SCALE UP

Talent Strategy For Growth Stage Startup

Jerry Hu
 Copyright © 2023 Jerry Hu

All rights reserved

The characters and events portrayed in this book are fictitious. Any similarity to real persons, living
or dead, is coincidental and not intended by the author.

No part of this book may be reproduced, or stored in a retrieval system, or transmitted in any form or
by any means, electronic, mechanical, photocopying, recording, or otherwise, without express written
permission of the publisher.

ISBN-13: 9798395515889

Cover design by: Jerry Hu

Library of Congress Control Number: 2018675309
Printed in the United States of America
 CONTENTS
Introduction
Chapter 1 - Should I set up a standalone Talent Acquisition team
for my start-up?
Chapter 2 - Where are my candidates?
Chapter 3 - How much equity should I give away?
Chapter 4 - Rethink organization design and workforce planning
Chapter 5 - Why does Talent Intelligence matter at start-up?
Chapter 6 - Take cautious steps towards M&A
Chapter 7 - Driving change as you scale
Chapter 8 - How to make people stick with you
Chapter 9 - Life after IPO
Chapter 10 - When bad things happen to good people
Summary
About the Author
 INTRODUCTION
This book is a collection of personal experiences, interviews, and
thought-provoking insights gathered from founders, senior HR leaders, and
venture capitalists across the globe. Personally having been part of several
scaling up journeys, I have to be honest that it was not always successful
and shiny. Behind all the headlines of startups securing massive funding
rounds, or entrepreneurs turning into millionaires, the road to
entrepreneurship is lonely and filled with all the blood and tears that only
the ones who have been through will be able to tell you.
Among the million challenges on this startup journey, people and
organization challenges will definitely be one of them. Some common
challenges such as high attrition, not being able to attract the right talents,
not sure how to preserve the culture as you scale… I hope by reading
through these book chapters, they can shed light for you, ignite your
innovative thinking, and offer practical case studies to overcome your
current or future hurdles.
I've taken a deliberate approach to keep the writing style like a
conversation, making it relatable and easy to read. This book is not a dry
textbook manual, it is a collection of essays designed to spark discussions
on various topics. By enriching these topics with examples from the success
and failure stories of myself and others, I hope to inspire practical solutions
that you can apply right away. While I acknowledge that there are cultural
nuances across different regions that may impact the applicability of the
lessons I share, entrepreneurship is a universal trait that resonates with
people worldwide. It represents a pursuit of freedom and self-
actualization.
 So feel free to jump into the chapters that resonate most with you at any
point in your reading journey. However, I do want to emphasize that,
through hundreds of interviews conducted, the challenges discussed in this
book have proven to be common across different geographies. Even if your
organizational design seems problem-free today, it doesn't guarantee
immunity from future obstacles. A thorough read of all the chapters will
provide you with a holistic view of startup talent strategy.
It's important to recognize that talent goes beyond the boundaries of an
organization. Employees, even after they leave, continue to impact a
company's brand, business, and future development, particularly if you
aspire to take your company public.
Join me on this engaging exploration of the talent side of the
entrepreneurial journey, where anecdotes, interviews, and practical insights
intertwine to create a tapestry of knowledge. "SCALE UP - Talent
Strategy for Growth Stage Startup" is your companion for uncovering
valuable lessons, navigating challenges, and embracing the exciting world
of entrepreneurship.
 CHAPTER 1
Should I set up a standalone Talent
Acquisition team for my start-up?
Here comes the exciting time that you have received an ample amount of
funding (usually around Series B) and you are ready to EXPAND.
Expansion of your products, regions and of course workforce as well. So
you find the current HR generalist person at your company is no longer
enough to support these high-velocity hiring needs. This is when you
should start thinking about setting up a standalone talent acquisition
function.
Although there are still a significant number of startup companies
continuing expansion without a separate TA function, even when they reach
Series D or E stage of investments. You really should think twice if you
want to maximize cost efficiency, and if you are serious about building a
sustainable company with long-term growth plans. Because growth
requires talent, and talent is never transactional. They need time to be
acquired, built and trained.
Setting up a talent acquisition function is no joke—it's a full-time job.
Your old-timey HR generalist is already swamped with employee relations,
payroll, and HR operations. There's just not enough time to dedicate to
scouting out top-notch talent. But here's the kicker: bringing in the right
individuals from the get-go will save you tons of trouble down the line.
Think about it—less hassle with training, smoother management, and
potentially even a smoother exit if that's the path you choose.
 So what should a startup TA COE (Centre of
Excellence) look like?
Trust me, it's not about having an army of hundreds of recruiters
supported by recruiting operations, employer branding, campus hiring,
systems, sourcing, and programs. That's just way too costly and premature
for a startup. Instead, let's start small and smart.
Your first move should be hiring a few full-cycle recruiters who can
wear multiple hats and handle recruiting operations and systems-related
tasks. If you have a tech product, my recommendation is to hire two
recruiters—one for tech roles and the other for non-tech roles. Make sure
they cover all levels of positions. Now, when it comes to those high-level
CXO roles, it's best to let the founder take the lead on filling them. After all,
who knows the company's vision better than the one who started it? And
here's a pro tip—when hiring those initial recruiters, look for individuals
who have the potential to grow into managerial roles. That way, as your
team expands, they can take on additional responsibilities and lead their
own teams.

But before we dive deeper, let's talk about

systems.
If you're still relying on Excel spreadsheets and drowning in papers and
emails to collect interview feedback, it's time for a change. Your top priority
should be implementing a cost-efficient recruiting Applicant Tracking
System (ATS) with basic functionalities. This will streamline your hiring
process, make collaboration easier, and save you from endless
administrative headaches.
Remember, building a startup TA COE is all about starting lean and
strategically scaling as you grow. Don't get caught up in unnecessary
complexities and expenses. Focus on the essentials, adapt to your specific
needs, and gradually expand your team and systems to support your talent
acquisition efforts.
 Let's talk about the magic of a good recruiting system. Seriously, it can
be a lifesaver, saving you time and money while ensuring you capture
essential data and provide a basic candidate experience. The best part?
There's a wide selection of options out there for startup companies, from
all-in-one HR solutions to standalone recruiting modules. If your budget
allows, I highly recommend going for a standalone Applicant Tracking
System (ATS). Why? Well, an ATS usually has more recruiting-focused
features and will come in handy when you're scaling your recruiting team
down the line. A good system will automate tasks like sourcing, interview
scheduling, offers, and reporting. And let me tell you, recruiting is all about
the numbers, so a real-time tracking system will work wonders for tracking
progress, analyzing trends, and generating insights.

What’s equally important is to build out your

employer brand from Day 1.
As a startup, it's understandable that you won't have the same level of
recognition as established household names or even a physical product. But
don't let that discourage you from venturing into the world with a
compelling employer brand proposition. In fact, being relatively unknown
can work to your advantage. Unlike well-known companies like KFC or
Coca-Cola, you have the freedom to build a more authentic and personal
voice without the restraints and concerns of upsetting consumers or
investors.
Here are some useful hacks to consider:
1. Take your time to find the sweet-spots of your brand.
Your company brand should be an extension of your vision, mission,
business model, and values. It should be unique to you and not a generic
copycat of similar companies. Your brand needs to have a core voice that is
carefully crafted and relatable to users, employees, and anyone who
interacts with it. It should have a soul that remains consistent throughout
your development. While company culture may evolve, the core voice of
your brand should remain true.
2. Promote your brand intentionally during major
development events.
As a startup, you go through various milestones and achievements just
like a child growing up. Whether it's securing funding, moving into a new
office, or celebrating a company festival, these are crucial moments for
brand promotion. No marketing hack can work more magic than your own
development history. Embrace and leverage these moments fully.
Remember, you are living in the experience, not just a press release. When
you speak for yourself, it's real and original, tailored specifically for you.
Focus on the content, not just the channel.

3. Don't go it alone—bring your whole crew with you.

While you may not have the budget for a dedicated employer branding
specialist or team, that shouldn't stop you from building your brand. In fact,
your entire company can be your greatest asset. Every member of your team
represents your brand every time they walk through the door or log in to
your servers. Encourage, empower, and enable your entire staff to become
social ambassadors for your brand. When they start representing your brand
through social media and word of mouth, they become your best
ambassador team in the universe. It's a reciprocal relationship—the more
they embody the brand, the more joy they experience and contribute to its
growth.

Now, consider hiring some super-power

recruiters.
These folks are the true heroes of startups. Why? Because they face the
challenge of attracting candidates without a well-known employer brand or
limited branding. It's up to your recruiters to sell your startup to potential
candidates. However, when hiring, don't forget to look for strategic
individuals with a well-rounded skill set and some HR generalist
knowledge or experience. The initial hires in a startup are crucial, and you
can't afford any bad decisions. On the flip side, many important aspects like
employment contracts, legal documents, compensation benchmarking, or
job leveling might still be under development. In such cases, lean on your
recruiting team to provide as many competitive market insights as possible.
Your super soldiers should also handle both high-volume and
targeted/executive hiring. And let's not overlook the operational work, such
as interview scheduling, extending offers, and onboarding. Full-cycle
startup recruiters truly take care of everything until the new hire is happy
and settled in those crucial first few months. Are you asking a lot from
them? Absolutely. But it's also time to seek out quick learners who may
not have all the experience but are willing to learn and pick up a few tricks
along the way, inventing new mechanisms just to save a few bucks.
When I built the talent acquisition function for a Series B startup, I
initially hired only two recruiters who showed incredible leadership
potential, despite never having managed people before. The three of us
embarked on building the foundational layer of the recruiting function,
shouldering a 500-headcount expansion plan. Both recruiters were
promoted to manager roles and excelled within just a few months. As the
company grew, they expanded their teams regionally, and one of them even
became the Head of TA. That's the beauty of hiring in startups—often,
potential trumps experience.
Think of the people you bring in as your star teammates. You want
curious learners, resilient entrepreneurs, and tenacious warriors. These traits
should guide your search for initial recruiter hires, especially since you'll
likely rely on the TA function to handle assessments as well. Unlike
corporations that have the luxury of separate recruiter and HR rounds,
startups usually combine these stages. So your recruiters are not only
sourcing candidates but also taking on assessment responsibilities. Plus,
people with similar tastes tend to attract each other, which is why your
recruiters should be the frontline culture ambassadors above all.

What about all the logistics and TA operational

excellence work?
Your first instinct should be to automate as much as possible. Sure,
automation isn't perfect and might lack that human touch, but when you
compare paying ten times the salary of a recruiting operations associate
versus investing in a system, the choice becomes crystal clear. Thankfully,
there's an abundance of recruiting Artificial Intelligence tools available
today. They can assist with interview scheduling, coding tests, video
interviews, extending and signing offers—you name it. These tools can be
standalone or integrated with most ATS platforms. Now, can these tools
completely replace humans? Most likely not. There will always be instances
when the system is down or unexpected accidents happen. My
recommendation is to phase in these technologies gradually instead of
going all out at once. Start small, conduct pilot tests, and see how it goes.
When I delved into interview scheduling automation tools, I had
numerous doubts about how an AI tool could handle different workflow
scenarios while still delivering an excellent candidate experience. So, we
narrowed down our choices to a full-scale chatbot-like automation tool
versus a half-automated, half-manual tool like Calendly. However, before
jumping into any selections, we decided to give them a trial run with a
small group. After a few weeks of testing and gathering feedback, we ended
up letting go of the idea of pursuing the full automation AI scheduling tool.
It was just too expensive, and its additional features weren't essential for our
company at the time. All we needed was a basic tool to save us some time
with human intervention.

