As an Investor / Founder - What should you know about how to deal with skills shortage

The Tech sector in Australia is growing! It took a while, but the government finally understood that it’s time to move from industry to innovation. The policy is catching up and investors are gaining confidence. However, without finding solutions to the skills shortage in the Australian market, start-ups are going to struggle.

Meeting with VCs and start-ups on a daily basis, I note they all seem to feel the same shortage in the Australian market:

  • Technology - development, cyber security, architecture etc. The great ideas are here, but not enough skilled people to develop and implement them.
  • Sales- proactive sales methodologies, the local and global experience of software sales.
  • Commercialism- many of the founders are running their first start-up, unlike in more mature markets such as Israel and the Silicon Valley, where in many cases founders have already been involved in a few start-ups before and have learned important lessons about how to run a start-up in a commercial manner.

Adding complexity to this skills shortage are: (1) while there are more and more start-ups, not enough graduates with practical certifications and experience are entering the employment market. (2) Global technology companies entering the region are offering salaries that start-ups cannot compete with, hence it is taking longer and longer for start-ups to recruit the skills and experience they need. (3) Beyond the salary, there is still a cultural element of risk avoidance and a preference to work in a stable 9-5 organisation with a “secured” salary.

So, what can be done?

At the policy level, the government should put more emphasis on STEM education at Secondary Schools while also look into interventions, subsidising relevant professional certifications and technology courses for those who already have graduate degrees and want to move to the innovation sectors, but don’t have the right skills and knowledge.

At the start-up level, there is one way to deal with the skills shortage:

workforce planning!

Stop treating HR and recruitment as a transactional immediate task. Start planning in advance the skills you will need, when you will need these skills and when & how to start looking for them.

Without this proactive planning approach, you will find yourself recutting today the people you needed six months ago and compromising on the necessary skills, experience and cultural match.

Are you an Entrepreneur ? These are three areas you must develop...

Ideas, passion, positivity, cleverness, and grit are great starting points. Most founders of start-ups have each of them to a certain degree. The difference between those who lead their ideas into successful companies to those who don’t get there is the attitude towards personal development and the actual learning curve.

The almost intuitive reaction to commencing the journey of entrepreneurship is seeking knowledge of important areas such the technology, market, how to manage cash flow etc. However, beyond the obvious commercial knowledge, to truly develop into a successful entrepreneur, founders need to “know what they don’t know” and seek support and development on the following:

  1. How to build their experience band in advance of the company’s progress- it is a false concept to assume that founders should only learn as their start-up evolves. Yes, we all learn from our experiences, but a start-up needs to be proactively lead, not have reactive founders that base their learning solely on the mistakes they make during this journey. Hence, I believe that all founders would benefit from actively seeking mentors that can open their eyes as to what they don’t know and need to know in order to successfully and proactively develop their companies.
  2. Recognition of red flags- what are red flags, how to identify them, how to interpret them in the organisational context and how to react are all important questions that, especially first-time founders need to learn. Again, mentors who established and grew companies are in the best position to help here as well. And no, they don’t need to understand the specific technology your start-up is dealing with; they need to have sufficient experience in building and expanding companies to draw your attention to those red flags.
  3. People management- how to select the right people to work with, manage, retain, develop and get out the best from your team (creativity, quality, and productivity) is not as simple as it sounds. Many founders put management development as the second priority, but can you really lead a company for success if you cannot get the best out of your team and keep them with you?

Passion, great idea and long hours dedicated to your start-up are not enough for success. As an entrepreneur, you must understand that part of the journey is your own development.

Parking your personal development until such time that you will have time and resources to focus on yourself, means that this time would never arrive, nor will success.

Take an action now and find the right support for you to strengthen your experience development, understand red flags and learn how to manage and lead your most important resources (= people).

The False assumption of new start-up Founders that causes them to fail

Founders of start-ups are often focused solely on getting the product in time to market and finding their new customers. They are too often concentrated on the day to day, rather than on managing their people. In recent coaching sessions, a founder told me “I don’t worry about what will happen if people leave me” and another founder said that “management skills are only nice to have”.

From my experience, the assumption that you can develop a successful company without paying attention to managing people and performance is false and dangerous.

Unless you are flying solo, no company can grow with a lack of talent. The basis for growth is having the right people, with the right skills at the right time.

This means planning your workforce in advance of the growth, identifying & developing your talent and making sure that those you can’t afford losing are staying with you throughout the journey.

Your employees are your capital. This is not merely a cliché.  For every start-up, this is a breaking point between success and failure. Start-ups don’t have time and resources to be process oriented and document every step, procedure, external relationships and code line. They rely on their employees more than a large organisation does. Taking for granted that employees will stay, and / or not caring if they leave could, and will, risk the start-up future success.

Implementing the right talent management framework is crucial and not just a ‘nice to have’. This does not mean bureaucracy, nor spending many hours on the issue.

Simple, best practice talent management planning, attraction, and retention strategies will help grow your businesses.

This is why the Australian government should subsidise training for the high-tech and start-up sectors

The high-tech start-up industry in Australia is gaining momentum, however, one of its major risks is the shortage of experienced talent to deliver the work (developers, UX, QAs etc.). Creative ideas and spirit of entrepreneurship are important, but we must ensure there is sufficient talent to deliver the work. Alternatively, salaries will continue rising until they reach a point when start-ups might not be able to employ local talent and will need to rely on outsourcing their core strategic work overseas.

Why is that happening:

  • While the innovation industry is gaining momentum, the number of graduates from STEM programs hasn’t picked up at the same pace.
  • Global technology companies receive benefits to open subsidiaries in Australia and can pay much higher salaries and provide great working environment and benefits.
  • With no incentives to take “risky” jobs in start-ups; graduates are tempted to go and work with the big, stable firms. Yes, a lot has been written about the power of culture…

When I talk to my clients and partners in the start-up industry, most give me a much longer list with further reasons. The bottom line is that if this won’t change, then the continuous growth of the start-up sector in Australia is at risk.

What can be done?

There are many ways that the Australian government can consider in supporting the industry. Startup AUS is doing a great job in advocacy. Last week I attended one of their events, which was an eye opener.

There is one point that I would like to emphasize. Successful and more mature start-up industries have been in similar situation years ago. What their governments then realised is that the “oxygen” of the industry is talent and a scarce of talent is a real problem. Therefore these governments subsidised courses for people who already had a bachelor degree (no matter in which area) to study tech based courses such as coding and QA. This meant that in addition to STEM graduates, the start-up industry suddenly had hundreds of people entering the workforce on a regular basis. Their academic knowledge might have been lower than that of an engineering graduate, but they started from the basic development and QA tasks and within two-three years many of them became very experienced and assets for their companies.

I am a great believer in encouraging the STEM studies at schools and at universities for the future, but we need talent now! If the government subsidises courses like certificate four in business administration or training, I would like to argue that subsidising courses that will allow more people to enter the start-up and innovation sectors would be a much better benefit for the Australian economy.

Just a thought…