Make no mistake: culture and ethics are lead from the top

The royal commission is constantly revealing unethical practices and behaviours in the financial sector that are associated with the culture of the specific organisations. These practices are indeed part of the organisational culture, but culture should not be blamed. Culture is not an entity, nor an act of misconduct by individuals who find a loophole in the system. Culture and ethics are the consequence of leadership. Leadership starts from the top. In this article, I would like to discuss what culture actually is and why it is the failure of the top leadership (board and top management), rather than of individual employees.

Culture is how things are done in the organisation– Organisational culture is often described as a “fluffy” concept that is hard to measure and report on to the board of directors. This is why we often see a huge gap between the values that are presented on the office walls, the policies companies display on their websites and the actual culture, the true way of how things are done in the organisation.

Culture influences the way team members think and behave–  as such, it is difficult to quantify the culture into a report, or to precisely measure it in a survey. For non-executive directors to know what is really happening on the floor, they actually need to be present and not rely on the top management written and verbal reports. Going down a few levels in the hierarchy and engaging with the employees and middle management would allow the board of directors a better understanding of their organisations’ true culture.

Culture promotes what is “right” and sanctions the “wrong” behaviours. “Wrong” behaviours that are not sanctioned are interpreted by the teams as acceptable conducts and become part of the culture. This is how organisations develop cultures of bullying and sexual harassment. It is when the top management turns a blind eye to behaviours that should have been perceived as unacceptable that these conducts become part of the culture. Hence, when CBA, for example, decided to ignore the activation of thousands of Youthsaver accounts by staff members using their own money or taking it from the bank, despite the small amounts and the supposedly no detriment for the customers, the management should have expected for further unethical behaviours to flourish in their bank. Once unethical behaviours are approved, the door is then opened to other immoral practices to thrive. The reason for this is simple:

  •  Culture is part of the “sense-making” process that helps employees interpret what is going on in the organisation and how to behave. We all have our individual values and ethical standards, but success and promotion in the workplace mean playing according to the organisational rules. The culture helps us interpret how to act and achieve our goals (and KPIs). Some employees prefer to move to different employers, rather than behave in a way they feel is not right, that is against their personal values and ethics. But what can they do when the common practices and standards of the industry are unethical? In June 2017, the Company Directors Journal reported the results of a global survey of financial services executives conducted by Economist Intelligence Unit in 2013. The survey found that 53 per cent of the respondents believe that career progression at their firms would be difficult without being flexible on ethical standards. Approximately the same number thinks that being rigid on ethical standards would cause their firms to be less competitive. Only 37 percent stated that being ethical would provide better financial results.
  • Organisational culture is influenced by the national culture it operates within. And here is where I am pessimistic and optimistic at the same time. The way the Australian media and society treated the AMP board is a reflection of the gender inequality in the Australian society. There is no connection between the performance of the then Chairperson of AMP and her being a woman and/or a mother. There is no correlation between the performance of the individual board members and gender as well. Yet, only female board members have resigned from the AMP board and the question that was asked at the AGM about recruitment according to gender or competencies is a major red flag. This is an unfortunate reflection that despite all the changes and efforts for gender equality, we are still far from where we should be as a society.

 

My optimism comes from seeing some social changes, including those that called for the royal commission enquiry to take place. Similar to the “#metoo” movement, where sexual harassment was the culture of the entertainment industry, I believe that the Australian society is going through a cultural change and the tolerance towards unethical behaviours such as those that were revealed by the royal commission is dramatically decreasing.

 

The role of organisational culture is to protect the organisation from changes. Culture often is portrayed as acting like the immune system of the body, protecting it from external influences and changes. This is the reason behind the failures of many organisational changes, such as mergers and acquisitions, joint ventures and transformations. In other words, the banks and other financial institutions are heading towards challenging times. The real challenge of the banks’ leadership will not be in focusing on the relatively easy tasks of changing processes, procedures, KPIs and bonus systems. The tough task will be to implement a new culture that is based on ethical decision making and behaviours. A culture that will allow employees to ask themselves in every given decision: “Is this the right thing to do?” and know the right answer and that the wrong behaviour will have unfavourable consequences for them.