Bring it all together — recruiting takes an

entire village.
After trying all the above, will you still feel like you're constantly short-
staffed and struggling to keep up with the pace of expansion and hiring.
Believe me, it happens more often than you think. Have you heard of
recruiter burn-out? Startup recruiters are constantly bombarded with
hundreds of job requisitions and have to navigate both tech and non-tech
hiring simultaneously. Even if you hire the most versatile and adaptable
recruiters in the world, there's no escaping the perpetual game of catch-up.
That's when it's time to start borrowing help. Break down the recruiting
cycle tasks and collaborate with other hiring managers. Send out scouting
emails, asking anyone available to lend a hand with scheduling interviews.
Enlist the CEOs as employer brand ambassadors. A TA function is never
complete until it becomes a team effort.
 CHAPTER 2
Where are my candidates?
You posted a job, and after one day, not a single application came in.
You reassure yourself, saying it's alright, let's give it a couple more days.
But when a week passes and still no one has applied, that's when you realize
something is definitely wrong here.
Does this situation sound familiar? Unfortunately, if you ask a million
startup recruiters or founders, they will tell you the same thing. The good
news is that it's not just you, and it's not a new problem.
This is probably one of the toughest challenges in startup hiring. No
matter how hard you try, the number of applications you receive might
leave you jaw-dropping. You start questioning yourself: Should you find
better ways to promote the job? Should you jazz up the job title to make it
more appealing? Should you seek help from an agency recruiter?
There isn't a one-size-fits-all solution, but here are a few tricks that
might help:

1. Before you go out searching, try to look within.

Startups are constantly growing, and it's only natural that one day you
wake up with an amazing idea, and you want to find someone to help bring
to life. So, you post a job opening. But before you start searching
elsewhere, why not give someone from your existing team a chance? There
are numerous success stories about internal promotions leading to long-term
organizational and business success, especially when it comes to leadership
roles. When you hire from within, you retain that valuable institutional
knowledge, especially from the founding members who have been there
from the start. They understand every pivot and the reasons behind them.
They have witnessed what worked and what failed. They have a sense of
belonging and commitment to the company that cannot be measured in
monetary terms.
So, is that 20 years of industry experience less important than
institutional knowledge? Well, that's up for debate and depends on the
complexity and technical requirements of the position you're hiring for. But
chances are, if you're a startup today, your expectations aren't overly
complex. Are you willing to give someone with a learning mindset a
chance?

2. If no one applies, it's time to hunt them down.

Embarrassment is your greatest enemy in this situation. You need to be
proactive, willing to go the extra mile. Waiting for applications won't get
you far, especially in today's candidate-driven market, where the power lies
with job seekers. This is even more true when you're still establishing your
company's reputation. So, forget about waiting around and start actively
hunting for talent. Even when you're looking to hire an office assistant, start
searching. You don't have the luxury of choice. Some of the best
candidates are passive job seekers who need to be pursued and
convinced. Perhaps today, while you're traveling on a plane, you find
yourself sitting next to someone who seems incredibly interesting and
would be a great fit for your organization. Why not set up a meeting and
grab coffee together? Once you open your mind, the possibilities are
endless. Potential superstar employees can be found wherever there are
people.

3. Get creative and think outside the box.

There will be times when you've tried all the tricks in the book and
nothing seems to work. That's when you need to get creative. It's time to let
go of rigid job descriptions and delve deeper into what skills you're truly
looking for. Ultimately, what you need are skills. Skills can be learned,
acquired, or borrowed. They don't have to reside in one specific location,
they can be remote. So, if you're struggling to hire a machine learning data
scientist in Singapore, why not consider outsourcing the entire team to a
remote location? Or better yet, explore the possibility of acquiring a
company that can provide the skills you require. Break down the job
requirements and focus on finding the perfect match.

4. Instead of Sourcing, think about Influencing.

You can unleash your creativity when it comes to workforce planning,
but there will come a time when you need to focus on sourcing candidates
in a more targeted manner. Have you ever wondered why some recruiters
achieve a 100% acceptance rate on LinkedIn InMail, while you face
rejection after rejection? It's more than just crafting the perfect cold-email
template and hitting send. Ask yourself this: If you were at a networking
event today, would you be willing to strike up a conversation with a
stranger who seems unreliable and takes forever to get to the point? Or
would you be excited to engage with someone who has a strong presence, is
endorsed by others, and exudes confidence?
If you still believe that recruiters only need to rely on the company
brand without cultivating their personal brand, you couldn't be more
mistaken. This applies not only to big corporations but even more so to
small startups, where recruiters serve as the face of the company to the
outside world.
The same analogy applies when choosing a real estate agent. The
individual agent plays a much more significant role than the agency's name
alone. Have you noticed those real estate agents who have gained fame on
TikTok these days? The days of simply sourcing candidates are over, we're
now in the era of influencing.
Timing is key.
There's a somewhat perfect timing for sending cold emails and LinkedIn
messages, depending on the roles and job levels. The right timing can have
an impact on your acceptance rate. Of course, you could try sending emails
at 3 a.m. on a Saturday and expect a reply the next day, but that's not
typically how it works. Numerous studies have shown that the best timing
is either Wednesday morning or Sunday afternoon. These time slots offer
people a chance to take a breather from their busy week or prepare for the
week ahead.
Carefully craft your social persona.
When people receive something from a total stranger, their initial
response is often defensive because of the numerous scammers out there.
Your social persona is not just a summary of your work experiences. Sure,
it's great that you've been doing something for 20 years, but what does it
mean for the recipient? Your social persona should align with the message
you're trying to convey. It can be reflected in what you post, who you
follow, and how you interact with others. Remember, you're not just
selling the job, you're selling yourself. Think for a moment: Would you
respond to a door-to-door Amway representative or someone who shares
similar tastes and interests?
That's why you shouldn't focus on selling, you should focus on
influencing. Your social persona should be consistent and reflective of you
as a whole-hearted person, encompassing your opinions in life, both inside
and outside the workplace. So, before you start approaching your target
prospects or candidates, wouldn't it be better if they already knew you or
had a chance to get to know you in an instant?
Don't source candidates solely by yourself.
As a recruiter, your strongest ally should be your hiring manager.
Receiving a message from the hiring manager directly is a completely
different experience from hearing from a recruiter. Prospects will feel
incredibly valued, and sometimes even overwhelmed. When you have C-
suite executives or investors on your side, it can completely change the
game. Let's be honest, they have much larger networks than any recruiter
out there. They belong to exclusive institutional networks or social clubs. If
you haven't done so already, it's time to start partnering with your best
sourcing ninjas.
Source and influence anywhere, anytime.
 Your sourcing efforts shouldn't be confined to sending LinkedIn InMails
only from your desk. In the era of influence, it's time to adopt a more
proactive approach, but one that is subtle. This could involve starting an
Eventbrite group to bring industry experts together for discussions.

5. Let the worst timing be your best friend

The time I wrote this, the bear market has reared its head once again. It's
nothing new, every few years or decades, we find ourselves in a bear
market. Stock market crashes, rising inflation, and increased commodity
prices force companies to tighten their belts and preserve cash. Cutting
costs becomes a necessity, and one major operational cost is people.
Now, here's where it gets interesting. Some companies continue burning
money like there's no tomorrow, while others choose to play dead by
freezing hiring. Then there are those who take drastic measures and lay off
employees. On the flip side, you have companies like Microsoft doubling
down on rewards.
Which route should you take? To be honest, there's no guaranteed
winner, as companies can thrive or perish regardless of their approach. It all
comes down to your fundamentals.
Let me share an intriguing analogy with you. Take a look at these
numbers. Do they give the impression of a bullish or bearish market over a
three-year period?
48% gain
12% gain
21% gain
27% gain
35% gain
72% gain

You'd be forgiven for thinking these were achieved during a bull market.
Surprisingly, these returns were earned during the worst three-year stretch
the American markets have ever faced—the period spanning from the peak
of 1929, just before the crash, to 1932, the market's lowest point. (Quoting
Bear Market Investing Strategies by Freeman Publications).
So, is it possible that a bear market can be your best opportunity to
snap up long-term winners? Here’s a few tricks to help you.
Peel the onion.
In times like these, most zombie companies fade away. How do you
identify them? By peeling back the layers like an onion. The core
information lies in the company's 10-K filings and other legally required
documents submitted to the SEC. Revenue, EBITA, ROE—all can be
manipulated. When it comes to recruiting, now is the time to screen
candidates meticulously, with a laser-focused approach. Mass hiring is no
longer an option. Extend interview frequency, meet candidates multiple
times and in different locations, incorporate case studies, or assign test
projects (which have proven to be highly effective). Everything that
previously seemed too time-consuming must now be prioritized. Whatever
method you choose, ensure you peel back the layers and thoroughly assess
the hiring risks. Also, exercise caution with mixed interview feedback. If
you usually follow a majority wins approach during good times, now you
need to weigh the dissenting voice more. Even a minority disagreement in
the interview panel could warrant a veto.
Seek out tenacious warriors.
Times like these call for warriors—individuals who can weather the
storm and endure. With cost-cutting measures in place, teams must operate
on frugal budgets, leaders need to be more hands-on, and you may need to
shift your target customers towards SMEs if you were previously focused
on corporates. In either case, you require adaptable and tenacious people
who can navigate rough waters. Start asking questions about how
candidates have overcome difficult times, whether in their personal lives or
careers. What matters most is how they managed to come out on top.
Patience is your greatest ally.
 Now is not the time when candidates are scarce, rather, it's when good
candidates are hard to find. Attracting them is even more challenging. The
lesson here is simple: don't give up. Stay calm and exercise patience. You're
not playing dead, you're simply waiting for the right moment. Keep in mind
that the usual 90-day recruitment timeline may not apply anymore. Waiting
is a luxury you can afford, as the potential consequences of a bad hire and
the subsequent trickle-down effects can be devastating to the team. When
you're searching for value rather than growth, patience is the king.
So, break free from rigid norms and embrace the limitless potential of
startups. People are drawn to companies for more than just a name or
financial incentives. They seek passion, learning opportunities, and the
thrill of doing something exciting. In the world of startups, you have the
advantage of being agile and innovative. Take a proactive approach, and
you'll be astonished at the incredible talents you'll discover along the way.
 CHAPTER 3
How much equity should I give
away?
Startup lawsuits often revolve around the tricky issue of equity
distribution. Startup equity, although it sounds glamorous and enticing, is
often misunderstood by most people. We've all seen those stories on TV
where the founders strike gold with their early-stage equities, but in reality,
they represent only a small percentage of the startup world. The harsh truth
is that most startups fail, and the value of company equities is closely tied to
the success of the business.
Now, I don't want to bore you with a Wikipedia-style explanation of
equity, as it's an incredibly complex topic. However, beyond all the
technicalities, how founders choose to distribute equity is where the
journey begins in establishing company culture. It sets the stage for how
people interact and how organizational strategies are shaped down the line.
Factors like the percentage of equity allocated, the type of equity offered,
vesting schedules, and the specifics of exit plans all play a crucial role.
When designed wisely, these elements can incentivize talented individuals
to join and stay with the company. But if handled poorly, they can lead to
unforeseen challenges and complications later on.
As the wise Daniel J. Boorstin once said, "The greatest enemy of
knowledge is not ignorance, it is the illusion of knowledge." Let's keep that
in mind as we navigate the complex world of startup equity.

