Author Archives: Aristotle Consultancy
For an entrepreneur, hiring a CXO can be an exhaustive task, albeit one that if done right, can be deeply rewarding, and in the same breath one small mistake while recruiting can be extremely detrimental to the business.
Because the entrepreneur’s view and vision of their business in unique, hiring the right leaders becomes an entirely “strategic” necessity, which unfortunately given the entrepreneur’s paucity of time is often reduced to a transaction with very limiting outcomes.
Entrepreneurial firms need to take a divergent route to hire the right fit for their business and work culture. They not only need to assess thoroughly for potential but also for the ability of the candidate to fit into an environment which is dynamic, where decisions need to be taken on the fly and the candidate’s ability to work with ambiguity. Another interesting observation is that entrepreneurial firms don’t want to invest the time and money that is required to hire the right leader.
It’s a classic Catch-22″ situation – “I want my business to grow, and I want the right leaders to help me grow the business. However I cannot incur the cost/time associated with the hiring, and the business paradigm challenging that is that the right leader can help you grow your revenue exponentially”.
The old adage “penny wise and pound foolish” is so apt, because several incredibly conclusive studies also show that the cost of a wrong hire on business can be more than – 5X of the revenue.
I firmly believe that the captain steering an entrepreneurial ship needs an entirely different set of skills than those at the helm of a more established business.
Here are 7 ‘stellar’ tips to help you navigate your next CEO/CXO hire:
1. Choose Potential over Pedigree:
A utopian hiring is one where the candidate hired has an excellent pedigree and tremendous potential. But that is utopia, and not always reality.
For Entrepreneur led businesses, it’s imperative for chose potential over pedigree. For start-ups, this is particularly the case, “leadership potential trumps experience”. Businesses need people who have the zeal to learn new skills, flexibility to adapt and the courage to persevere in the face of ambiguity and failure rather than experienced candidates who perform well, but have absolutely no desire to learn or change. I personally believe this is an area where the right recruitment partner can make all the difference. Choose an entrepreneurial firm to partner with, and the difference is evident in the outcome.
2. Focus on authenticity and maturity:
Take a measure of the candidate’s authenticity and maturity. Most CXOs are seasoned interviewers and can easily impress with ‘just the right answer’. How does one assess authenticity and separate the wheat from the chaff? Again, the right HR Head or the right Executive Search partner can add tremendous value. We use several techniques, assessment tools and tests to find the best fit.
While hiring can be open in your search and interactions, CXO hiring’s often get derailed due to inbuilt biases for candidates with a substantial same industry experience. Candidates with the right set of competencies irrespective of industry experience are often the ones that create greater value. They bring to the table a fresh outlook, many times a new perspective on an old problem. Willingness to adapt ensures survival and proliferation of the fittest. Charles Darwin’s theory holds true for organizations too.
4. Zoom Out with an External Perspective:
It is a good idea to involve your board or external advisors when hiring for senior positions. An outsider’s perspective adds diversity and color into the hiring, often challenging thoughts and ideas that an entrepreneur could have overlooked in his zealousness to hire.
5. Vision drives the process:
When we marry, we look at the long term. We see ourselves getting old with our partner. CXO hiring is akin to marriage. It’s a decision that affects all other decisions and will determine the course of your business in the long term. It should not be a ‘here and now’ decision. It needs to be completely aligned to the entrepreneur’s long-term vision.
6. Hiring is a Science, but Retention is an Art:
In retrospect, hiring is just the first hurdle crossed. Retention, of course, is a marathon run. As much as hiring deserves the full attention of an Entrepreneur, retaining the right individual is a bigger challenge. I recall an incident when after considerable time and effort our client, a billion dollar entrepreneurial company hired a CEO One year into the role the candidate quit. The client’s feedback was “he doesn’t live up to our expectations”. Over a cup of coffee the candidate told us that the Entrepreneur had not met him more than three times in the last nine months, so understanding expectations needed crystal ball gazing. A great company, a fantastic hire and a situation easily avoidable if both parties had spent time communicating more.
Entrepreneurs need to have well-defined & documented KRAs for CXOs and a robust, seamless mechanism of communication and review. Correct and timely communication is the key to retention.
7. Focus on candidate’s professional needs
Lastly, it’s always a smart idea to do a reverse evaluation. As you assess the candidate’s fit into your company, do take time out to check reverse fit also. Review your candidate’s career path to predict what would appeal to him/her as the next great challenge with reference to his/her professional strengths and skills. A right fit between a personal growth plan and organizational growth plan can point to your next Dragon Warrior!
Source – Entrepreneur Magazine
Founders need to chase funders, and one of the most frustrating things for entrepreneurs is to meet up with an investor who seems to be interested in giving them money, and then not hear from them for a long time. This radio silence can be very difficult to deal with because you are not sure how to interpret it. Does this signal the fact that they are no longer interested in giving you money? Were they just taking you for a ride? Or is that they are very busy, and you just need to be patient? Should you remind them? Or will this irritate them? If you keep on pinging them, will they interpret this as a sign of desperation on your part, and use this as a negotiation tool to drive down your valuation?
