies— their skill set would still become obsolete in a matter of years.

Training and development is crucial for building a flexible and prepared human capital, one that is cross-functional and can be deployed across your company.

Grow Inter-Organizational Career Opportunities

How long can you reasonably expect your top talent to find meaning, pride, and fulfillment from the same job description? Your top talent is looking for opportunities to exercise its talents, to break out, to create or build something on their own, to achieve something they can value, to lead, and more.

And they want to do them fast. Perhaps even now.

Unless you can offer them the fast career growth opportunities as you phase through growth stages, you will experience a talent drain. The most oft employed strategy is to offer accelerated careers proportional to the value these people bring to the table, and offer them new responsibilities and accountabilities. A cheat-strategy can be to consistently compare their growth with competitors (during review meetings perhaps) and demonstrate specifically how their growth at any level is several times faster than any other large competitors.

This obviously requires that you keep your top talent a step ahead of career-growth opportunities, as well as offer parallel career paths in managerial roles reflective of their experience and skill set.

Increase Communications

As leaders, your task is to communicate openly, constantly, and clearly. Integrate HR evaluations with company’s strategic goals and communicate them to the employees. Successful growth companies link messages by relying on their HR’s data. As a result, they are able to integrate the career demands of their employees with their business’s strategic goals.

Streamlining communication processes requires building a common medium for communication. Two common mediums include the intranet, and manager-employee face-to-face communication.


Another method of boosting talent retention for growing startups is by relying compensation methodologies in your HR department.

Pay for, and hence encourage, creativity and innovation. This results in an HR model that is based on, and pays strongly for performance/results. As a result, you’ll be encouraging poor performers to leave. A holistic and robust compensation strategy involves employing the following areas:

  • Paying Competitiveness
  • Cash Incentives and Variable Pay
  • Side Stepping Stock Options
  • Recognition
  • Benefits
  • Metrics and KPIs

Paying Competitiveness

Recruiting competitive talent is crucial to sustaining the often exponential growth of the company. When coupled with other career opportunities and training and development programs, it automatically increases retention rates. Monetary incentives for high performers allows your talent pool to dedicate efforts knowing that they will not only be recognized, but will also be rewarded and receive a monetary share for their efforts.

Cash Incentives and Variable Pay

Variable pay allows employees to leverage their contribution and added value to gain monetary recognition, and in turn increase productivity of your organization. Furthermore, variable pay and cash incentives are a great way to supplement your performance plan, and keep morale and retention high especially in case stock options run their course. Such incentives, when tied directly with performance metrics (individual, based on team performance, functional, or organization wide), are a great way of bonding people to the company and linking performance results.

Side Stepping Stock Options

A key issue in managing human-capital is that fact the non-scalability of stock options. The transition of the startup towards a full-fledged growth company is impacted by signing bonuses and non-bespoke stock options for a plethora of reasons. Some of the most common problems include:

  • The Reloading Dilemma — Often the best people leave the company to get new signing bonuses or because they’ve found better stock options at another company. This normally occurs because the HR does not realize that their original hiring package was based on the perceived value of the individual to the business, and not their current value
  • Unpredictability — Then again, many leave because they are not confident if the company will be able to sustain its growth at its startup or current pace. It is a common occurrence that as the startup continues to grow, fewer stock options become available for the taking. Given that the value of the stock is dependent on market forces outside of company control, such as the general economic climate and overall performance of the market niche, unpredictability sets in as setbacks may occur.
  • Entitlement — Many high performers leave because of employees who had valuable stock options, and have (or are likely to become) become entitled during the course of the transition. Think of it as a “last straw condition” for your high performers.

The best course of action is to task your HR to plan mitigation strategy into your startup before it gears into the high growth phase. In case you already are moving into the growth phase, shifting the focus to better retention incentives through due recognition of contributions, additional benefits, and finding the right metrics and KPIs for reviewing performance and contributions.

Recognition Programs

Recognition becomes increasingly problematic as the startup scales into a growth company. However, establishing sound recognition programs is crucial to the success of the company. This is evident when one compares the WorldatWork reports from 2005 and 2013. The latest report on recognition titled “Trends in Employee Recognition” surveyed over 470 of its member respondents and found that 88 percent had robust recognition programs in place.

What I find interesting is the fact that the 2013 report included metrics for peer-to-peer programs and programs for motivating certain employee behavior. The 2005 report did not have considerations for either, pointing to the evolution of the industry.

