Can start-up HR provide a radical new HR strategy?
Start-ups are taking global markets by storm. No longer are they one-off ventures in fresh fields, instead they are becoming the biggest players in their respective markets—and they are bringing with them new ways of working with employees. A crucial question many in traditional companies are asking is: what is it start-ups do with their workforce to get them engaged and help drive business success? Can this working culture enhance business performance in larger and more traditionally-run organisations too? HR Magazine finds out.
Working nine ‘til five with a liberal smattering of overtime, following company guidelines, reaching targets and meeting deadlines, seeing if something’s not quite right—all are part and parcel of a traditional workplace routine. For many, this has been the work culture throughout their career and has the benefit of history to show for its success.
In recent years, the likes of Amazon, Google, Facebook and Uber have hit the headlines with their global success stories—but lift the lid on their internal mechanics and one finds a setup and culture that differs in many ways to that of traditional corporate human resource strategies.
The difference comes down to these companies embracing a ‘start-up approach’. In one sense, these are relatively young companies that have sprung up and began buzzing with new ideas—but more accurately, such start-ups have brought a new and exciting working culture that appeals to the digital natives of the Internet era.
What is a start-up?
The definitions of a start-up vary considerably. While Merriam-Webster defines it as simply ‘a fledgling business enterprise’, it has increasingly become associated with a certain culture, especially in the high-tech sector.
Neil Blumenthal, co-CEO, Warby Parker—an online eye-and sunglasses retailer— described it as, “A company working to solve a problem where the solution is obvious and success is not guaranteed.” Meanwhile, Alexander Kaymer, co-founder and Managing Director, KAYRO Solutions—a Hong Kong international business consulting firm—told HR Magazine, “Their business operations primarily utilise new media, Internet and online topics while traditional companies deal more with physical goods, traditional trade and supply chains.”
Many now agree ‘start-up’ is a ‘state of mind’—or as Jan Koum, CEO, WhatsApp put it, ‘A feeling—where traditional hierarchical structures are broken down and bursts of fast-paced innovations change the course of business’.
Adopting some of these novel principles has the potential to significantly enhance staff engagement and unleash the full power of HR as a strategic business partner.
Transparency
Start-ups place a lot of emphasis on their level of transparency. It is not uncommon that start-ups release information to employees that include company performance week-to-week, what made the company begin a new arm of business, changes in business plan(s), how the company progresses and its reaction to competitors. Moreover, leadership in start-ups tends to reveal organisational plans and ask for active feedback from staff before implementing any changes, as opposed to the top-down decision making processes that are currently in place in many companies.
Leo Widrich, co-founder, Buffer for example surprised many by making the salaries of Buffer’s employees and the formula behind them transparent to the world. He claimed to have done this because they believe transparency is helpful on every level building trust with employees and helping retain key talent.
In contrast, big corporations are still facing challenges in becoming more transparent. According to Transparency International’s 2014 Transparency in Corporate Reporting Survey, they found that out of a set score of 100%, only 34 of the 124 largest trading companies in the world scored marks over 50% for transparency—with the average organisational transparency rate standing at 39%.
The likes of Microsoft, Pfizer and McDonald’s were amongst the lowest scoring companies at only 13%, and US companies are seeing the lowest transparency rates at an average of 24%. While the start-up culture seems to promote such transparency, the process has not been so smooth for some companies famed for this culture—including Google and Amazon—who in the same report were at the bottom of the list for organisational transparency as well.
Jumping around culture
Transparency is just one part of the story that helps start-ups to be attractive places to work. Speaking exclusively to HR Magazine, Adam Kingl, Executive Director of Learning Solutions, Executive Education, London Business School spoke about the changing expectations of millennials, “Gen Y do not expect linear job progression. They think of their careers as a portfolio of opportunities and experiences rather than climbing a career ladder. If companies want to retain this generation, they should give them challenging projects to work on and training opportunities more quickly.”
Jumping around different portfolios is something Joel Gascoigne, co-founder, Buffer has picked up on, “In Silicon Valley, there’s a culture of people jumping from one place to the next. That’s why we focus on culture. Doing it this way means we can grow just as fast—if not faster—than doing it the ‘normal’ cut-throat way. We’re putting oil into the engine to make sure everything can work smoothly so we can just shoot ahead and that’s what we’re starting to see.”
With Gen Y in particular jumping around, what culture anchors them to a company? For start-ups generally, the trend appears to be giving employees more responsibility. Commenting on the culture her start-up company offers, Caoimhe Keogan, VP People, Soundcloud stated, “We do this by giving people a purpose and making sure they are clear on what their role is and what they’re expected to do. We just give people the tools and freedom to do their jobs. What draws people to internet start-ups is the fact that they can make a real impact and take on a lot of responsibility there.”