Many investors seem very enthusiastic and encouraging when you first meet them, but they then keep on asking for additional data and more information before they are willing to engage further. This can be very frustrating, because most startups have very limited runway and cash is a major constraint for them. They usually need to raise funds urgently, and it’s hard for a founder to provide all the minute details which an investor demands when he is are trying to run a company at the same time. While founders understand that investors need time to do their due diligence, what upsets them is that often seem to be using delaying tactics as a bargaining tactic. This delay can cause a lot of frustration, specially when the founder goes out of his way to promptly provide whatever information the investor asks for, no matter how pointless it seems to be. The problem is that their thirst for more data seem to be never-ending, which means you are always trying to play catch up in order to satisfy them. Your hope is that if you can keep them happy, they will be much more inclined to give you a cheque, which is why you are very reluctant to do anything which may upset them, and you do your best to comply.
Founders need to understand that investors have to follow a process because they are investing someone else’s money, and this can often be time consuming because there are so many people involved. For example, with large VC firms, there will be an India office who will need to get approval from the US head office before they can invest. You will need to talk to multiple people at the firm – for example, an analyst, and then the associate, and finally the partner, who will need to get approval from his board. A major problem is that if even one person says no, the deal gets shot down. You need everyone to say yes, and it takes a long time to get all the ducks aligned in order. Each of these people is extremely busy, because they’ve got so many other things to do, so it’s hard even to get an appointment or to get them to pay attention to your particular deal.
While getting the money is a high priority for you, it’s fairly low on their list of things to do, and you need to learn to live with this reality. Try to look at it from their perspective.
Investors see lots of deals day in and day out, and they are not going to get penalized for saying no to you. This is why they prefer passing on a hot opportunity – they know that another one will come by soon. It’s not the end of the world if they fail to invest in the next unicorn, but the last thing they want to do is to put money in a dud, because this reflects badly on their judgment. They will have to do a lot of explaining if they invest in a company which goes belly up, and they don’t want to risk damaging their reputation by taking too many long shots, as this can harm their career.
This is the reason why lots of investors don’t mind building up a huge anti-portfolio, and why they’re very conservative about which companies they will allow into their portfolio. Even though they are supposed to be venture capitalists, their processes are designed to reduce their risk, so that most would prefer to be conventionally safe rather than sorry because they bet on an outlier.
Some of the delay is also a power-play dynamic, because investors understand that cash-strapped startups don’t have the luxury of time. Some will leverage this urgency as a negotiating tool in order to be able to get better terms. However, most good investors value their long-term reputation, and will not take undue advantage of the fact that they have more power in the funder-founder equation. When they take their time, please understand that they are doing it in order to protect their interests. Even though they may have a lot of money, they also have a fiduciary responsibility as to whom they give the money to, which is why they need to be cautious.
Source – Inc42.com
Mergers and acquisitions have picked up significantly in the startup space with 48 deals in the past three months, according to Xeler8, a platform that tracks startup activity in the country. This is in line with the trend towards consolidation among startups.
Whether it is a strategic move to eliminate competition, or to take advantage of the conducive market situation, startups are looking at acquiring other ventures.
Online fashion marketplace Voonik Technologies recently made three acquisitions Zohraa, a marketplace for designers and boutiques, Styl and Picksilk that helped it enter the premium ecommerce segment. “It wouldn’t have been possible to acquire them in some other market,” said Sujayath Ali, cofounder of Voonik. “They were also looking for a chance of M&A because they weren’t able to scale up.”
While capital is flowing out of the bigger startups into the smaller ones, industry players believe that their money is well spent as they end up acquiring a technology they otherwise would have to work towards. There are others who spend their money to acqui-hire – that is, buyout for the employee skills and expertise other startups.
Bengaluru-based online gifting platform Giftxoxo recently acquihired BookMyInterest, a marketplace for hobbies and leisure activities.
Experts in the field say there are a lot of small deals in the markets, and soon mid-size deals would pick up. “Small deals are a good thing, but there are no mid-size deals at the moment,” said Sanat Rao, fellow at iSPIRT M&A Connect programme. “Mergers and acquisitions are higher than what they used to be a few years ago, but we need more mid-size deals, which I think will pick up soon.”
InnerChef, a Gurgaon-based food technology startup, has acquired two firms in the same space to expand their presence to other cities. Its cofounder Rajesh Sawhney said it is looking at more acquisitions in the future.
Voonik officials said the company is now looking to acquire from the fields of machine learning and artificial intelligence.
Source – ET Retail
Aavriti Jain, co-founder, Dhora, a Jaipur-based seller of designer clothes, leather goods and semi-precious jewellery, has had a terrible summer so far. Orders on the portals Dhora sells, such as Amazon and Flipkart, have dried up. Not long ago, Dhora used to ship 60-70 packets a day. Now, many days go without orders.