The fact of the matter is that reward and recognition is becoming an integral part of the HR strategy, where rather than simply rewarding someone at the end of the year for achieving goals, the company simply makes incremental rewards throughout the year (think quarterly or bin annual reviews, appraisals, recognition, and/or rewards). The purpose of these recognition programs is to reward significant contributions, inventions, breakthroughs, unexpected contributions to income growth, new projects and clients, among others. This makes it easier for employees to reach their goals and receive higher rewards while motivating them to align their contributions with company goals.

Some of the most common recognition metrics include above-and-beyond performance, length of service, and the social component of peer-to-peer recognition and programs. All of this fits neatly with the current mobile society where employees can move within an organization, especially the social component of the recognition program that allows co-workers to know when an employee has received recognition.

In Conclusion — Facing the Challenges

I believe that the sustained growth of startups is highly dependent on how well the HR manages to scale its model for talent pool management and retention. The biggest challenge in this area, especially for the growth tech companies, is of defining the metrics and skills to measure the creativity, innovativeness, and contribution of its employees in terms of their impact on company’s performance and profitability.

Technologies continue to evolve, and the HR must continuously re-invent itself and consistently develop and test newer methodologies to engage the company’s talent pool and mitigate turnover rate.

Re-Engineering HR – Managing Your Human Capital in a Growth Company

The biggest challenge facing executives while scaling their startup into growth companies is managing their talent pool while suffering growth pains.


If you hope to remain ahead of the fast-growth curve, and tranquilize as much of the associated pain (and prevent the HR nightmare of a blow up or total meltdown) then here are my thoughts on the matter: completely re-engineer HR processes and systems.


It is crucial to making a smooth transition.


Chaotic Change — Problem at a Glance


You’ll have to abandon a lot of practices that worked for your initial startup stages, and replace them with new ones. Given that all the human capital practices and process have to play catch up with growth, you will be required to stabilize your workforce to one where you have more dedicated and “intra-preneurial” talent, ones who could be more creative and dedicated to the company goals. This should point to the need for changing the overall culture of the company and make growth intrinsic not only to the company but also of its talent pool (through personal development and career growth and opportunities).


I’m sure of one thing: It will be chaotic. Then again I’ve seen that during rapid growth, executives are more than willing to respond to changes, adapt to different challenges, and find opportunities that can move the company to a more sustained phase of growth.


The three crucial areas that I believe need consideration include your retention, reward, and compensation practices. Let’s start with the first round of primary growth oriented changes that have to be re-engineered in the HR department.


I’ll start changing your HR filtration system: its existing retention, hiring, and firing processes.




Be selective. Identify and retain people who are essential to your business’s strategic goals and business model.

MichaelZammutoFoxApp - Copy

Many leaders would have already realized that the startup strategy of relying on career gamblers, transient, and free agents is no longer effective. It worked during the startup phase because the recruitment strategy was (and it normally is) of getting people into the empty seats and getting the engine chugging productivity. Growth phase demands selective empowerment and elimination from the current talent pool, while recruiting talent for core competencies.


Retain dedicated high performers closest to the organization’s core competencies. The retention focus of the HR should be on talent that directly affects core competencies and core business processes. This can be followed by marketing and other technology based jobs. Your goal should be to prevent talent drain to other larger companies.


Talent will always be magnetized by the best deals in the industry, and unless you offer them something that adds value to their work, they will get pulled to the ones that offer them or at least give them the perception of offering those incentives.


I believe two fundamental leadership actions for developing a robust retention strategy include:


Leadership Action #1


Understand the fragile balance between the talent that stays or leaves in terms of total rewards, i.e. the total deal that your company is offering them, including the company culture, the work environment and people, leadership, the terms of pay, career growth and development opportunities, and of course how interesting and creative the work is. (I’ll address relevant strategy in the next section)


Leadership Action #2


Appreciate key talent. Make your employees feel valued for the value they bring to the company, their contribution, dedication, and hard work. Reiterate the processes that show them that they count and are included in the company’s future. (I’ll address retention strategies and total compensation as another model for growth oriented retention strategy in the second section)


Total Rewards — Growth Oriented HR Road Map


Leaders in the surveyed companies provided their approaches to the elements of an integrated total rewards strategy.


Six core elements to forming a robust retention strategy include:

  1. Employee Engagement
  2. Company Culture
  3. Improving Manager’s Role
  4. Training and Development
  5. Career Opportunities
  6. Communications


Increasing Employee Engagement


A targeted study sponsored by Achievers (Harvard Business School Review, 2013) shows that employee engagement as crucial factor in achieving overall organizational success. Incidentally, efficient productivity was rated on par with employee engagement whereas the ability to innovate ranked lower than either. The most impactful factors driving employee engagement includes:

  • Clear job descriptions
  • How employee’s work contributes to the overall strategy of the business
  • Recognition given to high performers
  • Continuous and effective communication from the senior leadership
  • Efficient and fair performance reviews
  • Pay and appraisals directly linked to corporate goals
  • Development and training programs linked with personal growth as well as linked to the corporate goals of the company, among others.