Google has embraced giving people freedom to make a real impact with its ‘20% time’ initiative. It means that one day a week, employees are allowed to go away and work on a project that they are passionate about—the result of which has seen pet projects turned into actual products that Google now offers— and customers worldwide rely on.
Flexible working
Flexible working is another very important aspect for companies looking to modernise. Working from home at irregular hours is becoming more common in companies all over the world. Although, while it is not a new concept by a long shot, it is a feature widely thought to be taken up by start-up culture.
It features prominently at SoundCloud and Keogan agreed that flexible working is an incredibly important perk for employees and business nowadays, especially in the start-up scene. She explained, “We believe in flexible working— we don’t have a strong opinion on where people work, it is all about getting the work done. So wherever people best do, this is fine. It really depends on the individual personality, but people are generally social animals, so we do like having a space where people come together in the office. If people need to do intense or detailed work, sometimes it’s easier to do that alone outside the office.”
Flexible working is even gaining senior level support worldwide—according to the latest research by Regus, which surveyed over 44,000 senior business people across more than 100 countries. In fact, John Tsang Chun-wah, Financial Secretary, Hong Kong SAR Government recently encouraged employers in Hong Kong to introduce more flexible working arrangements in his Budget Speech in February.
HR as an afterthought
While these tactics might support and foster innovative business models and improve staff engagement as well as talent recruitment and retention, there are many aspects of HR that are often overlooked in young companies and actually form a very strategic part of doing business that big corporations have learned long ago not to ignore.
Shanley Kane, founder and CEO, Model View Culture—an independent media platform with a focus on technology, culture and diversity— has witnessed numerous practices in start-up HR that she considers ‘toxic’, and suggests younger companies have a lot to learn. Some of these include a lack of diversity efforts, relationships with early employees becoming too close—thus leading to issues such as bias and favouritism—and HR being defensive, not proactive, in its strategies.
HR, in many cases, is seen as an afterthought with employees who lack qualifications and experience getting promoted within HR. She commented, “It is incredibly common for HR departments at start-ups to be created by promoting early operational employees with absolutely no background, experience or training in HR to the role.” She writes that the ‘ill-fated’ recipients of these promotions are often general personnel who have filled a variety of roles in the initial build phases, only to take on the roles and responsibilities of HR as an afterthought when the company grows.
She added, “First, having had no experience or formal training in HR, the newly-appointed HR lead lacks the requisite training, background, professional support system and body of experience to effectively perform the job. Having novice, pseudo-HR professionals with no training or experience in sexual harassment, discrimination and employment law is obviously dangerous not only to the company but to marginalised employees who are not offered a competent human relations arm in which to seek recourse.”
Most HR professionals dedicate their career to avoiding the ‘anti-patterns’ Kane describes but they have been trained extensively by companies who value their existence and benefit directly from having a large employee pool managed proactively and inline with corporate values. This leads to large HR budgets and salaries for creating HR departments that stimulate, guide and support the entire company—resources that start-ups often do not have in the early stages and often neglect in the later stages.
Gender imbalance
Moreover, issues such as diversity and gender imbalance are largely neglected in the IT and tech industries, especially in start-ups. Karen Farzam, co-founder, W Hub said female students made up only a third of those studying technology-related subjects—and role models were severely lacking for those women that did try to buck the trend and join the male-dominated industry.
The winds however do seem to be changing. There are efforts to get female employees into these industries with the likes of The Women’s Foundation in Hong Kong running a series of mentorship and workshop programmes to promote technology among girls, with volunteers from big corporations such as Goldman Sachs taking part.
“It’s a good thing for more girls to get into the tech industry, because right now I would say it’s still very, very much male-dominated and we appreciate the variety of people joining. It’s a huge struggle,” said Victoria Li, 26, a recent graduate of educational start-up General Assembly’s 12-week web development course.
Companies that provide volunteers in these programmes, such as Goldman Sachs, set a great example for start-ups to tackle gender imbalance and diversity in the workforce. It is issues such as these that ‘traditional’ HR has been aware of and has been tackling for a long time. Taking a cue from best practices employed by established corporations can help HR get a foothold in young companies—where it’s often sorely needed.
That is not to say these patterns cannot be remedied. Companies that started out as start-ups such as Amazon and Google and have now grown into behemoth organisations often highly value their employee happiness and the budgets they provide for quality HR reflects that. For these companies, however, the line between a start-up and a corporate entity is severely blurred and one might even consider them corporate entities completely in their own right.