So, let’s pay attention to this important question that is not asked often enough in the boardroom: “is the right thing to do?”. It should be reminded that every decision we make, including the decision not to make a decision has ethical implications. Furthermore, organisations have stakeholders, not only shareholders. Doing the right thing refers to the stakeholders- the customers, the community, the society, the environment, the employees and their families, the weak and the poor- not just to the profit of the organisation and the benefit of the shareholders. Following the findings of the royal commission, it looks as if this question was forgotten in many decisions, as well as stakeholders not being top of mind.

Last but not least, culture, this “fluffy” concept is shaped and modelled by the board and top management. It does not evolve in a void and cannot be accountable for faults and unethical conduct. Complacency, for example, cannot occur on the floor when the board and top management send messages of worry and angst. Management proactively leads and shapes the culture and when the culture goes wrong, they take the accountability and are responsible for developing and implementing a cultural change. Regaining the public trust starts with taking accountability and acting ethically.


Can high performing teams last in a toxic environment?

The following story happens more often than you think!

 

In a workshop I conducted to teams from a range of corporates, many of the participants described their corporate culture as toxic, inefficient, with silos and lack of collaboration and some even portrayed the culture as unethical.

Following on that I asked them if they have seen or been part of a dysfunctional team. Most hands were up with regards to seeing dysfunctional teams, less hands were raised to indicate being part of such a team… That’s interesting, I thought to myself, as I moved on to ask about high performing teams. Most participants raised their hands and claimed that their teams are high performing, despite existing within a toxic environment. Many believed that this is a sustainable situation.

Well… It certainly is not!

 Let me explain why:

  What makes teams high performing?

The internal structure, processes and dynamics of the team’s development set their basic performance. From my experience, in working and developing high performing teams, I find that they have the following internal ‘ABC’ characteristics: (© DifferenThinking)

  • Alignment – of purpose, mission, strategy, goals and values
  • Before me attitude team members share the load and put the team’s agendas first
  • Conflict management – they know how to grow from conflicts while avoiding their costs
  • Diversity of thinking – these teams are diverse and built on cognitive differences
  • Ethical standards- in the basis of decision making
  • Foundation processes – clarity about how to work together and get the best out of the team
  • Gratitude- based on trust and open communication

But these are only preliminary conditions. No high performing team can survive in a silo. Every team operates within its external environment as well, influencing and being influenced by it. To become a high performing team is not just composition, internal dynamics and team processes, team members must effectively collaborate with other teams. Hence the culture of the organization supports or disrupts the team’s performance.

Operating in a toxic culture, means operating in an environment that is lacking trust, commitment and accountability. Often even lacking of focus on what really matters (vision, goals, customers and results). Toxic environments have different ways of dealing with conflicts (ranging from avoiding to living as a “war zone”), and all are disruptive and dysfunctional. Most often these types of cultures ignore, or even encourage, unethical decisions and behaviors.

So, while we all would like to build high performing teams, the first place to start is by changing the organiszational culture, rather than the structure. A team that performs well in a toxic environment is most likely not a high performing team and under a positive culture would have been able to achieve much greater results.

 Looking back at my initial true story, I ask do these members are really part of high performing teams?

My response would be that I don’t think they are. While they may do achieve their milestones, from an overall perspective it does not mean they are high performing.

One last thought, let’s have a look at some of the findings by the Royal Commission. Again and again we heard of teams in financial institutions that have achieved all of their KPIs and even exceeded them, by providing services to non-existing customers and or to people who were deceased.  These team members received bonuses for achieving their KPIs an internally some of the teams were considered high performing.

Where they really???