According to the 8th iteration of the Gallup Poll, increased employee engagement has direct bearing on the important growth KPIs, growth sustainability, and integrity of the business model. From the poll, the following eight factors experience significant improvement due to increased employee engagement:

  1. Turnover (for high-turnover and low-turnover organizations)
  2. Shrinkage (theft)
  3. Safety incidents
  4. Quality (defects)
  5. Profitability
  6. Productivity
  7. Customer ratings
  8. Absenteeism


Renewing Values, Creating a Growth Oriented Culture


Finding a common ground definition of organizational culture for growth oriented companies is fabulous. You won’t find single culture or definition that has worked for all organizations. Some common cultural models include:

  • Performance culture — that values high performers, contributors, and achievers
  • Success-oriented culture — that links business goals and success of the business with the reward system, rewarding core competencies and top-performing talents
  • Enabling culture — that relies on empowering people, growing their capacities, and encouraging new job roles
  • Focused culture — that keeps re-inventing its core competencies and business processes only,
  • Others — a whole post, for another time.


I believe that a growth oriented culture is an environment in where your team members can become owners of the business process i.e. they don’t have to wait for the CEO to be in the room to make a decision. I believe strong growth oriented cultures empower employees and makes them dedicated to the team in a different fashion. And for me, the two values that should be intrinsic to the growth culture as the startup is scaled include agility and mobility.

  • Agility — the commitment to rapidly respond to change in market and company’s objectives, and hence, to always remain ready for stepping outside of their comfort zones
  • Mobility — a commitment to company’ strategic goals, to remain un-rooted to a single job description, and have the flexibility to be deployed in various departments and teams according company needs.

I believe a culture based on agility and mobility will always value continuous empowerment of its talent pool, risk changes to job descriptions, realize their abilities, capacities, and passion, and empower them to take new roles in the organization.


Investing and risking time and effort in your organization’s culture is important, primarily because it has powerful momentum, one that overcome the shortcomings of your strategy, and beat better and more competitive strategies in the market — Every. Single. Time.


Improving Your Managers’ Role


“Employees leave managers, not companies”. I think we’ve heard it too often for a single lifetime. To give credit to it, I must say that it has had its impact, but still the fact of the matter is your manager still needs improvement. It involves improvement in leadership role and setting an example as a role model, training and coaching, and in their ability to direction for your business, engaging team members, and aligning their abilities with business objectives and strategic goals.


You have to make them accountable for talent retention, development, and motivation. And the only way you can do that is to reduce barriers to decision making by delegating greater administrative authority.


[Continued in Part 2]



5 Systems That Have Helped Me and Can Help Other Startup Execs Discipline Their Business



If academics are rearing to jump on a reference to Foucault’s “Discipline and Punish”, then now’s not a good time.


We know the market has moved out of its earlier discipline and punish model to a better (and less panoptic) model of management. Hence, in this post no harm was done, nor any punishment given to any theoretical business beings (except, well, some business practices).


Disciplining Businesses


Once the startup has reached into the “fun stage”, where customers start placing orders, executives face the herculean task of keeping their business under control. Since the business has gained a momentum of its own, and continues to run on the intake provided by the customers, it can start to move into unprecedented territories.


Unless the executives are able to leash it, chances of controlling the growing entity can dramatically grow thin.

MichaelZammutoDistDish - Copy

From my experience, 5-systems have proved beneficial in overcoming disciplining problems. I believe, they will prove helpful for other executives in the same boat. These five systems include:

  1. Balanced Scorecards
  2. Strategy Maps
  3. Strategic Job Families
  4. Top Grading
  5. Business Rhythms


Let’s see each in brief.


Balanced Scorecards (BSC)


The worst thing that executives often do is to hang their strategic plan as portraits, watching them every once a while during the quarter. It is crucial that executives establish a framework for placing all important KPIs into the right perspective and then measuring them accordingly.


The Balanced Score Board (BSB) transforms your strategic plan into an order churning machine for managers and employees on a daily basis.


Its power is often underestimated by considering it as merely a measurement system, but I’ve found it to be a complete management system capable of providing feedback for both internal business processes as well as external outcomes. It will allow you to continuously improve strategic performances and results.


