In the fevered early days of starting up, the founder needs to focus almost exclusively on product, and only then on profit and people. But when the startup’s growth engine fires up, product-market-fit is achieved and scale becomes a reality instead of a future target, the founder has to flip his priorities and start focusing on people first and then profit and product. Recently, I was part of Jivraj Singh Sachar’s podcast, Indian Silicon Valley, and the conversation got me thinking about this evolution founders need to go through in a very short span of time (listen to the podcast here). I believe how well a founder makes this transition from product-first to people-first will determine how successful the founder and the startup startup will be. Which is why I decided to focus on this topic in this post in my First Principles series.
A tough transition
A startup on the path to success takes about years to move from early stage to growth. This translates to the founder, who may very well be building a company from the ground up for the very first time, also needing to make a rapid transformation in this short span of time. In the early days a startup founder primarily needs to be good at storytelling, but once the startup is on the growth path and flip happens the founder needs to have great vision and needs to be a strategic thinker. Parallely, the founder has to be almost single-minded in his focus on product in the foundation days of the startup and in under 2.5 years pick up the skills, the knowledge, and the capability to be a people leader. To put it mildly—this is a tough transition.
Why do I stress upon this transition, and upon this need to put people first? The answer is deceptively simple. The founder needs to be the startup’s leader—that’s a truism. Does a leader lead product or people—people, of course. This is the answer then for why founders need to undergo this rapid skill growth.
How can founders transition smoothly
Like in many aspects of the startup journey, this is more an art rather than a science. However, I have seen that a few key choices and skills can help the founder make this transition with greater ease.
1. The founder should keep in mind, and this should reflect in action, that eventually people are the most important part of the startup. What does this mean? A startup can have the greatest product idea, but it will need people for execution, to get the product to market, and to ensure the product remains relevant. Founders need to remember this right from when they are putting the first touches to the startup and the product. More often than not, in the beginning, the founder has just an idea.
2. It is also necessary to choose and hire the right set of people, who will work to get the idea off the ground. Founders sometimes make the mistake of being too selective or conversely picking the first candidate who shows interest.
a. The early-stage employee should be agile, needs to be a hustler, and has to be a problem solver. At this stage, subject-matter expertise, overall experience, and even qualifications do not matter as much as these qualities. A founder needs to be able to assess whether the potential hire has these qualities. Equally, the early-stage employee needs to have a big heart, should be passionate about the idea and the work and should have a willingness to take risks. What the founder and the employee need to remember is that the latter is almost like the founder at the early stage.
b. When it comes to specialist hires, in the early-stage, an exception to the earlier rule is in cases of extremely specialised knowledge requirements in the early-stage itself. For instance, if you are launching a gaming startup you will need an expert user experience designer right from the beginning. Similarly, founders face this conundrum of choosing the best mix of experienced and inexperienced hires. Again, if you are in a high tech space you will need more experienced hires. But a general rule of thumb is to maintain the 40:60 ratio between experienced and inexperienced hires. The idea is that the inexperienced employees will eventually pick up the skills and become an experienced team member, so the startup needs to ensure the hiring pipeline maintains this ratio throughout. Also, in tech being up to date is extremely important and it may well be that the fresher may have the latest skill sets. So when it comes to Specialist Vs Generalist and Experienced Vs Inexperienced, the founder needs to make an informed decision that works for the startup.
c. However, the most important criteria especially at the early stage is a match of mindsets between the founder and the employee. There needs to be synergy between the founder and early-stage employee.
The whole value proposition is being able to debate, to poke holes and, of course, to effectively execute the idea—if the founder and founding team do not have the chemistry and openness to accept one another’s opinions point blank then it is pointless.
While I am focusing on hiring decisions here, it is a fact that a lot of these decisions will be taken on the fly and much more of the founder’s thought process will be dedicated to the product, as it should be. What I want to reiterate here is that people-decisions and hiring need to also be done mindfully as the early days of a startup sets the pace and standard for decision making at a later stage. Course correction is always much more difficult than charting out the course. These correct people-decisions in the beginning will also give the founder a head start on the transition journey that he will eventually need to make from product-first to people-first.
3. Linked to the earlier point, is the point regarding organisational culture. Org culture has become something of a buzzword, yet it is still quite misunderstood. (I did a deep dive into org culture with the AgroStar case study here).
The founder needs to decide what they want and what they do not want in terms of people-qualities—what kind of human behaviours that needs to be celebrated and included. That becomes culture. In blitz scaling we know a founder has to focus on many important needs at the same time, from fundraising and growth to building the leadership team. Culture becomes even more important, as it becomes the template for the team to follow.
Within culture, emotional connection becomes important. Many employees go above and beyond because of this connection with the startup and, especially in startups, with the founder. People are working together for 12 to even 18 hours in high pressure situations. Only if this emotional connection is present, will it seem worthwhile in the long run. This emotional connection needs work; it cannot be faked.
4. Linked to culture is organisational processes, which ensure that there is a system and a method that is keeping the startup on track. Growth should not be a fluke. The purpose of a startup remains the same even at the growth stage, but the founder needs to be able to re-energise a team on the same purpose and on the vision that is being built. That is constant. Organisational processes, like OKRs (Objectives and Key Results), help employees understand how they are contributing to the startup. When that is clear, the employee stickiness goes up. Which is why even early-stage startups need to implement OKR.
a. Founding team retention: There comes a time in all startups when functions become clear cut and each needs specialists. Experienced hires are needed and at this stage a number of key early-stage employees might feel like they are being sidelined or are redundant. I have discussed this point in great detail in my earlier post on The Founder Conundrum: Should You Go Solo or-Get Co-founders. In that Rahul Garg, Founder of Moglix, made an important point: “The early team has been around right from product-market fit; they have a strong connection with the company and the founder and have strong pride in what has been built. They have the emotional connect and a certain ability to do zero-to-one far easier and far more seamlessly than leaders who come in later.”
While not all the early employees will choose to stay, a founder who has given importance to the people who have journeyed with him and who has built processes and systems to ensure these people remain relevant will be able to ensure that quite a number of early employees remain by his side even when and if senior hires replace them or come above them. Ensuring training and upskilling programmes are available, communication channels are always open and is two-way, feedback is given regularly and along with it support, and OKRs are in place will help ensure this works.
b. Conflict resolution: As teams grow, conflicts and difference of opinions will become more common. This is natural. In fact, if it seems like there is no conflict at all then there is something definitely wrong with the company! What is important is how conflicts get resolved. The point to keep in mind is to leave the person out of the conflict. Conflict is with idea, process or goal, not with the human. There is never conflict in the purpose; the conflict arises as there are always different paths, views or opinions on how to achieve this purpose. This separation of the person from the conflict ensures disagreements do not get personal. That said, if a person’s personal ‘culture’ is misaligned with the company’s, it is best to part ways if corrective actions do not work. Organisational culture is sacrosanct.
6. A strong HR goes a long way in becoming a strong support for the founder as he or she focuses on being a people leader. HR is an enabling function, it supports business to become successful. HR needs to follow a three-step approach—transactional, tactical and strategic. It plays these three roles at the same time. The HR leader may make a transactional or tactical decision for today, but needs to be able to foresee how that decision of today will impact the startup in the next two to three years. For instance, an equity plan may work well today, but the leader needs to be able to understand if that decision will have a negative fallout three years later.
As I have said, this transition is tough even for those who are naturally tuned to strategic thinking. But, transitioning from product-first to people-first in mindset is a necessity and the faster a founder understands this and works towards it, the better for the startup.