The Real Reason Why Start-Ups Fail (Stop Blaming the Window of Opportunity)

It is often claimed that start-ups with amazing ideas have failed because of the short window of opportunity. However, it is not the time frame of the opportunity, but the lack of the founders’ “soft” skills that cause the delay in time to market and hence the loss of opportunity. Let me explain why.

The window of opportunity is the time period in which the start-up can realistically and successfully enter the market. Once the window opens, other players enter the market as well and they have a fair chance of success. Google, for example, was not the first search engine, they just executed it successfully.

Once the window closes, the opportunity may be lost forever. In competitive markets, such as those that start-ups operate within, the window of opportunity is often narrow. Yet, the reason for start-up failure is not the short period the window is open, but rather the lack of founders’ skills to execute in a timely manner.

Hence, I find it inexplicable that the focus of many programs is on teaching entrepreneurs how to identify an opportunity, while almost forgetting the role of execution in realising the opportunity for success. Identifying the opportunity is indeed very important, but without the ability to act and execute, it is worthless. Founders must have the right skills to act upon the opportunity and scale up. I refer to these skills as:

Execution = People + Culture + Leadership

These skills are an umbrella for many sub-skills, all related to leading and managing people.  To mention only a few:

  • Motivating and engaging teams
  • Driving performance
  • Building resilient high-performing teams
  • Building and leading a strong culture
  • Resolving conflicts
  • Managing personal and team members’ stress
  • Networking and building rapport with stakeholders, board members and customers

Why are these skills the most important? Well, entrepreneurship is focused on developing, organising and managing the resource-constrained start-up on its risks with the aims of scalability and profitability. Thomas Eisenmann (HBR, 2013) identifies the main entrepreneurial risks as related to market demand, technology, financing and execution. In other words, identifying problems and opportunities is only one part of the window of opportunities. Developing, organising and managing (= execution) is all about teams, culture and leadership.

It is important to remember that in every stage of the start-up’s lifecycle, founders need different skills for success. For example, the skills that are needed for developing business plans and pitching are very different than those that are required to successfully scale up. When you need these “soft” skills, it is too late to start developing them. They are much harder to acquire and take longer than developing the “hard” skills. This is when many founders (especially first-time founders) fail. It is not the window of opportunity, but the lack of skills that cause obstacles in scaling up and delays in delivering a high-quality product and service to the market.

So, what can founders do? The first step is awareness. Founders and potential founders should identify the people, culture and leadership skills that they need to develop and start developing them as soon as possible. Don’t wait until you raised the capital, as this may be too late. It is also important to look at the “soft” skills of the founders’ team and identify the gaps. I call it “Teampreneurs”, because it is not about the skills of the individual founder, but the qualities that the founder team has, where they complement each other and where the gaps are. There are a few ways that founders can work on developing these skills, including building a personal development plan, coaching and peer mentorship. The Victorian government (LaunchVic) identified the skills gap as a major obstacle. LaunchVic is currently sponsoring people, culture and leadership courses for founders and executives of start-ups and scale-ups to support them with skills development.

In summary, there are multiple windows of opportunities founders can identify and assess (such as markets, customers, technologies).  These opportunities are constantly shifting; time is crucial. Success is not just about identifying the time frame of the opportunity but mainly executing in a timely manner. And here is where the “soft” skills of founders kick in.


Smashing the myth about female and start-up entrepreneurship

 Startup Daily reported that only 24 % of Australian AgTech startups that have received funding since 2015 have a woman on their founding team.

I am often asked why most startup CTOs are men? Why there are more men entrepreneurs than women? Is there a mindset that men are more equipped for tech and leadership positions than women? Are men more innovative than women?It’s a sad fact that the tech industry is still vastly dominated by men. According to Huffingtonpost.com, only around 25% of all tech jobs are held by women. The number is even smaller for management roles, with only 14% of all CTO positions in tech companies are performed by women. Not to mention that only 5% of the Nobel Prize winners are female, even though women constitute over 50% of the world population.

 So, let’s deal with the myth first:

Females are not less creative, innovative or entrepreneurial than man!