Here is a list of the foundational equity

taxonomies you should be familiar with.
 (All definitions are from Google's dictionary)

● Equity: “the value of the shares issued by a company.” “one's degree of

ownership in any asset after all debts associated with that asset are paid
off.”
● Exercise shares: to choose to buy or sell your shares in a company.
You don't have to exercise your options, but if you don't, you won't
actually "own" your equity awards.
● Fair market value: the current value of the share.
● Equity grant: “An equity grant occurs when an employer pays a part
or all of the compensation of an employee in the form of the corporate
stock.” This is how most startup companies distribute equity
compensation.
● Stock options: “a benefit in the form of an option given by a company
to an employee to buy stock in the company at a discount or at a stated
fixed price.”
● Shares: “a part or portion of a larger amount that is divided among a
number of people, or to which a number of people contribute.”
● Shares outstanding: The number of "Shares outstanding is the total
amount of shares that are held by all its shareholders.”
● Valuation: “an estimation of something's worth, especially one carried
out by a professional appraiser.” A company's valuation tends to move
up as funding rounds progress in the case of a funded company, but also
with natural business growth.
● Vesting Schedule: Startup "Employees might be given equity in a firm
but they must stay with the firm for a number of years before they are
entitled to the full equity. This is a vesting schedule.” Most startup
employees' equity packages come with a vesting schedule to protect the
company from "ghosts in the cap table".

But the most common equity products you will see are either options or
restricted stocks (e.g., RSU). Simply put, options are the ones you have to
purchase, so they come with a cost (usually at a pre-determined strike
price), and restricted stocks can be granted without the upfront payment
(you also have a choice to purchase certain restricted stock products).
 Vesting schedules. As an employee, when you finish signing that offer
letter, it doesn't mean your equity is coming to your next month’s paycheck.
Usually there is a cliff period around one year or two years. Which means
you won’t be able to access those equities until you have served that much
period of employment with the company. Then there are schedules around
how many years the remaining percentage will follow. There are companies
that practice 20% each year, some companies giving 5% in the first year
then the last 50% in the final two years. Or companies granting you 50%
after the initial two years… As an employer, how you design the vesting
schedules reflect your management style and impacts on the total rewards
package later on. For example, if your rewards philosophy is heavy on
equities, of course when the company goes through turbulent times, the
valuation dilutes and so do people’s overall rewards. This inevitably leads
to attrition if without a contingency plan. One of the interesting initiatives
Amazon comes up with is to allow employees to use their company stock as
collateral toward a down payment on a home purchase without selling their
equity stake.

Exit. This is the tricky part that leads to a lot of lawsuits. As an

employee, can you sell your shares immediately after you exit the
company? Or is there a window period (e.g., 90 days) for restrictions?
Would the company buy back the shares granted to you? Are you allowed
to trade in the private secondary markets before the company goes public?
As an employer, how you design those policies also depends on how much
trust you are putting into people and how protective you are of the company
shares. Or you can always implement a hybrid model giving people a
choice to sell back the shares to the company. If you are an employee, I
suggest maintaining a good network with current and former colleagues
could help you stay in the know about what you can realistically expect
when you leave the company.

Even if your company is just very early on, getting some professional
advice in the circle about how you want to structure those equity designs is
probably worth the time and money. Even if it is just a few words on a piece
of napkin, they are legally binding and there are doors once you open
cannot go back. There are definitely innovative companies offering
specialized equity distribution products today like Carta.

Let’s talk about the 4 commonly affected groups.

1. The Early Founding Members.
Whether you're a solo founder or part of a team, the distribution of
shares among the founding members is a crucial consideration. The
question arises: how much should each person receive? Well, there's no
one-size-fits-all answer to that. It's a discussion that requires input from
everyone involved.

Roles play a significant role in determining equity distribution,

especially when your startup revolves around unique ideas and intellectual
properties. If certain co-founders have contributed valuable ideas or patents,
their share of equity should reflect their contributions. However, oftentimes,
ideas are a collective effort, and striking a balance becomes essential. This
might entail a more equitable distribution of ownership, ensuring that
everyone feels their value is recognized.

Another factor to consider is the level of commitment from each

founder. Not all founders can dedicate themselves full-time to building the
company from scratch. Some might contribute on the side while
maintaining their full-time jobs. In such cases, those who invest more effort
and commitment into the venture should be appropriately rewarded. For
younger founders seeking to gain credibility and make their venture
successful, partnering with an experienced industry veteran might be
beneficial. Granting shares can align the risk tolerance of these corporate
executives with the startup's objectives. Different people have diverse
motivations and stages in their lives, so considering their individual
circumstances is important when determining equity commitment.

As for what constitutes a "normal" split, like a 50/50 or 40/60 division,

there's no fixed rule. It truly depends on the unique circumstances
mentioned earlier. However, it's crucial to remember that the way you
distribute shares will have a long-term impact as your startup scales up. It
reflects not only the total rewards within your company but also the culture
you aim to establish and the type of talent you attract.

In the end, equity distribution is a complex and multifaceted decision

that should be approached with open and honest discussions among the
founders, taking into account roles, contributions, commitments, and the
overall vision for the company.

2. The Senior Executives

Depends on how you wanna complicate things. The senior executives
like CXO or VPs can be rewarded with the same equity instruments like the
rest of non-exec employees or slightly different. Probably one of the
common ones I have seen are options, which allows the senior executives
having the choice to purchase the initial shares at a certain rate (a.k.a. strike
price), that is of course in sync with the fair market value at the time.

There are two main types of stock options: Incentive Stock Options
(ISO) and Non-qualified Stock Options (NSO). ISOs come with tax benefits
and are given to startup employees, while NSOs are taxed based on the
difference between the exercise price and the market price at vesting.

As an employee, deciding when to exercise your stock options requires

considering your company's vesting schedule and the potential for future
gains. Timing is crucial, and you should also think about tax implications,
exercise costs, and liquidity. You can adopt different strategies, like holding
onto the shares, selling enough shares to cover costs, selling all the shares,
reinvesting the proceeds, or spreading out exercises over time. Sometimes
it's better to wait and not exercise your stock options right away.

It's important to understand why you have to pay to exercise your

options. The exercise price is often lower than the value of the options, and
a valuation method can reduce it even further. Also, be mindful of the tax
implications when exercising your stock options. The difference between
the market price and the strike price gets added to your taxable income.
However, any increase in value when you sell the shares may be taxed at a
lower capital gains rate.

As most likely the equity will be a big chunk of the senior exec’s total
compensation. It is quite common for a hybrid selection of instruments.
That could include a combination of options and RSUs. Options of course
are a much greater tool when designed carefully to be acting as the golden
handcuffs for certain levels of executives. The idea behind golden
handcuffs is to create a strong incentive for employees to stick with the
company, even if other opportunities come knocking at their doors. As an
employee, it's important to note that while golden handcuffs may seem
attractive, they also come with a trade-off. They can limit your flexibility
and freedom to explore other job options or career paths. So, it's a bit of a
give and take situation.

"Our CEO will always be the Chief Risk Officer – a task it is an

irresponsible delegate. Additionally, our future CEOs will have a significant
part of their net worth in Berkshire shares, bought with their own money. " -
Warren Buffet, Berkshire Hathaway 2022 Shareholder Letter

3. Non-exec Employees
Now this again depends on the company’s rewards philosophy. Not all
non-exec employees are entitled to equities in many startups. But there are
of course companies giving out equities to everyone no matter the seniority
like Amazon. There is a saying the earlier you join the more equity you will
get. This is actually only true in the sense when you are talking about
the value of the equity rather than the quantity. Companies' market
value adds up when more funds are being raised and revenue generated.
Equity is most in sync with a startup’s worth. So, when the company
valuation jacks up 300%, so would that initial 200k worth of shares. But
just like public companies, there are fluctuations and downtimes. Of course,
unfortunately if the startup is in trouble or goes bankrupt, then the initial
shares are just a piece of paper worth nothing.

For non-exec employees, a common equity product is RSU (Restricted

Stock Units), which essentially is a zero-cost product. RSUs are like a
delayed gift of company shares. They're like virtual IOUs that say, "Hey,
you're doing a great job, and we want you to benefit from our success down
the line." So, instead of getting the actual shares upfront, you get a fancy
promise note.

Now, these RSUs don't magically turn into shares overnight. They also
have a vesting period where you have to hang tight and meet the company's
conditions. Once you've been patient and fulfilled the requirements, those
RSUs transform into real, tangible shares, and you become a proud owner
of a slice of the company.

Now one thing you should be aware of is the tax complication. For
most countries, your equity is part of your income hence you need to
contribute the mandatory income tax brackets accordingly. Now the
complications are due to your nationality, granting locations and the
business entity registry of your companies, you might need to pay
additional local tax when you are exercising the shares later on. But you
don't have to pay those taxes right away. You settle the bill when you sell
the shares, and then you might face capital gains tax on any increase in their
value. It's like the IRS wants its fair share, but you can be strategic and
make the most of your RSUs while keeping your tax situation in check.

Besides the sign-on equities, there is also another product quite popular
with the startup scene is RSA (Restricted Stock Awards). Similar product
but different on cost and vesting schedules. RSA is usually used as a
performance management tool to incentivize employees. For employees not
entitled to sign-on RSUs, RSA can be a powerful tool to motivate most
likely high performance junior staff.

How much should you set up for employee equity pools? Typically,
10-20% (for tech startups) and much less when the company grows up.
Depending on your business model, depending on the company
environment you want to create, I have also seen a continuous higher
percentage for a consulting model or game-centric companies. A few things
can be taken into consideration here though. First off, think about how
many employees you have or plan to hire in the future. You want to make
sure there's enough equity to go around for all the awesome folks on your
team.

Another thing to consider is industry standards and market practices. It's

like checking out what everyone else is bringing to the potluck. You don't
want to show up with just a bag of chips when everyone else has homemade
lasagna. Look into what similar companies in your industry are offering in
terms of employee equity. It can give you a rough idea of what's considered
fair and competitive.

Lastly, you'll want to strike a balance between being generous with

equity and making sure you have enough for future hires and incentives.
You don't want to give away the entire pie and have nothing left for dessert.
So, think about the long-term growth of your company and how much
equity you might need down the road.

4. Investors and Advisors

So, how much equity should you allocate for investors ? Is it 10% or
20%? Well, there's no magic number either. Every startup is unique, starting
with different investment needs and seeking funding at different times. If
you relied on external funding to kickstart your business, my advice is to
tread cautiously when it comes to giving away equity.

There are scenarios where a startup can end up resembling an

investment management company if the founders lose a majority of their
shares and voting rights. It's essential to maintain control and ensure that
your vision and decisions are not compromised.

As for advisors, they come in all shapes and sizes. They provide
valuable resources, consulting services, and believe in your company's
potential, so they ask for a piece of the pie in return. A common approach is
to set aside around 1-2% of equity for advisors. However, if you're
experienced and confident in your abilities, you may not even need advisors
at all.
 Remember, finding the right balance between retaining control and
leveraging the expertise of investors and advisors is key. It's a delicate
dance, and it's crucial to consider your unique circumstances and long-term
goals when deciding how much equity to allocate.

"Equity is the most expensive asset for a company." – Kushal, Myadvo

Techserve

Too many companies try to manipulate people with ignorance,

eventually the bubble will burst. Having a systematic contingency plan,
intelligent scenario forecasting and democratic communication strategies
can prevent those hidden mistakes and lay the foundation of a trusting
culture.
 CHAPTER 4
Rethink organization design and
workforce planning
When your team is small, like fewer than 10 people, everything feels
intimate and connected. You know each person's work inside and out
because they're all reporting directly into you. It's a special time, filled with
camaraderie and teamwork. You can have impromptu coffee chats that
spark brilliant ideas, or gather for a spontaneous lunch meeting where
decisions are made on the spot. As the founder, you wear multiple hats,
whether it's being the CTO, Head of Sales, or CFO, depending on your
background. The entire organization and culture revolve around your
personal style. It's a time of rapid change and agility, where you can pivot
and innovate on the fly. However, it's also a phase where some founders
may fall into the trap of micromanagement.

But as your company grows to 100, 300, or even 1000 people,

expanding to multiple regions, things start to get more complex. Suddenly,
you find yourself spending hours and days thinking about organizational
design and reporting lines, without a clear understanding of everyone's
actual responsibilities. You want to delegate control, but you also worry
about losing touch with important decisions and maintaining a consistent
culture across teams. You long for the agility of the old days and may even
attempt to centralize operations, only to realize it doesn't work as smoothly
as you hoped.

