The Hindu Business Line : Invest in people as you grow

There is an excellent framework by Eric Flamholtz that categorises emerging companies into four stages: the new venture stage; the expansion stage; the professionalisation stage; and the consolidation stage.

As revenues are an indicator of the complexity of running an organisation, let us see where things fall from a revenue perspective during the different stages. So, from a revenue perspective:

Stage 1: Could be between 0 to $400,000-500,000

Stage 2: Between $400,000-500,000 and $3-4 million

Stage 3: Between $3-4 million and $25-30 million

Stage 4: Upwards of $25-30 million

Many things that entrepreneurs do must vary distinctly between each of these stages, including the development of people. While it would be interesting to talk about the various things that companies should do as they go through each of these stages, the HR issues related to this could get diluted. So, I will limit my focus to HR aspects and specifically to the people development aspects at various stages.

At Stage 1 — the new venture stage — people development is never an issue. There is a small, close-knit team and there are so many challenges to solve; people get to do many things which are not necessarily a part of their job description. In this environment, people develop fast and are extremely satisfied. So, people development at this stage is never an explicit challenge.

As companies enter Stage 2 — where things begin to take off and the product/service has a high degree of receptiveness in the marketplace — development of people starts gaining importance. Of course, there is never enough time to do people development at this stage since everybody is so busy trying to push products/services out of the door to keep up with growth.

However, good entrepreneurs must realise that a new wave of people who have joined the organisation think they are joining a company that is successful and has all the operational systems, such as planned people development activities, in place. This new wave of people will never be as forgiving of the lack of systems as the original close-knit team.

At Stage 3 and beyond, people development acquires extreme importance and if emerging companies cannot provide a better experience, exposure and a planned career path for people, it is a recipe for disaster and an invitation for talent to leave for bigger and better-branded firms.

Each new wave of people joining the company would have fewer opportunities for interaction with the founding team and only an effective system can hold them. Personal interactions with the founding team that served as the glue in Stage 1 and to some extent in Stage 2 companies will no longer suffice. So, it is extremely important to professionalise all activities of running the company at this stage, including people development.

Key Issues

Some of the issues that emerging companies need to take note of include the following:

Emerging company entrepreneurs need to realise that each stage of growth is fundamentally different and requires a complete change in the way things are run. What worked yesterday does not necessarily need to work tomorrow and needs t o be changed. Else, the company cannot smoothly make the transition to the next level of growth.

The development of people is not just a by-product of projects and the work assigned to them. Work assignments are simply driven by business conditions and might or might not completely relate to the aspirations of the individual. Whil e people in the company must do what is required for the organisation’s success, the organisation must also think about the career path of every individual in a planned way and provide them with the required opportunities .

Emerging companies should focus on brand building. Even in a land of giants, there are enough opportunities to tell the story and promote the attractiveness of emerging companies. Companies must make brand-building in the talent market an explicit activity as in India, people’s self-esteem seems to completely rest on the brand for which they work. Branding initiatives on the part of the company not only gives people something to talk about in their social network, but also, very importantly, increases their perceived value in the marketplace.

Hence, there is direct value addition to an individual if he or she is perceived to be working for an attractive emerging company.

The Solution

Some of the solutions to the above issues are:

Recognising the different stages of growth and acting differently at each stage of growth.

Making people development and branding explicit activities that have the attention of top management.

In people development, emerging companies break the HR function to focus separately on recruitment and internal HR activities such as people development. However, I would recommend that every 50 or so employees be assigned to a separ ate HR executive whose sole function is the planning and implementation of the career-path of those employees.

Promote through branding efforts. This would create a powerful motivator in the talent marketplace and make the emerging company an attractive employer.

In branding, associations such as Nasscom must play a critical role in spotlighting the attractiveness of emerging companies. Initiatives such as the IT Innovation Awards and Fast 50 rankings would definitely help emerging firms find a place in the limelight.

If emerging company entrepreneurs pay the same amount of attention to people development activities as they do to their market or product development, it can create huge beneficial effects as the company begins to grow in scale.

(The writer is CEO, Aspire Systems, an outsourced product development firm.)

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