However, they (or should I say- we) do need to overcome hurdles that men do not have in order to unleash our creativity, innovation and take the courage to prosper and shine above others. These obstacles, even the personal ones mostly stem from social expectations.1.     Men and women are equally innovative, but women are perceived as less innovative

Millward and Freeman found that while men and women are equally innovative, men are perceived as more innovative and risk-taking, and women are perceived as more adaptive and risk-adverse. This means that when men raise an initiative at work, people perceive it as innovative and when women introduce an initiative, it’s often perceived by others (be it male and female) as an adaptive solution. Millward and Freeman also found that innovative solutions were perceived to be more likely to be implemented if they were suggested by a male. Perception matters!

2.     Failure is more damaging to female

Millward and Freeman also noticed that men are expected by others to take more risks when innovating and that failure is less damaging to men because that’s part of taking risks. Women are expected to be less risky, and this limits their courage to innovate and share their innovative ideas. Failure is more damaging for women’s personal brand, so they are often more careful and adaptive in innovation. No wonder then why the fear of failure is a top concern of women who found start-ups. Innovation and entrepreneurship are processes of trial and error. There are more no’s then yes’s. We still live in a society that expects men to take risks and fail as part of the process while the message for the female is that they need to succeed at everything. On the other hand, a great success by a woman is often seen as too much…

3.     Girls are raised and educated in an anti-creative-business environment 

 Research shows that women and men are born with equivalent creative potential (Dr KH Kim). However, girls are often raised in an anti-creative-business environment climate. Boys are often encouraged by their families and the society to learn subjects such as STEM, finance, management, marketing, and entrepreneurship. As such, from childhood, women are not afforded the same resources and expectations as men are. This significantly contributes to the fact that fewer women found technology start-ups. For example, only 5%-15% of high-tech businesses are owned by women and only 8.3% of patents awarded by the European Patent Office are by women (Lymec.com).

4.     The support network and funding opportunities for women are much smaller than that of men

Female founders report that a lack of available advisers and mentors limits their professional growth (inc.com). It has been found again and again that women face limited access to funding. For example: though it could be unintentional, men fund people like them (gender, university etc.). VCs with female partners are more likely to invest in start-ups funded by a female. But how many of these do we have??? It is certainly easier for men founders to raise capital than women; except in cases when the woman has demonstrated her expertise and built her brand over time. First-time entrepreneurs’ male and female do not get the same opportunities!

So, how can we support increasing the women founders and co-founders’ talent pool?

  • Tailored founders training– It is important to enrich potential founders by creating unique training characterised by an inclusive entrepreneurial culture environment. It is not just about lean canvas, finance, marketing etc. We need to provide women with the right learning environment that will encourage entrepreneurship and take risks.
  • Support networks– We should continue developing the eco-system and develop formal and informal support networks for women to seek assistance and inspiration from.
  • Matching co-founders– Many founders are looking for co-founders. It’s harder than you may think… Working in pairs, men and women can do a better job of jointly developing new ideas and can potentially complement in management and scaling up the start-up.

Nepotism and start-ups: the Reality

The definition[1] of Nepotism is considered to be when people with power or influence favour relatives or friends, especially by giving them jobs or promoting them. But isn’t it how many start-ups commence?

When founding a company, cash is tight and the ability to attract talent is limited. Founders don’t have room for recruitment mistakes and the fit of every new employee is imperative for success. Hence, it is only natural that they try and find friends as their co-founders and reduce the risk by hiring friends and family members as their first employees. However, after capital raise and as part of the scaling up process, this practice, that might make life easier and safer at the start, can become a risk for future success.

 The practice of hiring friends and family members ensures that we recruit and promote those that are like us. We have a lot in common, which makes it easier, but it also means reducing the diversity of thinking and cognitive diversity. At later stages, it can create some cultural issues and affect loyalty, engagement and talent retainment. So, let’s break this down and look at when it is safe to hire friends and family members and how to avoid the risks it brings with it.

