Thousands of new companies are launched in India every year, making it the third-largest hub of startups in the world, according to the National Association of Software and Service Companies in New Delhi.
But amid planning for the new company's growth and business success, founders don't always plan their 'people' strategy in the early years. This could be a mistake, say experts, as having a people plan helps avoid hiring mistakes and creates a positive culture for the company as it grows.
Successful company founders say there are six strategies that entrepreneurs should embrace to develop an effective people management plan for a new company's initial years:
- Hiring: Freelance Recruiters Can Help
Founders typically rely on personal references and connections to make their first few hires. However, as the business expands and the company needs the next group of employees, founders may not have the time or ability to scan through job websites and other tools to find people.
At this stage, consider contracting with a freelance recruiter, says Gaurav Agarwal, co-founder of 1mg Technologies Pvt., a digital healthcare platform with headquarters in Gurgaon. Candidates being recommended by staffing firms typically are "active," meaning they are actively looking around for jobs, so their acceptance rate usually isn't high, says Agarwal, who co-founded 1mg in 2015.
A freelance recruiter should be someone not attached to an agency, but who can understand the company's requirements to help find the right talent. Once your company requires multiple new hires, he says that's when you should consider hiring an internal recruiter either full-time or part-time.
- Ideal Initial Team: Look for Risk-Takers
Companies that are just starting out may not be able to hire people who've graduated from the best colleges or have a ton of experience or skills. But that's okay, say founders.
"You'll have better luck finding highly motivated employees who weren't from the best of colleges and have limited experience, but are willing to work really hard to prove their mettle," says Swati Bhargava, co-founder of CashKaro.com, a coupons and cashback site in Gurgaon.
Look for candidates who have the right attitude to build something, who are self-starters and can work well in chaos or an unstructured environment, says Bhargava.
"If you are working for a startup that is trying to change the world, you need people who have that risk-taking drive," says Bhanu Chopra, founder of RateGain, a software applications-maker in Noida.
- Retaining Staff: Make Them Mini CEOs
All companies, big and small, struggle with getting good talent to stick around for the long term. There are no hard and fast rules that work every time.
In the initial years, startups don't have a lot of money to motivate employees to stay. The next best tool for founders is to give employees a sense of ownership. Let them know how they are helping build the company, so they become invested in the company's growth.
"Give them a work culture that encourages innovation and disruption," says Adhil Shetty, Chennai-based co-founder of BankBazaar.com, an online marketplace for loans and credit cards.
As the company grows, founders should be delegating power and decision-making among staff. This philosophy of distributed leadership has meant "we have never lost a single senior leader in the history of our company," says Ritesh Agarwal, Gurgaon-based founder of Oyo Hotels & Homes, a hotel chain with a presence in more than 18 countries.
Other tips to avoid employee churn include coaching managers to be clear about what they're hiring someone to do, which helps avoid dissatisfaction later with an employee's performance, as well as disenchantment by the employee with the company. Also, steer clear of candidates who have switched jobs frequently in the past.
- Values: Begin on Day 1
Big companies are always talking about "values" that define what they stand for. This is equally important for companies that are just starting out, since it encourages founders to look for people to hire who fit the values and culture of the company.
When there is confusion over what the company stands for, it leads to disagreement and founders end up "fighting among themselves," says Gaurav Malhotra, an angel investor in Delhi who works with healthcare startups. He advises that founders should seek help from consultants or investors when writing these values.
At 1mg, the founders didn't go for generic values like "honesty" or "integrity" because Agarwal says these are basic moral imperatives expected from everyone. Instead, they wrote down specific values that guide day-to-day behavior, such as: "Done better than perfect" and "Be a CEO," meaning everyone at the company should be empowered and feel that they can be a CEO.
- After Funding: Go Easy on Compensation
Once startups receive funding from venture or private equity investors, some use that money to hire candidates from top colleges or are highly coveted and thus demand high salaries. In recent years, this has driven compensation out of whack. But during the initial years of a company, as well as during times of economic or investment slowdown, investors often request justification for the high salaries. So be prudent before agreeing to a salary that's higher than the rest of the team.
- On Firing: Be Quick and Respectful
RateGain founder Chopra is a big believer in the wisdom of American management guru Jim Collins, who says that to get somewhere, it's important to get the right people on your bus and the wrong people off of it. For young companies, an employee who isn't performing or who doesn't fit the company's culture is the "wrong" person on the bus and should be taken off as soon as possible.
"I would encourage people to act quickly, but it's very important to manage your steps on how you do it," says Chopra. While it isn't easy to fire someone and it's usually costly to refill that position, Chopra says it's imperative to follow through. "You have to do things that are in the long-term best interest of the company," he says.
Once the company reaches a certain scale, at least 50 employees or more, it makes sense to hire professionals to fulfill the human resources functions. "As the business grows, it is extremely important to bring in the experts and focus on building the right talent through a professionally managed and robust HR organization," says Agarwal of Oyo.