Sashi Somavarapu, founder and CEO, Redlily.com, a seller of baby products across e-commerce platforms in Hyderabad, is also having a torrid time. “People are buying, but prefer essentials over discretionary items,” he says. Orders for items like diapers and napkins but those for strollers and baby clothes have declined, with buyers preferring to visit stores to shop.
Several sellers across the country have noticed this change in buyer behaviour in the last two months. And this is across categories electronics, clothes, designer wear, kitchen items and baby products.
It is not hard to see why. On April 1, the government disallowed deep discounts, insisting that portals can’t dip into their cash reserves (read venture money) to subsidise products. Discounts if any will be at the discretion of manufacturers. That means Samsung and Micromax can offer discounts but Paytm, Snapdeal, Shopclues, Amazon, Flipkart etc cannot.
Deep discounts were the USP of these websites and if they were discontinued, customers would rather go to a physical store that not only offers discounts but also allows them to check out items directly. Online shopping in India, at about $10 billion in the total retail business of about $450 billion, is growing 10-12% annually. Out of the 400 million internet users about 40-50 million shop online while regular buyers would be less than 10 million.
The growth was largely fuelled by discounts. “Discounts created online shopping,” says Rajat Kohli, consultant, market expansion, Zinnov Consulting.
A large number of those shoppers seem to have gone into hiding. The business of online sellers of electronics has dropped by around 30% since April this year while that of fashion and shoe e-tailers has fallen 40-50%. Sanjay Thakur, president, eSellers Suraksha Forum, says, “Discounts and volumes have an inverse relationship.”
Dinesh Chopra, director, Softex Surya, a Nehru Place, Delhi-based retailer of computers and electronics says sales have fallen 30% since April. “Now price (of ecommerce websites) is aligned to retail outlets and portals are also focusing on fast selling items rather than display unique items on landing pages.”
Chopra thanks his lucky stars that he didn’t shut his store in Nehru Place. “In recent weeks I have seen increased footfalls and conversions.” Earlier, he says, people came to see products, compare prices with online and buy from portals as they were cheaper. Now with similar prices online and offline, shoppers are flocking back to buying offline.
The government order on discounts has in effect created a level playing field for online and offline retailers.
Source – ET Retail
The other day, I came across a TV interview of Rahul Yadav, who was CEO of a startup named Housing. com till he was sacked by the board. The interview is old, having being conducted in September 2015. However, there is one part of it which offers an interesting insight into what is wrong with Indian startups. At one point in the conversation, Yadav confesses that he doesn’t like ‘Excel sheets’. He says that when they (he and his cofounders, presumably) were meeting potential investors, if the investor asked for Excel sheets, they would just drop that investor.
It’s clear from the conversation that the loathing is not for any particular software sold by Microsoft. Instead, ‘Excel sheets’ are a synonym for calculations and projections about the business. These spreadsheets would have calculations about how much the business would spend, how fast it would expand, how much could it earn and from what kind of activities it may make money. However, if any investor turned out to be the sort who was interested in discussing such things, these entrepreneurs just stopped talking to him and moved on to someone else. As Yadav says, with a sly smile at one point in the interview, that when an investor wanted too much detail, he knew it wouldn’t work out.
Now there’s nothing unusual about this attitude. This has been a time-honoured tradition of Indian promoters since long before these digital days avoid investors who are interested in too much detail, just look for a greater fool instead. However, I do feel that in the domain of technology startups, this attitude arises from a fundamentally different premise. Earlier, promoters had complete self-awareness that they were doing something shady by fooling the investors about the true nature of the business. Nowadays, the entrepreneurs seem to be fooling themselves, too.
They seem to firmly believe that as long as they have enough scale, that’s great, even if they are losing money on each transaction. There’s a joke about this: “We know we are losing money on each customer, but we’ll make it up on volumes.” It’s not a great joke, till you Google it and find that a lot of people don’t know it’s a joke. There’s a widespread belief among startups that this really is true. The opposite view, that a business is a business and cannot defy the basic logic of sales, expenses, profit and loss for too long, is seen as something that doesn’t apply to new, technologybased businesses. The fundamentals of business cannot be ignored for too long.
One of the problems in India is that there seems to be a widespread belief that the marquee startups are justified in going through a long period of heavy losses because Google, Facebook and Amazon went through this. The problem with this idea is our skewed idea of what ‘tech’ is. During the time that they were making massive losses, the big American Internet giants were building their infrastructure and developing genuinely groundbreaking technology.
Even Amazon, which was supposed to be just a retailer, invented the infrastructure-as-a-service concept and is now ahead of Google, Microsoft, IBM et al in cloud computing with its fabulously profitable AWS (Amazon Web Services) business unit.
Nothing remotely resembling this is going on with Indian tech businesses, which seem wedded to the idea of almost literally giving away money to customers in every transaction.
In a way, it shouldn’t really matter to anyone if a lot of businesses lose money belonging to greater fool investors and eventually shut down. However, the negative impact on employees, suppliers, the brick-and-mortar competitors put out of business and on the business environment generally will be huge. It would actually be good for everyone concerned if India’s zombie startups reach their logical end sooner rather than later.
Source – ET Retail