 When hiring friends/family is good for the start-up

  • Finding the right co-founder is crucial. It is not only about the hard skills that each founder brings to the business but ensuring that the co-founders can work together and build a high performing team. Approaching friends and family, means that the founders probably already have a good idea of what their strengths are and how they get along.
  • After raising initial capital (from family, friends and angels), recruiting the first few employees is a difficult task as well. You often don’t have enough money to pay competitive salaries, you don’t have a reputation of a “cool” employer yet, you don’t have posh offices with beers and food and taking a position with a small start-up can be considered as a big risk. The number of candidates that are interested in the job is smaller and founders often feel they have no choices, but to compromise on skills. If already compromising, why take the risk of bringing someone you don’t know?  It is safer to take someone that you already have personal relationships with, that you trust. Family and friends are more likely to also understand the cash flow constraints and won’t ask for increases or leave you easily when they gain experience and become competitive in the employment market.

When hiring friends/family risk the business

  • Hiring people like us, means risk falling into group think. Even when initially it looks like each friend brings different approached the table, the great relationships unconsciously can cause us to tend to agree or avoid conflicts in order to maintain the relationships.
  • Throughout life, we are exposed to many people and select those we feel close to. We collect our friendship group at school, university, sports and other interests. This means that our friendship group tends to have lots in common- such as age, interests, academic background, gender and culture. Recruiting our friends means that unintentionally we surround our team with limited cognitive diversity, which is at the basis of innovation. And what about potential clients? You want your team to be able to understand the needs of your diverse potential clients. Cognitive diversity is not just nice to have; it is a must! It is a core ingredient for successfully scaling up.

Once your team has passed the stage of recruiting the first handful of team members, continuing with the practice of bringing friends and family members can cause a cultural fraction of the team.

Past the initial stage, even if you don’t mean it, even if you recruited or promoted the best-suited candidate, others may perceive it as nepotism. Trust issues can arise and turnover of talent can begin. After all, they perceive it as nepotism, which means that for them (and their career path within the start-up) there is a glass ceiling. Why work hard above and beyond if there is no promotion or clear future for them?

With nepotism there are two important points to remember:

  1. It is not about your intention, but about how it is perceived by the team
  2. Regaining trust after it is breached by perceived nepotism is extremely difficult

So, what should you do?

  • Check that the team has a diversity of thinking and use techniques to avoid group thinking as part of the decision-making processes.
  • Make a conscious decision when the time would be to start recruiting talent from outside your network.
  • When recruiting the first employee out of your network, acknowledge and be open about the current relationships.
  • Be INCLUSIVE and allow everyone to influence in meetings and take part of the decision making. Be careful from influences of individuals outside meetings.
  • Pay a careful attention to the start-ups’ culture of transparency, inclusiveness and look for feedback about what “you don’t want to hear” and why you are wrong, rather than why you are right.

If you are a founder or employee that has experienced similar situations, I’d be very interested to hear and learn about your experiences and what worked and what didn’t work for you and the organisation.

[1] https://en.wikipedia.org/wiki/Nepotism.

What Are the MUST HAVE of Every Successful New Venture Team?

In my previous post, I discussed the importance of the New Venture Team (NVT) in setting the start-up for success and failure. The NVT is a unique type of team that has a much greater accountability and wider role than that of a normal functional team within an established organisation. Being a member of an NVT is nothing like the team member role that we are all so used to. The ultimate outcome of the start-up is the result of how the NVT functions. No matter how great the idea is or the potential of the new technology, only high performing teams can establish a sustainably successful start-up. We tend to assess the start-up results, looking at sales, profitability, global growth, while overlooking how the start-up really got there.

So, what does it take to become a successful start-up?

There are two major team components that drive the start-up results: diversity of thinking and team processes.