Here's the truth: there's no one-size-fits-all solution for the best

organizational design. Every startup goes through a few common
challenges, but it's crucial to think twice before making any snap decisions.
Take the time to evaluate what will work best for your unique situation and
consider the potential impact on your team and culture. It's a balancing act
between structure and flexibility, and finding the right approach is key to
sustaining growth and success.

1. Expanding into a new country, who should

NOT report to the country General Manager?
One of the management challenges that often arises is how decentralized
the non-sales functions should be. Should all corporate functions such as
HR, legal, and finance report directly to the country General Manager
(GM)? Or should they be localized as well? There are several factors to
consider in making this decision.

Firstly, you need to determine the level of trade-offs you can tolerate
between agility and governance. While a decentralized model may offer
short-term agility, it requires a balance and deliberate decision-making
mechanisms to ensure sustainability. Secondly, you should assess the
headwinds and tailwinds from the external markets. For example, if the
economy is experiencing a downturn, decentralization may need to be
reconsidered for cost-efficiency purposes. Lastly, take into account the
background of the GM. If they are part of the founding team and have been
with the company from the beginning, it might be wise to grant them more
autonomy and trust their ability to bring the cultural elements of the
company to the region.

Remember, organizational design should be dynamic, not static. It's

not about keeping everything the same throughout the entire journey.
Instead, you should be agile and adjust quickly when you see the need or
when the market is shifting. As your organization matures, you can
gradually let go of some control measures, allowing the infrastructure to
build itself out.

The key is finding the right balance between centralization and

decentralization, adapting to the unique demands of each market, and
continually evolving as your company grows.
2. When should you separate tech and product?
Unless you have a founder with a product background right from the
start, the product function is typically embedded within the broader
tech/engineering umbrella. This is because in the early stages, everything in
tech - infrastructure, data, engineering, and product - needs to closely
collaborate to build the initial version of the product. However, as your
product gains stability and you aim to scale, founders often contemplate
separating the product function from tech to transition into a more product-
driven company. But before rushing into such plans, it's crucial to consider
a few factors, including timing and the nature of your business.

Separating Product too early can actually complicate matters. In the

early stages, the engineering team, including engineering leads, often
double up as product managers. They allocate resources and think about
feature designs. When you separate a small and lean team, the newly
created product manager roles can end up feeling more like project
managers. Instead of focusing on designing product requirement
documents (PRDs), functional requirement documents (FRDs), and
meticulously improving product features, they may feel reduced to mere
coordinators between the business and engineering. Similarly, the
engineering team may perceive the product team as lacking implementation
knowledge, merely relaying information without considering feasibility and
timelines.

Finding the right timing and balance is crucial. It's important to assess
whether separating the product function will truly enhance collaboration,
improve the product's focus, and enable scalability. Every startup is unique,
and the decision should be made based on the specific needs, capabilities,
and stage of your company.

3. How many is too many for your S team?

"S Team" refers to those individuals who report directly to the CEO.
When you have a small organization of around 50 people and 20 of them
are reporting to the Founder, it's still manageable because there aren't many
layers of management. However, when your organization grows into 1000
people and you still have 20 people reporting to you, it's time to reconsider
a few things. It really depends on the structure of the founding team, but the
CEO's role needs to undergo a drastic evolution when you reach a 1000-
person organization. You have to consider how much time and effort you're
putting into fundraising versus managing daily operations. It all depends on
the dynamics and demands of your specific organizational state. If you feel
overwhelmed and find that you're not utilizing your time wisely, it's a sign
to reevaluate your organizational design. The first step is to conduct an
organizational health check, focusing on decision-making, culture,
productivity, and costs. There are famous examples like Spotify's squad
model and Amazon's single threaded leadership and two-pizza teams that
you can draw inspiration from.

Spotify’s squad model

Instead of the usual corporate hierarchy, Spotify creates these small
squads. Think of them as bands within the company. Each squad is made
up of talented folks from different areas like design, development, and
product management. They come together, united by a common mission.
And here's the cool part: each squad has the freedom to own their piece
of the puzzle. They get to make decisions and call the shots. It's like being a
band member who gets to write their own songs and rock the stage their
way.
With this setup, Spotify encourages a culture of innovation and
autonomy. Squads have the flexibility to experiment, try out new ideas, and
iterate quickly. It's like they're constantly jamming, finding the perfect
rhythm for their products and features.
This model also fosters collaboration and knowledge-sharing. Squads
interact with each other, forming what Spotify calls "tribes." It's like
different bands coming together for a music festival, sharing insights, and
inspiring each other.
By breaking down the traditional hierarchy, Spotify creates an
environment where talent can thrive. People get to explore their passions,
contribute their unique skills, and have a real impact on the music streaming
experience.
Amazon’s single threaded leadership and two pizza team
At Amazon, there is a concept called single threaded leadership. It's
like having one person take the wheel and drive the ship. Each project or
initiative has its own leader who's responsible for its success. It's like being
the captain of a ship, navigating through the vast ocean of challenges and
opportunities.
Why single threaded? Well, imagine if you had multiple leaders
juggling different tasks and projects at the same time. It'd be like trying to
catch multiple flying frisbees all at once. It's hard to focus and give your
best when your attention is divided. That's why Amazon encourages leaders
to be fully dedicated to their specific area, giving it their undivided attention
and expertise.
Now, let's talk about the two pizza teams. No, they're not eating pizza all
day (although that does sound pretty awesome). It's about team size. At
Amazon, they believe in keeping teams small enough that they can be fed
with just two pizzas. It's like having a small group of people sitting around a
table, brainstorming and working together.
Why the obsession with small teams? Well, Amazon knows that big
groups can slow things down. It's like trying to coordinate a large orchestra
where everyone's playing a different tune. By keeping teams small, they
promote agility, creativity, and fast decision-making. It's like having a tight-
knit group of friends working together towards a common goal.
And here's the secret sauce: Amazon combines single threaded
leadership with two pizza teams. Each team has its leader, who's
responsible for guiding the group towards success. They work closely
together, like a band rehearsing for an epic concert. With their small size,
they can collaborate effectively, move quickly, and deliver results.

Scaling an organization can happen vertically or horizontally. Simply

bringing in more people to share the workload won't necessarily solve
the problem of time management. In fact, it can create more problems
because you'll need to allocate additional time to manage those new
recruits. Having a bloated founder's office is a prime example of this.
Always go back to the business strategies you've planned out and assess
whether you have enough talent resources to execute them. Are you placing
the right people in the right positions that align with their aspirations? What
are the trade-offs between short-term and long-term growth? It's important
to find the balance between tensions and cohesions within your
organization. Sometimes, what your organization needs are more
mechanisms to help self-diagnose and operate effectively, rather than
simply adding more resources that could burden the entire team.

In my interview with Richard Hillier, the former Head of Talent

Acquisition, EMEA of Airwallex, he shared an interesting story about his
experience with a startup company. They went on a hiring spree without
considering the overall efficiency of the organization. It wasn't until the
management noticed a sudden 2 million increase in their human capital
operating expense that they realized the consequences of their actions.

Richard pointed out that many startup founders face pressure from
investment committees to focus solely on increasing their headcount,
disregarding the long-term impact on sustainability and productivity. He
emphasized the importance of founders negotiating wisely on human capital
metrics during fundraising to ensure a balanced approach.

We cannot talk about architecting your

organization without workforce planning
When it comes to expanding your company, whether it's in terms of
sales, operating regions, market share, or workforce, it's important not to
mix them all together as one big bundle. Just adding more people doesn't
automatically mean increased productivity or sales. Instead of blindly
handing out headcounts like a Black Friday sale, it's crucial to take a step
back and engage in systematic workforce planning.
 Workforce planning shouldn't be a one-time thing, just like any other HR
tool. It requires a consistent and iterative approach throughout the
year. In a dynamic economy, it's wise to review progress every quarter if
necessary. And don't think of it as a task only for HR, it's a collaborative
effort that involves gathering information from both top and bottom levels
of the organization.

Now, I know what you might be thinking. Startups don't have the luxury
of extensive people data or time for elaborate planning sessions like big
corporations. Strategies are often developed on the go, with constant trial
and error. Is there a more concise way to do workforce planning?

Absolutely! A week-long session on workforce planning may seem

excessive for a startup, but focusing on a few fundamental concepts can
work wonders.

1. Educate your team on the benefits of workforce planning

and be an advocate yourself.
A common scenario is that founders delegate their headcount plan to
their direct reports, who in turn pass it on to managers. The frontline
managers end up proposing team structures and driving the organizational
design. While this decentralized approach can foster trust and a nimble
management culture, it often leads to over-hiring and workflow
complications down the line.

On the other hand, a completely top-down approach should be avoided,

especially as teams grow and you lose direct insight into what's happening
on the ground. Striking a balance between top-down and bottom-up
perspectives is key.

Human capital costs will always be a significant portion of expenses,

often the largest. It's important to approach these costs with caution, just
like any other aspect of your business. Adopt a lean startup mentality and
plan for rainy days. Remember, the impact of people's costs extends
beyond just their time at the company. Former employees can either be
powerful brand ambassadors through referrals or, if they leave with
negative experiences, they can tarnish your brand.

Educating your entire company about workforce planning is crucial. The

goal is to optimize talent and tap into the full potential of your organization.
Managers need to deeply understand the current workforce, each team
member's strengths, potentials, as well as their interests and goals. Where is
the overall business heading? What are the short-term, mid-term, and long-
term objectives of different teams? Identify gaps and explore opportunities
for re-skilling or leveraging innovative processes and technologies.
Workforce planning should be transparent and collaborative, as disruptive
innovation rarely comes from external sources alone.

Be an advocate yourself, if today you are having a bloated founder’s

office hiring roles with no clear responsibilities or expectations, simply an
extension of yourself, to distribute workload or deliver messages. This will
impact all levels of the organization, and managers will mimic to create
fluffy roles to skip work or the blame.

2. Implement a HC approval process.

If you're used to people simply giving you a call and getting headcount
approval, it's time to establish a documented process. If you have an HR
system, make use of it. If not, even simple emails can serve as a starting
point. The approval process should include justifications for the need, a
detailed plan, and approval chains. Despite having a million things on your
plate, reading these justifications should be a priority.

For example, if you're a small sales team of five planning to expand to a

new region, consider exploring centralization first. This means utilizing
existing staff from your home country with support from outsourcing or
contract agencies before rushing to hire without even having a registered
entity. Keep things simple and frugal instead of creating separate teams for
business development, lead generation, and product marketing. Plan out
phases for launching new teams and assess the organization's maturity
along the way. Sometimes, when corporate veterans join startups, they tend
to create roles that are not yet suitable for the startup environment, which
can complicate workflows and stretch resources.

Take a cue from Amazon, where those directly involved in creating new
skills or enhancing customer experiences are considered direct headcounts,
while others are indirect headcounts. Amazon is famously known for
discouraging empire-building and avoiding excessive middle
management. Jeff Bezos himself believes that bureaucracy-loving C- and
D-players usually reside in middle management. This approach contributes
to Amazon's impressively low general and administrative expenses,
accounting for only 1.5% of total revenue.