Job satisfaction
On the flip side, start-ups are doing certain things more effectively than traditional companies. In spite of the uncertainty that often comes with joining young companies, job satisfaction remains high. This may be because start-ups stand for culture and fun, just as much as work, with 93% feeling valued within their team and by company founders, according to a survey by the American Psychological Association.
Recent research in APAC from Microsoft recently showed how small and medium-sized businesses (SMB) in the region are meeting employees’ expectations in being more productive, collaborative and innovative in a mobile-first, cloud-first world. The study showed that as many as 74% of employees in APAC considered themselves as mobile workers, with 69% in both Hong Kong and Singapore, ahead of employees in other mature markets.
In what Microsoft has dubbed the ‘New World of Work’, companies—young and old—embrace new principles of doing business, a lot of which can be said were pioneered by start-ups. Horace Chow, General Manager, Microsoft Hong Kong commented, “Over the last decade, globalisation and technological innovations have brought the world closer and fundamentally changed the way people live and work. SMBs make up over 90% of business in Asia, and 98% of total business enterprises in Hong Kong—they contribute significantly to economic growth.”
While the study indicated Hong Kong is among the top in the region, there are three key areas which there could be more development—flexible working and work-life balance, more democracy in choice of technology, and technology optimisation. Microsoft claims that the ‘New World of Work’ presents four clear benefits for SMBs today—a more productive workforce, a more collaborative workforce, a more innovative workforce and a happier workplace.
Quality candidates from referrals
Start-ups are also seemingly reaping the benefits of approaching talent in less conventional ways. In Hong Kong, according to LinkedIn’s Talent Trends Report, 50% of employees find their opportunities through word-of-mouth—which ranked as the third most popular means of getting a job. It compliments findings by Resource Solution’s Talent Insights Survey 2015 which revealed that 20% of its respondents in APAC got their current job through a referral—ranking as the second most important way of getting a job.
While HR in bigger, well-known corporations have had no problem getting applications from talent, start-ups have appeared more actively in-tune to branding and exploiting personal networks to snatch away some of the brightest up-and-coming talent.
One such start-up, which has made recruitment by referral central to their business, is RecruitMyBuddy.co.uk. According to this start-up, if someone refers a friend and they get hired, they earn GBP 500 paid by the company who hired them. A one-off fee for the perfect candidate seems like the perfect HR headache cure—both for corporate HR and for start-ups—so how well does it work?
Marc Wareing, founder, RecruitMyBuddy, reflected that “The feedback we have received so far has been extremely positive. If you speak to a great deal of HR managers, many of them will agree that internal referrals are usually great hires—they just aren’t getting enough of them. RecruitMyBuddy takes that concept and expands it—it gives companies an incentive to advertise with us and gives referrers an incentive to recommend good quality candidates.”
As a start-up themselves, the people behind RecruitMyBuddy have a keen eye on saving cost, without having to sacrifice quality. The value of referrals is well-known to HR, but outsourcing recruitment can be a time-consuming and costly endeavour– something that both established HR departments and hatchling companies can struggle with on occasion.
Coming from a HR and recruitment background himself, Wareing found that often the best quality hires came from internal referrals. Oftentimes, this is limited by how many employees the business has, what incentive those staff members have and the scale of their networks.
He commented, “Our main focus is always on the quality of the candidate. Recruitment agencies will often be an expensive route to go down, and they may have only a limited understanding of your industry simply because they don’t work in it. On the other hand, our referral network sits on the opposite side of the fence; they have already seen candidates in a work environment and are therefore far better placed to spot good candidates.
He added, “However, referrers are effectively ‘mini’ specialist recruitment consultants who will be doing it as a secondary form of income, which greatly reduces the cost for the business involved.”
So while this still does not address the issue of recruiting completely externally—consultancies and agencies will likely dominate that market for the foreseeable future—it certainly showcases how the start-up mindset can innovate HR and cut costs while doing so.
Best of both worlds
Companies like Google have risen far beyond the start-up model they started out with but they remain one of the top companies to work for, according to numerous institutions and surveys year-on-year. Google retains its ‘unique’ position by incorporating the best of both worlds.
Both start-ups and established companies can achieve amazing engagement, recruitment and retention rates through a myriad of ways—as evidenced by the sheer variety in most ‘best places to work’ lists—so saying there is such a thing as a golden key to HR, or even that we are on the wrong track would be inaccurate. It should be noted, however, that by implementing some innovative HR tactics from start-up pioneers or listening to tried and tested HR practices from the business world can make any company’s HR even just a little bit better.
By employing established HR principles and combining that with things like flexibility, transparency and engagement, HR can unleash the start-up spark in any corporation, young or old—big or small.
Paul Arkwright
Publisher
