HR processes and documentation for startups

Processes take away the subjectivity in decision-making. And since HR is about dealing with people, subjectivity can be a dangerous thing.

Most startups make the mistake of thinking that they will handle the HR activity on a case-to-case basis in the initial stages, and implement the processes when they are ready to scale.However, when you are growing, there is never enough time to plan, test, implement, rework and finalize processes.

The ideal time to build any processes, even for HR, is when starting up. Processes need not be complex and multi-layered. A process is nothing but a well-thought of way to deal with any situation or activity.

Some of the processes, and therefore the documentation related to the processes, which a startup should define at the beginning of the journey are as follows:

  • Interviewing and evaluation: Working out a process which allows you to interview people with a well-defined objective and evaluation criteria is critical. It also helps provide a template for valuating the candidates, and helps narrow down the choices.
  • Compensation package: A well-designed compensation package not only reflects a professional approach, but also helps employees feel good about their offer. In fact, a well-designed compensation package can also lead to cost savings for the startup. Consult specialists like PlugHR for a startup consulting package.
  • On-boarding an employee: On-boarding an employee is the process of welcoming a new employee into your company. Especially for the first few employees, it is important for you to have a one-on-one on-boarding program. Define a process covering the following
    • A welcome talk/presentation that outlines the vision and aspirations of the company – help the employee feel great about the decision to join
    • Explain the processes that may be relevant, including the areas in which processes that are yet to evolve
    • Present their business cards, and a nicely drafted welcome note
    • Ask if they have any queries and questions
    • Give them clear KRAs and directions on what they are expected to do and what they will be evaluated on
    • Finally, introduce them to the rest of the team highlighting some of their key strengths
  • Performance measurement: This is directly related to the process of setting clear KRAs or Key Responsibility Areas. The performance measurement system should be directly linked to the compensation review mechanism.
  • Feedback and regular interactions: Set a process for regular ‘all-hands-on-deck’ meetings where the founders should share the process, or lack of it, every month. If the progress is not as per plan, this forum should be used to explain how you are planning to adjust the plan so that the company is back on track. This should also be the forum for getting people’s feedback.
  • Exit interviews: One critical aspect that is ignored in most startups is a formal exit interview. When a person is leaving a startup, asking the reasons for the decision can be very informative and instructive in understanding the gaps between perceived expectations and perceived reality. This can be useful in either – the founders setting things right if there were any gaps, or in communicating the expectations right, in case the gaps were perceived rather than real.
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How much equity should I ask for, from an early stage startup, in lieu of a normal salary?

While there are several approaches available, and a lot will depend on the stage of the startup, status of funding, criticality of your role, etc.

Typically, if your role is critical to the success of the startup, the founders will be willing to give a higher equity in lieu of normal salary. However, if you bring generic skill sets to the team (e.g. social media marketing, sales, coding, etc.) then the percentage of equity will be, understandably lower.

A good way to think about this is to multiply the difference between ‘normal salary’ and what is actually paid by a number that you and the founders feel is right to justify the ‘risk’ associated with the engagement.

E.g. (and these numbers are just for illustration) if your ‘normal’ salary should be $ 10,000 pm, and suppose the startup was giving you $2000, and that this lower salary was to continue for a period of 18 months, then the total salary that you would not get would be $8000 pm X 18 months i.e $144,000. Now, assume that the founders and you agree that you should be compensated in equity worth 3x of the amount that you are foregoing, in which case, you would need to be given $450,000 in equity.

Now comes the tricky part… i.e. of estimating how much equity would be worth $ 450,000 when it is given to you. Here’s where the math changes into art/perceptions/negotiations. Assume that the founders feel that the startup will be valued at $ 45 million, then they would give you 1% equity, whereas if you feel that they would be valued at $4.5 million, you would want 10% equity. Here is where you and the founders would need to agree on the vision, aspiration, potential, etc.

Of course, this conversation will happen only if you are critical to the team… else, you will be given equity in line with the ESOPs policy of the startup.

Is it better to hire a web designer or outsource the design and UI work?

Here are my thoughts –

  • When you work with on outside firm, you save by not having to hire a person and have them on staff for this purpose. The design won’t be too altered, so outsource is a good option. One can maintain the site internally once it’s done and delivered.
  • By hiring an outside firm, you also get the expertise and know how of a firm, that has hopefully been doing this for a living and for a while. They can offer you a range of solutions both in case of information architecture as well as design for the website. And the designs that you will receive are from a group of designers and not just one individual.
  • It is not always necessary to outsource to local firm /freelancer. For most web development projects there’s no need to see someone in person, especially for a smaller site. It can be done via phone and emails.
  • Design work will slow down after a month or two. A freelancer is flexible enough to pick up work as you need. You only need to pay a freelancer for the work they do. There is also a range of skill levels available to suit your budget.
  • If you are a developer, then you should ask the design agency/resource to provide you with static HTML pages. Paying for more (working templates) is not worth it, because you’re going to be modifying those over the life of your business; your employees need to know and love how they work. Paying for less is risky because it can be time-consuming to translate a mockup into a working HTML page (browser, screen-size compatibility, layout issues, etc).
  • Make sure you wireframe before you even think about look and feel. You can do this yourselves if you have prior experience with UX design. If not make sure your designer is skilled in that area and isn’t “just” a graphic designer.

Would love to hear your views…

When is the right time to hire a sales person in a startup?

The answer to this question depends on the stage of the startup, the nature of the industry, the current team’s capabilities and competencies and the resources available for hiring and retaining the appropriate sales person. 