Of course, as you grow into a larger organization, a manual HC approval

process becomes unsustainable. This is where systematic workforce
planning sessions come into play. Arrange meetings with your leadership
team to cover both business and manpower strategies. While big companies
typically conduct these planning sessions annually, startups can do them
more frequently. Look into Amazon's well-known WBR (Weekly Business
Review) and OP1/2 (Operating Plan 1/2) planning sessions for inspiration.
Amazon’s WBR and OP1/2
WBR, or Weekly Business Review, is a meeting where teams discuss
the details of their business. They go over metrics, customer feedback, and
pressing issues to make informed decisions based on real-time data. MBR,
or Monthly Business Review, takes a broader look at the business. Teams
analyze performance metrics, assess progress, and identify areas for
improvement. OP1 and OP2, or Operating Plan 1 and Operating Plan 2, are
planning sessions that occur twice a year. During OP1, teams set goals and
define plans for the next six months. OP2 is a mid-year check-in to review
progress and fine-tune plans. These meetings promote collaboration,
transparency, and goal alignment. Amazon empowers teams to make data-
driven decisions without excessive bureaucracy.

To delegate effectively, have aligned direct reports responsible for

headcount decisions and establish consistent decision-making criteria.
Consider utilizing an in-house resource or external consultants for
workforce planning expertise.
3. Planning shouldn't be a one-and-done affair.
It's an ongoing journey that involves the whole team. It's like a dance
where everyone has a role to play. Planning is not just about numbers and
charts, it's interconnected with performance, talent, and learning.
If something isn't working, it's important for people to feel empowered
to speak up and drive change. We're talking about a culture where
borrowing or building skills is valued over simply buying them off the
shelf. It's about fostering a learning mindset and encouraging innovation.
Workforce planning goes beyond just people-related matters. It's about
exploring new technologies and innovative ways to re-engineer how
work gets done. There are some fascinating success stories out there, using
technologies like RPA, Slack workflows, AI, and more, to turbocharge
startup workforce planning.
Josh Bersin, a respected voice in the talent industry, emphasizes “the
importance of a systematic growth model. It involves strategic planning on
a regular basis, continuous development of your people, thoughtful job and
organization design, and ensuring accountability is in the right hands.”
So, remember, workforce planning is an ongoing process. It's about
aligning your strategies, nurturing your talent, and staying open to
innovative ideas and technologies. It's a recipe for long-term success and
building a thriving organization.
 CHAPTER 5
Why does Talent Intelligence
matter at start-up?
Let's talk about Talent Intelligence (TI) and why it's important for
startups, even though some may say it's too early to focus on it.
Experienced TI experts would argue that it should actually be one of the
first functions to be established. But before we dive into the debate, let's
understand what talent intelligence is.
Simply put, Talent Intelligence harnesses the power of people data to
drive business/organization excellence. But there isn't a universal use
guide per se. I have seen it being used in system design, recruiting, talent
management, or people analytics. Personally, I believe there shouldn't be a
rigid framework to define the correct TI model. Just like any other HR
function, models can vary, but they should all focus on solving business and
people challenges. Regardless of how fancy a TI model may seem, if it
doesn't address real business challenges, it becomes nothing more than
graphs and refined data.
For startups, there are numerous challenges and opportunities that
require a strategic lens to rethink problems and develop tailored solutions.
For example,
● When should you hire a CFO?
● Which market or region should you expand into?
● Where can you find an outsourcing tech hub?
● How aggressive should your growth be?
● Is your long-term incentive (LTI) design competitive in the market?
● How do you hire a generative AI engineer in a scarce market?
 Sure, you can make snap decisions based on intuition or copycatting
your competitors, but there's a more systematic way to approach these
matters. That's where Talent Intelligence shines as a strategic HR
framework.
So, how does TI play a role? Its fundamental methodologies involve
effectively utilizing both internal and external people and market data;
processing, synthesizing, and translating it into actionable insights. It
follows a similar thought process as any consulting project. You start with
extensive market research, develop project goals, gain stakeholder buy-in,
and make efficient decisions within a reasonable timeline.

1. Should I hire a CFO whenever?

A CFO is a vital position for any startup, but finding the right time to
bring one on board is crucial. If you hire a CFO too early, you risk
overwhelming an experienced IPO veteran CFO who may not have enough
strategic tasks to engage them fully. On the flip side, waiting too long to
hire a CFO, until you're considering an exit or an IPO, can lead to serious
problems such as audit issues, inadequate forecasting and planning, and a
lack of proper data for reporting.
That's where Talent Intelligence (TI) comes in, making the decision-
making process more informed and strategic. TI starts by analyzing the
internal readiness of your organization, collecting valuable insights such as
when your competitors started hiring CFOs. It delves into the factors that
contribute to their success and learns from the lessons of typical hires,
assessing their backgrounds and performance. This deliberate approach to
designing the CFO role evolves continuously through a series of thoughtful
discussions. But TI doesn't stop there. It recognizes that the hiring
landscape and talent movement are constantly changing, and therefore, a
strategic TI approach should be integrated throughout the entire hiring
process.
2. How about hiring for a skill like generative AI
in a premature market?
Like many new technologies that swamp the market before they can be
properly defined, it might be clueless for companies/recruiters trying to
navigate those hiring demands. But just like many new skills emerged in the
past and became a hot hit for a while, such as cloud, 5G, web 3, NFT,
blockchain…, it takes a systematic approach to this type of niche hiring.
Talent Intelligence probably is the very best tool/mindset to assist with
those recruiting mandates. The following is a step-by-step use guide.

Mapping out the Job Taxonomies

Because there are no defined titles or role competencies yet exist in the
market. It is difficult to research what the competitions or successful models
have done, as the technologies are being developed or enhanced just so we
speak. The earlier founding companies like OpenAI emerged also overnight
without a systematic recording of the skills being scaled, or many times it
remains a million-dollar intellectual property that is impossible to access.

So start mapping. What are the current job taxonomies can you collect
for generative AI? Google is probably the best tool for this, but if you have
advanced Talent Intelligence tools (e.g., Talent Neuron, Draup,
Eightfold.ai…) that can aggregate every job board on the planet, it
definitely can make the job much faster and more efficient. What will pop
up? Things like Generative AI Engineer, Generative AI Machine Learning
Scientist, Generative AI Data Scientist, Generative AI Researcher,
Generative AI Java Developer…

Data collection

Maybe there are 100 or 300 of those job taxonomies, your first step is
collecting and mapping them all out. The good part is that because it’s still
hot, there are probably not that many titles out there. You will soon see a
pattern during the exercise. Another good part is that AI itself is not new, so
things like NLP (Natural Language Processing), deep learning, neuron
networks… can easily be referenced back to existing job taxonomies.

Data cleaning

Many jobs are just adding “generative AI” in front of a normal job title
without even changing the JD at all. So you can immediately eliminate
those JDs as they are essentially useless. But put a mark on which
companies post like this. You will soon be able to spot if some companies
are simply hoping to catch the wave without a proper comprehension or
sometimes plan of how to apply these skills. Those are probably not your
target company later on.

Filter the duplicates. What you might find is that there are possibly a
selective few of the most accurate capture of job taxonomies, most likely
from big tech or those original AI companies. Then the rest started to
copycat and eventually ended up with a dozen same things, just slight
modifications. The common pattern for those duplicates is reflected on the
use of the exact same JD templates.

Data analysis - dive deep into skills

If you had 100, maybe after the exfoliation, you are down to 50 or even
less jobs, you can begin the analysis process. First, I suggest you categorize
or group them into a few job families, could be engineers, data scientists,
developers…then you need to start gauging the JD very, very carefully,
possibly reading one word at a time.

What we are looking for here is really the specific skills or keywords
that are adjacent to generative AI. These could be GPT, VAE, GANs…,
mark them down and then look for the verbs associated with them, such as
architecting, designing, debugging…

Now why do you need to look for verbs? Verbs are a great vehicle to
spot the soft skills needed for those roles. For example, verbs like
architecting, design, modeling…This proves that Generative AI engineers
probably need very strong architectural skills, which then might give you an
idea for people who should be really good at problem solving and have
strong logical attributes.

Now the last important step is to understand who they have to work
with, and how they work together. Of course, this type of intelligence might
need qualitative interviews later on by talking to candidates/prospects
specifically. But it's good to mark them down for now and read as much as
you can. These people are very good targets for reskilling, since they are
already working with the engineers. They are exposed to a certain level of
the job one way or another. If they have the interest, it’s your go-to group
for training.

Data visualization

Ideally once you have finished this detailed analysis, you would be able
to put together a graph of the competency model. The model could be a few
layers, such as the base layer with the must-have and the foundational skill-
sets, then comes the nice to have and enhanced skills, the last layer, top of
the pyramid would be those really niche skills that are performed by usually
a distinguished scientist or researcher. These again are great tools to help
see which group can be re-skilled or trained easily and usually goes from
bottom to top. This will come very handy when it comes to workforce
planning, learning and training… everything beyond recruiting.

Now start researching on the target prospects

From the previous job mapping exercise, you would probably have
generated a list of the companies and be able to categorize them into a few
groups, such as big tech, startups, by geolocation as well.

So I suggest applying the same logic to your target prospects which is a

common approach for exec/target hiring. Before you start sending emails
and scouting, I suggest you start piling up the career trajectories, attributes
and patterns… and the schools and especially their publications and
journals. Those are all the channels for sourcing later on. Because the pool
is too limited and those candidates are probably all passive. You will need
an in-depth level of insights later that can translate into sales techniques.
 Take a tiering approach towards sourcing
The most important thing is to find a partner, and the best ones are the
hiring managers themselves. Since the expectations and competencies are
still evolving, it's important to view each prospect as an opportunity to learn
about their work, skills, and organization. One approach is to prioritize your
sourcing efforts and focus on the most relevant pools, nurturing
relationships instead of just hiring. Collaborating with hiring managers can
help build these networks. Keep in mind that top talents are often not
actively seeking new opportunities, so it's about creating a community
rather than just offering a job. In emerging tech fields, people are generally
eager to learn from each other, so leveraging industry forums,
collaborations, or inviting them as guest speakers on your platforms can
help establish connections.

The insights gained from these primary connections are invaluable. You
can gather information from 3-5 key company organizational charts and
share competitive intelligence with the hiring or workforce planning team.
This will help refine your hiring requests and identify opportunities for
reskilling. It may seem like a lot of effort, but without conducting proper
research, scouting and disrupting the talent market can lead to falling
behind as the market matures. It's similar to the stock market where initial
listings face skepticism and rumors. If you're not careful during this period,
it can affect your reputation in the long run. In the recruiting world, it
means avoiding vague job descriptions or making uninformed decisions
without understanding the market dynamics. In a niche talent market like
AI, where there are only 300,000 practitioners globally, with only 27%
being women, according to McKinsey’s research on AI talent, people often
know or know of each other, and word of mouth can make or break a team's
brand. So, even if you don't hire any top prospects initially, building a
community is essential.

The second tier of prospects is likely to be the ones you actually hire.
This is where you can leverage the knowledge and information you've
accumulated to accurately target, prospect, and attract them. Start by
researching their research labs, specific professors, lab lineage, the journals
they publish in, how they acquire their skills, and the relevant courses they
take. It's important to understand how they continuously refine and enhance
their skills. This approach should be based on evaluating their skills rather
than just assessing their qualifications.

The last tier of prospects includes those without direct experience but
are trainable or possess skills similar to those already present in your
organization. In a competitive market, there will be times when you can't
compete for offers or struggle to attract top talent. In such cases, reskilling
becomes a viable hiring option. It's important to simultaneously target
prospects from both the second and third tiers to ensure timely hiring
success.