The diversity of thinking:

NVTs operate in a never-ending changing environment. They don’t have the luxury of reaching a milestone and resting there for a while. While working on reaching a milestone, they need to start thinking on the next one. At the same time that the start-up is evolving, the environment is rapidly changing. Most decisions and practices need to be constantly evaluated and the comfort zone is far from the horizon. In this type of environment that is based on novel and unstructured decisions, the major enemy is group thinking. You must have a diverse range of opinions looking at the situation before making a decision. To reach a diversity of thinking, NVTs need to have a variety and complementary:

  • Experiences, knowledge and expertise- that cover understanding of internal processes and external influences
  • Skills and competencies
  • Personalities- when looking for co-founders, people often seek complementary skills and individual chemistry. However, beyond the chemistry (which is very important indeed), NVTs must have complementary personality traits. This is something that investors tend to overlook as well. For example:
  1. Risk profiles- if everyone in the team is risk adverse, the start-up might move too slowly. If everyone in the team is a risk taker, then the start-up may take off fast, but major risks might not be considered and mitigated. The team needs to have a balanced view of risks when making decisions.
  2. Resilience- leading a start-up is a never-ending roller coaster. Founders and members of NVTs must be there for each other. They must pull each other up, despite the challenges, and move forward. Everyone will have a time of regression or a moment of desperation, but if one is pulling down the entire team, the start-up is in danger. The mental state and resilience of the team are crucial.
  3. Looking at frameworks like MBTI, we can learn about other types of diversity that the team would benefit from decision makers that use intuition vs. evidence based thinkers, process oriented vs. breakthrough seekers, task oriented vs. people oriented, fast and dynamic vs. steady, those that love running with a project on their own vs. collaboration focused people and the thinkers vs. the feelers.
  4. Culture, gender, age – support the ability to understand future client and stakeholders’ needs.

The diversity of thinking is a key for successful decision making. Having said that, there are two inputs that each of the individuals brings to the team that should have no diversity on high integrity and commitment. Believe me, hearing many stories of founders, you don’t want to be a team member where your colleagues are cruising or not sharing your definition of what integrity means. No compromises on these two!

Team processes:

While the diversity of thinking is key, it also creates risks and needs to be managed properly:

·     Conflicts- the more diverse the views are, the more conflicts the team deals with. Conflicts are not a problem at all; on the contrary- when managed constructively, they allow the NVT the opportunity to discuss the start-up’s goals and make better decisions. The problem arises when conflicts are avoided and/or managed badly, this is when teams find themselves dysfunctional and pay high team and individual costs (anxiety, separation).

  • Team dynamics- including teamwork (working together and sharing the load), and feeling of safety in the team- are processes that need to be worked on. Alternatively, power and political games kick in and start eating the team from the inside.
  • The processes of establishing the start-ups’ vision, strategy, goals, business plan and culture significantly influence the start-up’s success as well.

The team can be diverse, but if these processes are not set well for success, the start-up heads towards failure.

So, what does it mean to be a high performing NVT? This is the topic of my next post…

Want to get your NVT right? – Follow me on LinkedIn or Twitter to ensure you receive these short posts full of practical advice.

Want to share your thoughts about NVTs, culture and start-ups? I would love to hear from you.


How does culture influence start-ups? – The Cultural OPPORTUNITY

Culture, culture, culture… your start-up has a culture, even without any conscious effort. Like it or not, everything your start-up does is affected by its culture. The culture provides internal threats and opportunities. If start-ups get it wrong, the culture can hinder success and risk sustainability, as the window of opportunities is short. So instead of ignoring it, why not proactively manage your organisational culture and ensure it provides opportunities for growth and success?

In my last post, I identified signs of negative cultural characteristics. This post is focused on cultural characteristics of great start-ups, those that create opportunities, support success and lead for growth.

What constitutes a great culture?

 

For outsiders, start-ups seem like glorious work places to work at. Photos and stories in the media of amazing fun activities created a feeling (especially for graduates) that working in a start-up is an easy, fun journey. In fact, this is exactly the opposite. Start-ups demand longer hours, unpredictable deadlines and can be at times very stressful to work in. Hence, the importance of developing a great culture that navigates the energy and creates opportunities.

