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.
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.
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.
TOTAL COMPENSATION STRATEGIES
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
- Metrics and KPIs
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 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.