3. Is the problem really hiring?

Sometimes you come across challenges like struggling to fill a position
for over a year, or hiring candidates who never seem to work out. But
before jumping to conclusions about the quality of your hires, it's worth
considering whether the issue lies in the hiring process itself. Let me share
a personal example that might resonate with you.
During my time leading talent intelligence efforts for Alibaba's Digital
Media and Entertainment group, we faced significant difficulties in
recruiting creative talents such as actors, scriptwriters, and movie
directors. However, our struggles went beyond mere talent acquisition. We
also experienced high attrition rates among our existing creative workforce
and found it difficult to bridge the gap between the culture that creative
talents thrive in and the engineering-focused culture within the company.
Consequently, our business failed to take off.
We used Talent intelligence as a diagnosis tool first to dissect the
problem and closely examined the business model while delving into the
people and culture practices of a model company — Netflix. Our central
research questions are why Netflix's unconventional HR approach
worked so well for them and what set them apart from Alibaba. The
following are key insights from the Founder of Netflix, Reed Hastings'
book, "No Rules Rules":
 Netflix’s peculiar HR practices
● Freedom and Responsibility: Netflix values a culture of freedom and
responsibility. Instead of relying on strict rules and policies, the company
empowers employees to make their own decisions and take ownership of
their work.
● Talent Density: Netflix places a strong emphasis on hiring and
retaining top talent. The company believes in having a high-performing
workforce and is not afraid to let go of employees who do not meet the
high standards.
● Keeper Test: The "Keeper Test" is a practice at Netflix where
managers ask themselves if they would fight to keep each of their
employees. This helps identify top performers and ensures that the
company maintains a high-performance culture.
● No Vacation Policy: Netflix does not have a formal vacation policy.
Instead,
employees are encouraged to take time off whenever they feel it's
necessary. This approach promotes a healthy work-life balance and trusts
employees to manage their own time.
● Radical Transparency: Netflix values open and honest
communication. The company shares information widely, including
financials and strategic plans, with the belief that transparency helps
employees make better decisions.
● Feedback and Development: Netflix encourages frequent feedback
and coaching conversations between managers and employees. This
helps individuals grow and improve their performance continuously.
● Pay Top of the Market: Netflix offers competitive compensation
packages and benefits to attract and retain top talent. The company
focuses on rewarding performance rather than following traditional
salary structures.
● Context, not Control: Instead of micromanaging employees, Netflix
focuses on providing context. By sharing information and strategic
 goals, employees have a clear understanding of what needs to be
achieved and can make decisions accordingly.

These peculiar HR practices have contributed to Netflix's success in

fostering innovation, attracting top talent, and creating a high-performance
culture. It's important to note that these practices may not be suitable for
every organization, but they have worked well for Netflix in its journey of
becoming a leading global entertainment company.
After conducting this comparative analysis, we formed hypotheses
suggesting that the root cause of our challenges wasn't the hiring
process but rather a fundamental difference in our business vision.
Addressing these challenges would require a complete transformation of
our business model.
For instance, Netflix's creative culture thrived due to Hastings' passion
for content and his ambition to build a media empire. The culture within
Netflix supported creative talents' desire to collaborate with other skilled
individuals to create award-winning productions. Because to succeed in the
creative industry, you only need ONE Grammy or Oscar winning
production once in your lifetime. Yet only a very small percentage of
creatives is lucky to have that chance. Besides various other factors, what
they desperately need is a platform to work with extremely talented crew to
make a life-changing production happen. And Netflix created that platform
for them. So people choose to join and stay, not just for the high rewards,
but also a lifetime chance to make it in the tough industry. This cultural
alignment did not resonate with Alibaba's engineering-driven culture,
especially considering the added complexity of the Chinese cultural
influence. It was unrealistic to expect Alibaba to replicate Netflix's
mechanisms like canceling performance reviews or implementing unlimited
vacations, as the contexts were simply too different. Ultimately, it boiled
down to the different visions of the two companies. Alibaba's vision was to
Make it Easy to Do Business Everywhere, and the digital media and
entertainment segment emerged from that mission by offering lifestyle
services to e-commerce consumers. In that sense, Amazon's Prime business
model was more comparable.
 Armed with these hypotheses and findings, we organized a visit for our
CEO to meet with Hastings himself in Los Angeles. During their insightful
discussion and idea exchange, the Alibaba CEO decided to completely
transform our business model.
Instead of relying on in-house hiring, we embraced a collaborative
approach by partnering with independent creative studios. We offered
resources and shared intellectual property to support them. By leveraging
talent intelligence, we recognized the advantages of adopting a profit-
sharing business model through these partnerships with independent
studios.
TI is not just a process, it's a mindset.
Just like when you hire full-stack engineers during Series A funding and
eventually divide their responsibilities into frontend and backend as the
technology becomes more complex. Even if your startup's HR function
initially follows a 360-degree HR generalist model, it shouldn't deter you
from exploring TI initiatives. You can engage an external TI consultant or
allocate a portion of your HR or planning mandates to Talent Intelligence.
While HR is often the first point of contact, if you're truly seeking strategic
impact, TI should be integrated within your planning and strategy team.
Now, you may be wondering where to start if you don't have access to
fancy tools. This is a common concern regardless of a company's size, but
the reality is that obtaining free data is easier than ever these days. You can
explore various free websites/tools that provide both quantitative and
qualitative data. Your recruiters are valuable assets for gathering qualitative
data. They interact with candidates daily and can provide insights on salary
information and talent trends. Don't overlook the wealth of firsthand
intelligence they can offer.
Lastly, it's important to note that gathering data is only the initial step.
Filtering and identifying what information are true and useful is equally
crucial. This process of discernment behind the scenes enables you to
transform the gathered information into proactive recommendations, which
is where a truly experienced TI consultant can provide invaluable guidance.
 CHAPTER 6
Take cautious steps towards M&A
Mergers and acquisitions (M&A) can be a double-edged sword for
startups in the growth stage. While it may seem easier to acquire or invest
in existing companies in your market or expansion area, it's important to
note that around 80% of M&A deals are reported as failures in the long run.
A significant factor in this high failure rate is the clash of cultures and talent
integration. For startups that may not have a robust HR M&A function, it
becomes even more critical to approach every M&A decision deliberately
and strategically. Some may even argue to consider it as a last resort option.

To begin with, I suggest leveraging the resources of your investment

partners, if possible. Large-scale venture capital firms often provide support
at the people and organizational levels, including assistance with recruiting
and M&A. Seeking advice and input from these partners should be your
first step. They have extensive networks of founders (potential deals) and
possess financial and operational experiences within and beyond your
domain. Additionally, it is essential to keep them informed and involved if
the potential investment progresses.

Apart from venture capitalists, another option worth exploring is seeking

expert advice from external consultants specializing in HR (e.g., Mercer,
Aon) or management consulting firms with HR M&A expertise. However,
it's important to note that these services can be expensive, so consider if
your M&A is complex enough to justify engaging them.

Ideally, you should have a team that has previous experience in M&A
from financial, business, operations, legal, or HR perspectives. The more
diverse the expertise, the better, as M&A touches upon various aspects of
both companies involved. Let’s break down the M&A cycle by stage.

Pre-deal
Once you have completed your homework and identified an excellent
M&A opportunity, it's crucial to involve the talent team immediately. The
worst-case scenario is to have HR come in after the deal is done to clean
up the mess. This often results in a significant number of resignations and
low morale among teams. People should be informed of your decisions
early on. If possible, have the HR team involved during the pre-deal due
diligence process. Remember that a merger of two companies is not just a
business investment, but also an investment in its founders and teams. If the
two startups have vastly different approaches to organization and culture,
it's likely to lead to failure from the start. Considering your acquisition is
most likely not a large company, it's fair to seriously consider people side of
the equation in decision-making to create a mutually beneficial outcome.

Since both companies involved are startups, job-level benchmarks,

compensation structures, and even performance reviews may not be in place
or well-documented. At the very least, the talent team should conduct
interviews with the leadership teams to understand their histories and any
efforts or challenges related to people management. For example, if you're
acquiring a company to enter a new market region, don't underestimate the
difficulty of attracting and retaining talent there. Otherwise, you might end
up spending most of your efforts on hiring in an unscalable region, resulting
in skill gaps between the two teams.

In the deal
You have done your research, everything seems fine and you begin
negotiating the terms and entering a potential M&A deal. This is where
extensive HR M&A work comes into play. While it's important to be
thorough, keep in mind that, as startups, you may not have access to
detailed due diligence processes due to missing data. Sometimes, you'll
need to rely on experiences and intuition for judgment. However, you
shouldn't overlook any aspect of rewards, talent, organization, operational
models, decision-making processes, and so on.

The following is a checklist for reference.

1. People and Culture:

● Assess cultural fit between the two companies.

● Evaluate leadership styles and determine compatibility.
● Identify potential clashes in values, norms, and work culture.
● Determine the impact on employee morale and engagement.

2. Organizational Structure:

● Evaluate the organizational structures of both companies.

● Identify redundancies and overlaps in roles and responsibilities.
● Determine the best approach for integration, whether it's merging
teams or maintaining separate units.
● Plan for any necessary restructuring and communicate changes
effectively.

3. Talent Assessment:

● Assess the skill sets, competencies, and experiences of employees in

both companies.
● Identify key talent and critical roles that need to be retained.
● Evaluate the potential for knowledge transfer and cross-training
opportunities.
● Determine the best approach for talent integration, including
reassignment, promotions, or layoffs.

4. Compensation and Benefits:

● Evaluate and compare compensation structures, including salaries,

bonuses, and equity.
● Identify any gaps or discrepancies in pay scales.
● Develop a plan for aligning compensation and benefits across the
merged entity.
● Address any concerns related to benefits packages and ensure a
smooth transition.

5. HR Policies and Practices:

● Review HR policies, including performance management, leave

policies, and employee handbooks.
● Identify gaps or differences in policies between the two companies.
● Develop a plan to harmonize policies and communicate changes to
employees.
● Ensure compliance with legal and regulatory requirements.

6. Communication and Change Management:

● Develop a comprehensive communication plan for employees at all

levels.
● Provide regular updates on the progress of the merger and address
employee concerns.
● Develop change management strategies to minimize resistance and
facilitate a smooth transition.
● Establish channels for employee feedback and address concerns
proactively.

7. Employee Integration and Retention:

● Develop an onboarding plan for employees from both companies.

● Foster an inclusive environment to promote collaboration and
teamwork.
● Implement retention strategies for key talent, including career
development opportunities and recognition programs.
● Provide support and resources for employees to navigate the changes
and ensure their well-being.

8. Legal and Compliance:

● Conduct a thorough review of legal contracts, including employment
agreements and non-compete clauses.
● Ensure compliance with labor laws, regulations, and any relevant
industry-specific requirements.
● Address any potential legal risks or liabilities associated with the
merger.
● Seek legal counsel when needed to navigate complex legal issues.

9. HR Technology and Systems:

● Assess the compatibility of HR systems and technology platforms.

● Plan for the integration or migration of HR data, such as employee
records and payroll information.
● Develop a timeline and strategy for system integration to minimize
disruption and data loss.
● Provide training and support to employees for any new HR systems
or tools.

10. Performance Measurement and Evaluation:

● Establish metrics and benchmarks to measure the success of the

merger.
● Develop a plan for ongoing evaluation and monitoring of HR
integration efforts.
● Regularly review the effectiveness of HR processes and adjust as
needed.
● Monitor employee satisfaction and engagement levels throughout the
integration process.
Remember, this checklist provides a starting point, and it's essential to
customize it based on the specific circumstances of the merger and the
unique needs of the organizations involved.
Utilize matrix boards if necessary for scoring and ranking purposes.
Collaborate closely with internal teams in legal, finance, and business, as
people's decisions are interconnected with these issues and have subsequent
consequences for other teams. If resources permit, seek support from third-
party experts or advisory teams to provide a fresh perspective when you're
uncertain about certain decisions. Always check in with your existing team
to ensure alignment.

Let me share a story from my previous experience on an M&A team at a

startup. We were excited about acquiring a regional startup to help bridge
the language gap and speed up our expansion. Little did we know that
overlooking an important people aspect would lead to disastrous
consequences.

You see, our tech teams were mainly proficient in Java, while the
company we acquired relied heavily on .NET as their backend language.
Initially, we thought transitioning would be a breeze since Java is widely
used and finding skilled developers shouldn't be a problem. But we failed to
consider the people & culture aspect, and that's where things went south.