The BSB forces us to view the organization from four perspectives (Financial, Customer, Business Processes, and Learning & Growth), and hence develop metrics, methods of collecting relevant data, and analyzing each perspective to figure how value is being created for the organization.


This is then communicated using Strategy Mapping (next).


Further Resources


Gain basic insights into the use of the Balanced Scoreboard, read “Using the Balanced Scorecard as a Strategic Management System” (Robert S. Kaplan and David P. Norton).


For a more fundamental understanding of the Balanced Scoreboard read Robert S. Kaplan’s original work “Conceptual Foundations of the Balanced Scoreboard” published in HBR (2010).


Strategy Maps


It is crucial to communicate the strategy of the organization, focus its efforts, and choose appropriate measures to report to an organization’s progress in implementing a strategy.


This is where Strategy Maps come in. They are a simple diagram that explicitly shows the cause-and-effect relationship between the four BSC objectives (Processes, Financial, Customer, and Growth & Learning). With this diagram, you can easily and thoroughly document the primary strategic goals being pursued by an organization or a management team.


They have allowed me to easily communicate strategies for the prime question “How we are to create long-term value for the shareholder?”


With a Strategy Map, the creation of shareholder value (the result in most cases) is exhaustively linked to organization’s core capabilities, innovation, organizational design, human resources, IT, connected learning, and processes, customer, and quality management. This graphic communication of the strategy among executives allows one to align resources for the successful implementation of strategy.


Further Resources


You can look up some examples of Strategy Mapping here.


Strategic Job Families


It’s never enough to populate the company with outstanding employees. Executives must use them effectively though good organizational design. This is where Strategic Job Families has arrived as a greater device for addressing workforce management.


Imagine being able to direct the organization’s strategy by knowing which positions will have the most direct impact on the execution of your strategy.


This would require making tough decisions quickly, e.g. releasing employees who don’t rise to the challenge. By creating strategic job families, executives are able to identify he positions which may be Entry level but prove essential to the strategic development of the organization. Examples include entry level positions such as book keepers etc.


A good method of doing this is to analyze organizational strategy, develop a list of selection criteria, and then ranking and scoring each position.


Further Resources


You can brush up on the technique from Peter Reilly’s paper published by Institute of Employment Studies.




“The fundamental driver of shareholder value is the talent of everyone in the organization on whom you rely to implement your business strategies.” — Such is the recurrent Wisdom of Executives.


All of us realize that our strategies will become a wasteland if we are not able to hire and retain high performers for our organization. As an executive, we are tasked with developing a team of A players for every position in your organization. This is where topgrading comes in.


Topgrading, in simple terms, is the practice of first collecting, and then empowering, the highest quality workforce. This is done by proactively seeking out and employing the most talented people available — while redeploying employees showing lesser ability or performance.


Topgrading allows this by ensuring that talent acquisition and management processes are solely focused on identifying, hiring, promoting, and then retaining top people. It also allows you to easily coach and empower the right people in the strategic positions.


I’ve found it to be the best device for promoting the right people, in the most strategic positions. And from experience, I’ve seen that organizations that topgrade are able to drive improvements or changes in core strategic value drivers including time to market, quality, innovation, productivity, customer service, etc. These organizations continued to show growth and success because they have the most competent employees in all job families.


Further Resources


Read the original piece describing the practice in a thorough problem-solution oriented manner here.


Business Rhythms


Predictability is the essence of sustainable business activity. As an executive, it is strategically essential that you are able to keep all aspects of the organization predictable, and hence achieve a unique business rhythm.


This can be spread over 4 different areas:

  1. Vision — A preferable future that is consistently tested over time in face of new perspectives, and evolves. The clearer it is, and more connected it is with individual team members, the more rhythmic it becomes for them to work towards it.
  2. Achievements — By strategically defining milestones and goals, and consistently achieving them, you create a sense of purpose, identity, dignity, and confidence. This is only possible by creating a simultaneous rhythm between defining, tracking, measuring, and adjusting your goals.
  3. Meetings — A boon to productivity if they are not rhythmic in their recurrence, focus, engagement, and the decision orientedness.
  4. Growth and Learning — Unless you are able to coach, empower, and aid employees in re-inventing themselves and continuously upping their capacities, you fail to create a rhythm for learning and hence growth. Learning corporations are the future, or haven’t you heard it yet?



Balanced Scorecards, Strategy Maps, Strategic Job Families, Top Grading, and Business Rhythms have been the weapons of choice for me to handle and discipline businesses over the years. If you have been employing others, feel free to share!