A great culture is composed of four elements: leadership that sets a clear direction and a team that performs in a supportive, yet uncompromising, environment.

Trusted Leadershipstrong leadership means that the founders and managers model the right behaviours, decisions and company values. They never compromise on integrity (internally with employees and externally with clients and stakeholders). They acknowledge that great decisions can come from anywhere in the company, regardless of hierarchy, and hence constantly encourage contribution, innovation, and initiatives.

Clear Direction- a great start-up culture is focused on supporting the company’s success. The customer is the centre! There are a clear mission, strategy and goals alignment that create a shared sense of purpose. These are transparent and constantly communicated to the team.

Valued Team– why do great start-up cultures are always based on high performing teams? It is not only because of the recruitment of the right talent but also because these teams are based on collaboration, are continually challenged and receive the opportunities to excel. They feel valued and are managed as teams, rather than a bunch of individuals that work on shared tasks. They are inspired by the mission and big picture, not by a specific task / KPI to complete and be judged upon.

Unique Environment- the environment that is set by the leadership is that of intolerance for mediocracy, nor for waste. It is agile (flexible), with a positive vibe that allows people to have fun during this roller coaster ride, called start-up.

The cultural opportunity

 

Start-ups that get their culture right enjoy success and growth. Why?

Internally:

  • Their teams are motivated, loyal, and engaged. Morale is high, employee turnover is low and institutional knowledge is retained.
  • Their teams are focused on the same goals, working hard but feel valued. They stretch themselves and enjoy challenges and achievements.
  • Integrity and ethics are the basis for all decision making.

Externally:

  • They have happy clients! and great relationships with suppliers, investors and other stakeholders who are feel valued.
  • Their team represents a positive brand image of the company.
  • They are more competitive, given the focus on excellence.
  • They change and adapt to the external environment easily with no internal resistance.

How to proactively design the culture of your start-up and what to do when the culture goes wrong are the topics of my next two posts.

Want to get you start-up culture right? – Follow me on LinkedIn or Twitter to ensure you receive these short posts full of practical advice.

Want to share your thoughts about culture and start-up? I would love to hear from you.


Recruiting for your Startup is failing? This might be why…

I meet with startups on a daily basis and am amazed how they all describe the same symptoms as major challenges for growth: they can’t get the talent they are looking for on time to deliver promised deadlines! And when they recruit them, it is too late to start training and bringing them up to speed.

The reasons stated are always the same: lack of talent in the market, tough competition, multinationals and heavily funded startups are bumping salaries up…

These stated reasons are not the true problem. The core problem is that startups are making over and over the same mistake: wasting money on transactional HR rather than engaging in strategic HR planning.Transactional HR, especially in startups, does not support growth!

To grow your startup, you need a proper workforce planning for each of the planned milestones:

  • What skills will you need in order to achieve the company goals and by when?
  • How should the startup structure look like to ensure best efficiencies?
  • When should you start looking for these skills and how you will attract them?
  • How are you going to support your new employees to become productive on time?

Without such a workforce planning, well in advance, no transactional recruitment will deliver the right people with the right skills at the right time. You can continue paying for transactional HR and recruitment, but is this really where your money needs to go? Start thinking about your people performance as part of your strategic planning and you will get the results you really need!


What should successful investors and VCs look for…

When investing in a startup, you don’t finance a great idea; you invest in the entrepreneurs, the founders.

There are countless great ideas in the market, but not everyone, nor every team, can pull a company together and head it for success. This means that as an investor, you need to carefully observe the founders, way beyond looking at their idea, market needs and financial feasibility.

The list of desired characteristics is long and no one can have it all. From my experience, here are some good starting points to
focus your attention on:

1. Everything is workable, but not everyone is coachable!

As an investor, you should always look for ways to help the startup. You have the knowledge, experience, relationships in the market and network of advisors. So, in essence, many of the identified challenges are workable. The problem is that in many cases you won’t know all the challenges. Sometimes the founders don’t fully acknowledge them, or perhaps they just don’t see the entire picture correctly. At the end of the day, everyone could benefit from support, but not all of us seek it.