The engineers from the acquired company lacked the agility and
learning mindset we had hoped for. Moreover, their company culture didn't
support such transition efforts. What we thought would be a smooth
migration turned into a complete disaster. Most of their engineers decided
to leave rather than adapting to new technologies, leaving us with a
shortage of manpower. Our own team had to step in and help implement the
migration initiatives, costing us both money and invaluable time.

It was a humbling lesson for us. We realized that the number one
mistake we made was not involving our CTO in the M&A process. We
wrongly assumed that it was a small company and only financial matters
seemed relevant. But we were wrong. The lesson we learned here is to
involve all relevant stakeholders during due diligence, including every
member of your senior leadership team. For instance, a CTO's insights and
expertise are invaluable in the decision-making process.

Remember, in the world of M&A, every detail matters, and

overlooking even the smallest aspect can have significant consequences.

Post-deal
 So you spend weeks, probably months of work and finally the deal is
closed. You feel good about your judgment, and think this merger will work
out perfectly. But don’t forget the post-deal work, as they are equally
important. Even the perfect match won’t guarantee a sustainable marriage if
no one is making an effort. And right after closing the deal, it’s the most
precious time that needs that extra layer of care.
From a people standpoint, you need to steadfastly follow the progress of
the integration and make quick decisions if necessary. This could be
changing leadership, switching responsibilities, exiting unfit… The issue
can become very messy if you don’t act quickly. I have personally
witnessed both teams backfire and resulted in a terrible merger due to
culture or different leadership styles.
One of my experiences was on the acquiree side of the merger, where we
were incorporated into a tech giant through a corporate venture deal. At
first, everything seemed to be going smoothly during the pre and early
stages of the merger. However, around three months into the process, things
took a turn for the worse.
Initially, we assumed that integrating our culture would be seamless due
to similarities in our business nature and the age group of our employees.
As a result, we didn't take any specific measures to realign our cultures.
Since we were the ones being acquired, some people believed they needed
to conform to the corporate culture entirely, some people were very
confused. However, despite the surface-level similarities, we soon
discovered that our approaches and ways of doing things were vastly
different. Various factors, such as being a series A startup and our founders'
background in finance, played a significant role in these differences.
Consequently, we witnessed key individuals, along with their teams,
deciding to leave the company following the merger. With our core team
gone, the product and other teams began to crumble. Attempting to mitigate
the damage, we tried integrating teams from the corporate side, but it didn't
work out. They lacked the understanding of our product and the dynamics
of the new market we were entering. Moreover, recruiting new talent
became increasingly challenging as our company's reputation suffered from
the departure of influential employees who spoke negatively about the
organization.
The lesson we learned from this experience was the critical importance
of implementing culture alignment meetings, evolving our culture, and
establishing a new cultural structure immediately after the merger. It's
crucial not to overlook the details, as they can accumulate and eventually
backfire, leading to the destruction of the entire merger.
For the operational level of things, it is just equally as important when it
comes to job leveling, compensation…and if those issues are not addressed
quickly, they will enlarge and intensify as you go. This is also the time you
should be as transparent as possible. If things are still work-in-progress, do
NOT hide or make up excuses. It is recommended to rather give out an
honest timeline and your intention/plan of how to make it work. Again,
people can be demanding but we also understand it is not an easy task and
requires loads of effort, from all parties.
To recap, here's a summary of the key areas we discussed earlier that
require special attention.
● Tap into the resources of your investment partners, like venture capital
firms, for support and advice.
● Consider expert help from HR consultants or management firms if
needed.
● Build a diverse team with M&A experience from different
perspectives.
● Involve the HR team early on, during the pre-deal stage, to avoid post-
deal mess and low morale.
● Pay attention to crucial aspects during the deal, such as culture fit,
organizational structure, talent assessment, compensation, HR policies,
communication, employee integration, legal compliance, HR technology,
and performance evaluation.
● Act quickly to address culture clashes and operational issues after the
deal closes.
● Stay cautious and keep improving post-merger.
 Remember, successful M&A requires empathy, transparency, and
ongoing effort from everyone involved.
 CHAPTER 7
Driving change as you scale
So you began noticing the inefficiencies around communication among
teams, a lack of cohesive cultural representation across the company, or the
gap between desired vs. current talent and organizational capabilities. These
are some potential signs for you to start thinking about driving CHANGE.

As much as you want to retain the sweet family culture when you first
started, you have to face some harsh realities that change is inevitable and it
will not be sustainable to continue the old way of doing things. Policies and
processes will need to be in place to ensure information can be cascaded up
and down accurately and smoothly. And throughout the change
management process, you may need to let go of some dear friends, hiring
professionals, and investing in a number of organizational development and
culture initiatives.

Here are a few common change scenarios most startup companies will
have to go through.

1. Leverage technologies to scale up

communication
Maybe email/WhatsApp still works when you try to convey messages
across a 10-person team, it certainly won’t be effective when you reach
hundreds, and when teams need real-time cross-functional collaboration.
Not only do emails take longer time to respond and harder to interact, it is
also an expensive tool if you are thinking of keeping all those
communications in the cloud (Most cloud providers charge by storage size,
so the expense will compound when the company accelerates).
 Luckily, there are some great digital workplace suites out there that can
solve these problems. Take Google Workplace, for example. It offers
integrated communication tools like Hangouts, Chats, and Google Meet,
along with collaboration platforms like Drive, Docs, and Sheets. These
tools allow real-time editing and sharing, making teamwork a breeze.
If you're looking to engage younger generations like millennials or Gen
Z, or if you have remote teams, a standalone communication tool like
Microsoft Teams or Slack is highly recommended. Slack, in particular, is
often rated as a top choice for small businesses. It has fantastic
collaboration features that boost employee engagement and enable virtual
collaboration. Plus, it's easy to install and works with most tech setups.
But here's the tricky part: transitioning your communication channels
smoothly. You're bound to face resistance from different user groups. Just
remember, like any other technology transformation, it's a gradual process
that requires constant iteration and communication. If you're driving this
change from an HR standpoint, the first thing you should do is align with
your CEO and CTO. Create a thoughtful communication process and a
migration plan.
It's crucial to ensure that employees understand why, how, and when
the change is happening. If you can involve them in the decision-making
process, it will boost engagement and adoption later on. Consider giving
people a say through voting or feedback sessions. Remember, you're not
alone in this. Select a group of testers, focus groups, or ambassadors from
diverse functional backgrounds to assist you throughout the change
management process. They can pitch ideas, advocate for usage, and even
provide training for adoption.
Set a clear cutoff date to discontinue the use of previous platforms.
Resistance from sub-teams and slow adoption rates are common challenges.
To overcome them, you can explore gamification or rewards incentives to
speed up the migration journey if necessary.
Ultimately, the communication channel is just a means to an end. The
content you share is what matters most. As long as you're communicating
essential content on the chosen platforms, people will naturally adapt.
 Let me share an experience from my previous startup. Transitioning
from WhatsApp to Slack wasn't easy. We faced resistance from early
founding members and their teams, despite having a clear adoption plan. It
was the moment we introduced a gamification challenge that things started
to change. We collaborated closely with the CEO and launched
gamification strategies like "the best emoji for the day" to stimulate sub-
team adoption. Winners received small rewards for the whole team. We also
selected Slack ambassadors across different teams to provide coaching and
daily tips to their sub-teams. Finally, the senior leadership team agreed to
completely cut off communication from previous tools like Google Chats or
WhatsApp, making Slack the single official channel. Missing messages on
Slack meant missing important company updates. In just three months, we
achieved almost 100% adoption with a 99% satisfaction score.

2. Brush up your employee benefits

If you are really early on and expanding to series A. You have possibly
close to zero benefits beyond the essential medical and statutory benefits,
which are employee benefits required by law. But we all know this is not
sustainable, whether for retaining attracting talents, or building a supportive
company culture.
Expanding beyond the baseline of employee benefits becomes an urgent
task as you scale up. Benefits are an integral part of your total rewards
package, including visible benefits like medical, optical/dental, and
retirement plans, as well as invisible benefits like work-life balance.
It's important to strike a balance when choosing your benefits. Consider
the essential benefits, the nice-to-have ones, and the unique ones that set
you apart from other companies. Remember, as a series B startup, nobody
expects an extensive list of benefits that matches what larger companies can
offer.
Just like your people and organizational practices, your benefits should
be distinctive and aligned with your values and culture. If you value
people's creativity, you can incorporate policies like flexible leaves and
work-from-home options to give them the freedom to unleash their creative
potential. Take Netflix, for example, known for its unlimited leave benefits,
which attract and motivate creative talents. On the other hand, if you have a
strong engineering culture, offering learning benefits such as course credits
on platforms like Udemy can be a significant boost for tech employees
seeking continuous skill development.
Depending on your business model, integrating your product itself
into your benefits can be well-received. For instance, if you have an e-
commerce app, you can provide cash equivalent credits to your employees'
individual accounts, stimulating sales and giving them an opportunity to
experience and provide feedback on the product as users. Tech teams are
particularly enticed by the chance to experience and provide input on the
prototype before its official launch.
Employee discounts are common benefits offered by e-commerce
companies, allowing employees to try out the platform they work for. In my
experience working at a health-tech platform company, we offered free
trials of new products like mobile doctors and telemedicine services to
employees. We gathered their feedback as initial customers and made
revisions based on their input regarding time and speed. These benefits
eventually became a key component of our employee value proposition and
were highly endorsed by staff members.
Remember, as you expand, investing in a well-rounded benefits package
tailored to your values and culture is crucial to attract and retain talent while
fostering a positive work environment.