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Sales people typically like to work with companies where the processes are well defined, the value proposition has been proven and the marketing material and sales packages are all working smoothly. They usually like to achieve their numbers and targets, measuring themselves against their peers and their own achievements on the basis of how well they have achieved their targets. Hardcore sales folks do NOT typically like to be trapped in working and reworking processes, strategy, pricing, sale packages or even experimenting with different value propositions to different customer segments.

Ideally, you should hire a sales person (senior or junior), when some of the uncertainties of the business have been tested and proven.  

In the initial phase of the business, you will not / cannot know what price points will work, which audience segments will respond better or what communication messages will deliver better results. As a result, a new sales team tends to interpret this phase of ‘experimenting’ as “the management is undecided and unclear about what they want to do”, and hence start looking around for more stable opportunities. A sales team or the head of sales, leaving the company soon after joining, sends a wrong signal to the market – not just to other sales folks, but also to other members of the team, customers, vendors and investors.

Also, if you don’t have a challenge big enough for your sales head, he may not enjoy the work. You should therefore start hiring sales folks when the organization is really ready to leverage their skills and competencies, and provide them enough motivation and material to go and win in the market.

However, it’s not always possible to wait for things to settle down, before you hire a sales team.

So, if you really do need a sales person at the early-stages of your journey, make sure that you explain the current stage to the sales person, clearly define what his or her roles and responsibilities will be in this phase (e.g. could be – to help define the marketing and sales packages/programs) and honestly apprise them on the role that they will have to perform in the initial phase. Enlighten them that every startup goes through this phase of discovery, and emphasize the FACT that they will learn a lot from this phase than they would in just any sales management role. Position it as a positive and do not be defensive about it.

Even if you – an entrepreneur, are not a sales person, recognize and appreciate that the sales people are motivated differently and that you need to understand their mindset to be able to challenge them, motivate them, encourage them and reward them.

Happy Hiring !

 

What should you know about hiring one of your competitor’s rock star employees?

(I am assuming that there are no legally binding or even friendly agreements between you and the competitor on poaching from each other).

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To begin with, do not hire just because a rock star employee from a competitor is available. Evaluate a few key things before you hire:

  • Do you really have a need for a person with that skill set and experience? Sometimes the possibility of getting a rockstar performer from a competitor to work for you can tempt you to hire the person simply because it ‘feels like there could be value’ … and, perhaps, it may give your ego a minor boost. Evaluate if you really need a person with that skill set and experience or, are you tempted to hire just because he/she is available. In some cases, even if you do not have a need for the person just yet, you and your board/investors may take a decision to hire the person simply because that employee may not be available when you need them. If you do not have an immediate need, assess when you are likely to need a person of that competence and caliber and how difficult will it be to find someone else. And then, take a decision based on costs, opportunities and risks. If you have an immediate need, then go ahead and hire (of course after evaluating a number of other parameters… some are mentioned below).
  • Even in the same division (e.g. sales), if you have different needs than what the person was working on with the competitor, check if the person you are hiring can deliver on that need: E.g. a head of sales, who has been delivering exceptionally good results in converting customers may not be as effective in designing sales programs and marketing communication material, if that is the key requirement of your organization currently. Also, the person may or may not have a passion or interest in doing different things that they have recently excelled at. Hence, don’t just evaluate his ability, but also his willingness and interest to do different things than in his previous job. In some cases, if the deviation is short-term (e.g. designing sales processes and hiring a sales team and developing sales/marketing material) ,  the new person and you may agree that he/she would oversee/drive that activity before moving on to do what he/she has been a rock star at doing.
  • If you are at a different stage of growth than your competitor is, that rock star employee may not be able to deliver the same results as he/she did for your competitor. E.g. if you are just entering a particular market, whereas the competitor is a well-established player, the dynamics of the on-ground realities may vary. Hence, your rock star employee may or may not be able to deliver on them in the changed circumstances.
  • Check if there is a ‘fit’ with your company personality, value-system, aggression (or lack of it), work culture, policies, infrastructure, etc.:  People who succeed in one environment may not necessarily be as effective or productive in a different environment. E.g. if your competitor’s work culture was more aggressive or competitive internally than yours, while your company’s work culture is more ‘encouraging rather than pushy’, the person may ‘respond differently’ and may or may not perform as he/she used to in the previous assignment. (In the Indian context, I would use the example of a person, working with let’s say Reliance, not being able to adjust in a TCS or Infosys.)

Also evaluate possible risks

  • Would there be any backlash or reaction from the competitor
  • Would it have any impact on your existing team (especially among those whose level that rock star employee may come in as)

Of course, there could be a lot of positive side-effects in hiring a rock star employee from a competitor. Here are a few possibilities:

  • The most important positives are the information (whatever legally permissible), learnings and industry connections that the person brings to the table
  •  Often, a rock star employee is able to convince more folks from that company to join in, thus making hiring a bit easier
  • It could be a positive signal for customers/partners/investors

We would love to hear your views on this. 

Does having a good office help in the early stages of a company?

In my view, having a decent office does play a very important role in the early stages of a company.

Here are some of my observations on this subject: Working out of home in the initial phases does not help No matter how serious and committed you are to your venture, working out of a ‘non-office environment’ [i.e. home or Cafe Coffee Day type outlet] just cuts down on your productivity. It is not just about inadequate infrastructure and support system, an office environment and the people around you just add to the feeling of being a real company.

It is very difficult to recruit talent without a good office Perhaps rightly so, people create perceptions and first opinions about a company by looking at the office. In our case, we have been particularly lucky to have received the generous support of our ex-bosses who kindly accommodated us in their offices and thus allowed us to attract high-quality talent which perhaps otherwise would have been difficult to do.

Without an office, business plans tend to get restricted by space available Inadequate or no office space and working out of coffee shops does leave you vulnerable to taking decisions based on restrictions of space.