And this is where the concept of “coach-ability” kicks in. As an investor, you make suggestions. Some people implement them, others ignore. Why is that?

In order to truly develop and change, we need awareness and willingness.

 

Awareness- in order to change, or ask for support, one must be aware of her/his own blind spots and areas for development. Without the self-awareness, no change will occur. As an investor, you can tell your thoughts and observations, but they will fall on deaf ears. Hence, when meeting with entrepreneurs, you must check their self-awareness levels.

This is not always easy. When answering straight forward questions, entrepreneurs may indicate certain areas for development, but are these really the core areas they are lacking? Are these all their development needs? What are their blind spots? What do they know and tell about themselves? What do they know and don’t say? What don’t they know about themselves? What is their general attitude? You must ensure you know these answers before investing.

Willingness- Awareness is a great start, but is not enough. We are all aware of areas we could benefit from developing, however, must be willing to focus our energy on changing, going out of our comfort zone and trying new behaviours, different ways of thinking and working.

As an investor, you need to ensure that the entrepreneurs you are about to invest in are aware and are truly willing to learn and change on their way to success. This is especially important when investing in first-time founders, CEOs and CTOs.

Support- The support investors provide is far beyond knowledge. Ongoing coaching, mentoring, suggestions, ideas- all are important and will work well, provided that the entrepreneurs are coachable – aware and willing. It is not a one-off advice that will provide for success, but an ongoing feedback, as the entrepreneurs are in a process of trial and error, learning new skills.

2. Business maturity is not a matter of age

Many entrepreneurs are young and in some degree still naive. This is often playing for their success. Where maturity really matters is when it meets business understanding and commercialism. I refer to business maturity as a concept that includes the ability to know what they don’t know. The more intelligent people are, the more they are aware of the limitation of their own knowledge. Maturity is part of this as well.

Do they know what they don’t know? Do they see the entire commercial picture? If not- are they aware of the areas that they are lacking? What did they learn from previous failures? Those that are not mature enough will tend to blame external sources for the failure; mature people will be able to analyse what they have done wrong and what they should have done differently. They will be able to tell you how they are going to implement their learnings in the future. Honesty plays a part here as well.

Ability to focus, create a vision, inspire others and other traits are very important, but without sufficient business maturity- it will be very hard to run a successful startup.

3. It’s all about the team

Teams, teams, teams… everyone writes about the importance of the founders’ team. I agree, and also believe that the team approach is beyond that of the small founders. If the founders are friends and seem like a great team, but don’t have an inclusive team approach, how are they going to attract, manage and retain others?

It is also very important that the founders have complementary skills. Again, the concept of complementary skills goes way beyond the founders’ team. Especially when the team is small, each new employee is filling a skills gap and hence potentially brings a diversity of thought to the startup. How inclusive are the entrepreneurs? How accepting are they of different views? What is their communication style? Can they work well together? Can they work well with and lead others?

4. The spark in the eyes must be complemented with resilience and grit

Yes, without the spark in the eyes, the passion, creativity and energy, the startup can’t be built. But the spark is not enough. Building a startup is living in a roller coaster. There will be ups and downs, many small “failures” or regressions that have the potential to switch off the light. Entrepreneurs must be resilient. They need to be able to cope with numerous challenges and hurdles and have the gift, the courage to do it no matter what. Make mistakes, be rejected, fall, get up and move on stronger and wiser. Not everyone with passion is strong enough to go through it.

It is easy to identify the spark; a bit more difficult (but certainly doable) to assess resilience and grit.

 All these traits can and should be assessed as part of the due diligence VCs and Investors do prior to making investment decisions.

As I tell my clients, “at the end of the day, great ideas are built by people. Don’t forget the people element when looking for your next investment!”


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.