3. Onboard professionals to your team

Professionals here I refer to people who have specialized in certain
disciplines with successful track records and exposure to scale. No startup
is able to attract professionals from day 1. If you're fortunate, you may have
a few founding team members who can bring in skilled individuals from
their previous ventures. However, in most cases, everyone initially has to
take on generalist roles or handle end-to-end operations. For example, in the
early stages, one person might handle both sales and marketing. As the
team grows and reaches around 20 people in the sales department, it
becomes necessary to divide responsibilities into lead generation, business
development, and other areas of the sales cycle. This marks the transition
point where professionals start to come on board.
While it may seem logical to bring in more help, the environment may
not always be welcoming. Startup employees are accustomed to handling
tasks independently and completing them on their own. Hiring
professionals signifies a shift towards distributed tasks and collaboration
with others. However, everyone has their own working style and approach.
This situation can lead to two extremes: one group of individuals may be
relieved to have the workload shared and welcome the change, while
another group may resist compromising and changing their ways.
Developing effective policies and procedures to ensure accountability
among team members is a straightforward solution. However, the mental
preparation of employees to embrace the professional phase is equally, if
not more, critical. When professionals start joining the company across
various functions and levels, it can create confusion or shock among
existing teams. Professionals often come from prestigious educational and
work backgrounds, which can make early team members who lack such
credentials feel threatened and respond defensively to the changes.
As with any change management process, clear and frequent
communication is crucial. It's never the case that professionals replace the
original team or that the early founders become incapable of performing
their equivalent tasks. In fact, the best approach is to focus on the work
itself rather than differentiating based on seniority. Whether they are new
joiners or original team members, people come to work, contribute to the
company, and develop their careers. They should complement each other
with their unique skills and knowledge. While industry experience is
valuable, institutional knowledge is also necessary for success. Simply
copying practices from other companies won't provide a customized
solution to your specific challenges.
Therefore, it's important for the leadership team to communicate these
beliefs early on. Change is never comfortable, but it's crucial to give people
choices and time to adjust. The last thing you want is to have new
professionals replacing a large number of original team members, whether
voluntarily or involuntarily. Such a situation can severely impact team
morale and lead to decreased productivity.
Change can also turn into a double-edged sword if managed uncarefully.
As change impacts culture yet culture is also the foundation of any
sustainable change. So how do you preserve culture as you scale?
People have passed you in the hallway, and you don’t recognize their
names. You accidentally dropped in a team meeting, but have no idea
what’s really going on. Those could be the signs that you have grown into a
certain size that things are delegated safely. Maybe there is room for
improvement, but definitely no need for panicking. It is the rite of passage
for startups expanding to the next stage. Usually starts around series B.
What you should worry about is when the differences among people and
organizations lose a cohesive touch. You cannot really see any consistency
among decision-making across teams. People are hired and rewarded based
on drastically different sets of standards. Those are probably the signs
indicating it’s time to pay much more attention to CULTURE.
But first and foremost, you should acknowledge that culture is not
static, it will and should constantly evolve itself. Culture is also elusive,
that even the most scientific management practices won’t guarantee the best
outcomes. Culture needs time to build and preserve, needs people to
maintain and advocate.
“Culture is a shared way of doing something with passion.” ––Brian
Chesky, CEO of Airbnb.
In the early days of a startup with a small team, the founder(s) often
represent the culture because they have been involved in every step of the
journey. However, as delegation becomes necessary, differences and
diversity in culture may start to emerge. So, how do you ensure that the
central thesis of what you're building is not diluted and that people inherit
the essence and share the same dream you once did?
 It all begins with a pervasive vision and mission. If you look at
sustainable organizations across history, such as companies, governments,
and regions, you'll find that their vision and mission went through
experimentation phases in the early days. But as they enter a growth stage,
these elements start to shape around a consistent, long-term theme. Drastic
changes are rare. When developing your vision and mission, dream big but
stay practical.
Another powerful tool for preserving culture is values. Values govern
behavior, guide decision-making, and create a shared belief system within
the organization. Examples of famous values include Amazon's leadership
principles, Alibaba's core values, and Apple's tenets. However, developing
powerful values is not an easy task. Simply copying and pasting values
from a website won't resonate with people and may even benefit your
competitors.
The last thing you want is for values to become empty slogans on the
wall. Powerful values take time to develop and refine, and it requires
collective effort from the entire organization. Don't rely solely on your HR
team or expect a two-day offsite with the leadership team to generate
something remarkable. Values should serve your customers, your business,
and the entire organization, and they should be specific yet allow for
individual interpretations.
Once the initial draft of your vision, mission, and values is settled, it's
crucial to develop iterative mechanisms to ensure people understand and
utilize them in their work. This can include using them as hiring criteria to
assess whether you're bringing in the right talent, incorporating them into
performance reviews to reward behaviors aligned with the values, and using
them as a compass for decision-making. However, it's important to draw the
line between reinforcement and voluntary selection. You don't want people
to weaponize these tools for propaganda purposes.
Amazon is well-known for its self-selection process of builders. Jeff
Bezos, in his 2018 shareholder letter, described the profile of a builder.
“Builders are curious, explorers who like to invent and maintain a humble
conviction that success comes through iteration. This builder mindset
permeates every aspect of Amazon's operations, from self-selection during
the hiring process to decision-making, team building, and rewards.” By
nurturing a dreamland for builders to thrive and take ownership, Amazon
has been able to retain a significant portion of its core executive team for
the meaning they find in their work.
Shu Yang, former Senior HR Director of Alibaba Group concluded that,
"Any successful organization that harnesses a large workforce needs some
guiding principles or a shared purpose to thrive. What sets Alibaba apart is
its ability to connect the company mission with employees' personal
aspirations. Working at Alibaba is not merely a means to an end, it is a way
to realize one's own potential and find personal fulfillment. If we consider
Maslow's hierarchy of needs, self-realization is at the pinnacle of human
desires. Alibaba has devised various mechanisms to ignite this
desire among its employees, giving them a higher purpose."
People managers play a crucial role in building and preserving
culture. They should be provided with special efforts, such as training, to
set examples for their teams. It's also important to develop smart processes
that can track and review the adoption and sentiments of different
demographics within the organization, such as new hires, tenured staff and
exited employees. These processes can provide valuable data points for
comparative analysis, helping you understand why certain values affect
different groups in distinct ways and how subcultures develop within those
populations.
Furthermore, it's essential to review cultural elements consistently. This
can be done during yearly planning meetings or performance review
seasons. While the bulk of your vision, mission, and values may remain the
same, you should always allow room for change and pivot when necessary.
These tools can sometimes become double-edged swords, so ensure they
work for your organization's growth rather than against it. If they start to
impede progress, they should be reviewed and adjusted accordingly.
“Change before you have to.” — Jack Welch
 CHAPTER 8
How to make people stick with you
Let's be real here. Even the most amazing startups can't escape the
dreaded attrition cycle. Waves of turnover are inevitable during company
transitions. Regardless of the unemployment rate, people are quitting more
than ever. Sometimes it's obvious, other times it's quiet-quitting, but either
way, it's happening. There's no magic number for a healthy attrition rate,
but what you should worry about is when your Glassdoor rating plummets
by 300% in just a few months or when you're making waves on Blind.
When unhappy employees leave, they're likely spreading the word to
everyone they know. As a startup, you can handle some ups and downs in
the business or fundraising process. However, there's one thing you can't
undo, and that's your brand. If your own people don't love the brand and
you're okay with that, think again. Employees aren't easily replaceable, and
you'll start seeing the snowball effect of your brand losing customers,
partnerships, and ultimately investments.
Before you jump into action, take that Sunday afternoon and dive into
your Glassdoor or Blind page. Sure, those reviews are mixed with personal
feelings and noise. Not everyone's perception is accurate. But when
consistent voices point out the same issues, it's time to pay attention.
● Change. When you come across reviews that mention how the company
used to be great but has since changed, or when they say it's not what it
once was, it's time to dig deeper. Is this the intentional change you're
driving? For instance, if you're aiming to transition from a close-knit
family culture to a more scalable and professional environment, and the
reviews align with that direction, then it's likely for the better. However,
it's also common for people to become extremely frustrated with politics
 and hierarchies as companies grow larger. In those moments, it's crucial
to investigate further: What are the underlying causes? Which specific
teams are affected? And do you have strategies in place to address and
remedy these issues?
● Managers. If people writes of poor management and a negative
management style at various levels, it's time to reassess your current
manager workforce. Look for prevalent topics like micromanagement,
managers lacking clear direction, or favoritism. Determine whether they
are the right fit for their roles or if they require reskilling. In startups,
many managers are promoted from being excellent individual
contributors (ICs). However, people management requires a different
skill set. Remember, managers serve as role models and their behaviors
trickle down through the organization. As founders, it's essential to
regularly reflect on your own leadership style and evaluate if these
comments are reflecting your own actions.
● Rewards. While there is no one-size-fits-all rewards strategy that
guarantees satisfaction, it's crucial to pay attention if you consistently
offer lower salaries than your direct competitors. This may indicate a
need to review your salary bands and consider engaging an external
consultant for guidance. Another harmful aspect of rewards is when you
fail to fulfill your commitments and lack transparency. This breach of
trust between employees and the company can ultimately lead to the
erosion of your brand.
● Learning Opportunities. When employees perceive a lack of learning
opportunities or progression within the company, it can be a significant
concern. If new managers with impressive backgrounds continuously
join the team instead of promoting from within, or if tasks are assigned
without considering individuals' interests or career aspirations, it
hampers the direct access to leadership and ownership of projects that
attracted candidates to startups in the first place. Removing the space for
learning and growth can result in quick employee turnover. It's essential
to prioritize and foster a learning environment to retain talent.
How to fix it?
 Startups don't have the luxury for a full-scale exit interview, or the
resources of the person to conduct it. I suggest either the founders or senior
executives should be doing the job. Even if later on you hired a team of HR
professionals, founders should sit in some exit interviews whenever you
can.
There are a few categories of exit interviews you should pay special
attention to: the involuntary leavers, the top performers, the early founding
members.
Why the involuntary leavers? Most startups don't have a sophisticated
performance management system yet. Most of your performance reviews
are determined by managers solely. People get lucky when they run into an
experienced manager. For a new manager sometimes, it is easier to get rid
of the old-timeys so they can feel more secure. Talking to the involuntary
leavers is a good way to spot those incompetent managers and signs of
politics.
Needless to say, there must be something wrong when your top
performers or early founding members start to depart. Sometimes they
may not be telling the truth. I suggest you follow up with them closely even
after they depart. Most people have emotions and need time to heal. Or they
are not in a position to speak the truth when the impacted teams are still
there. But after they start their new jobs and sufficient time is given for
processing emotions, people will start to reveal more.
How to conduct exit interviews? This is a practical guide.

1. Prepare: Familiarize yourself with the employee's background and

reasons for leaving.
2. Choose the interviewer: Ideally, have founders or senior executives
conduct the interview.
3. Create a comfortable environment: Ensure privacy and make the
employee feel at ease.
4. Listen actively: Pay full attention and show empathy throughout the
interview.
5. Ask open-ended questions: Encourage detailed responses to gather
valuable feedback.
6. Separate facts from emotions: Distinguish between objective
information and subjective feelings.
7. Respect confidentiality: Assure the employee that their feedback will
be handled confidentially.
8. Take notes: Document key points and specific feedback for future
reference.
9. Seek clarification: Ask follow-up questions to gain a better
understanding if needed.
10. Express gratitude: Thank the employee for their time and
contributions.
11. Follow-up: Stay in touch to address any outstanding concerns and
maintain relationships.
12. Analyze and act: Use the feedback to identify patterns and make
improvements.
Make sure you are all ears, listen very carefully and absorb every piece
of the information. Then you need to sit down and separate facts from
emotions. Do not jump into any conclusions after you validate those
assumptions through multiple sources, especially anecdotes.
"The thing I have noticed is when the anecdotes and the data disagree,
the anecdotes are usually right. There's something wrong with the way you
are measuring it. " - Jeff Bezos.
Sounds like it takes time? Well, if you think about all the future leavers
and your employer brand 6 months or 1 year from now. I bet you would
think twice about moving that sales pitch and squeeze in some exit
interviews.
Here are a few solution tips to some common challenges.

1. Bad managers.
People leave because of bad managers, plain and simple. But are you
hiring the right people to be managers in the first place? Your recruiting
team should prioritize assessing people management skills, even if startup
hiring teams are often impressed by candidates' drive, entrepreneurial spirit,
and performance records. Look for managers with direct or indirect
experience, or the potential to develop into great leaders. Evaluating
management skills is a mix of art and science, making it challenging for
someone without experience to judge another's capabilities. Your manager
interview committee should include senior leaders to make informed
decisions. Another strategy is to have experienced directors lead the team
and train potential managers for success. Ensure that the successors
genuinely want to be managers, rather than forcing them into the role due to
seniority or pressure from above, which may not align with their career
aspirations.
Implementing effective manager training is crucial and should be
consistent, measurable, and practical. Avoid wasting money on generic
management courses that people take just for the sake of it. Instead,
consider review sessions where managers can directly hear feedback from
employees. The key is to ensure that the majority of feedback is honest and
insightful.
Amazon’s Daily Connection Survey
The daily connection survey at Amazon is a practice where employees
provide regular feedback on their managers. It allows employees to share
their thoughts, concerns, and experiences related to their managers'
performance on a daily basis. This survey serves as a platform for
employees to voice their opinions and provide feedback on managerial
effectiveness. It enables Amazon to gather real-time insights, empower
employees, track manager performance, and drive continuous improvement
in management practices.
Manager training covers technical and soft skills, and there's much to
learn and improve. However, the most important step is to foster awareness
within the company that promotes a culture of good managers. Educate
and reward people accordingly, emphasizing that a good manager culture is
a core goal. It's not just about educating managers themselves, it's about
cultivating a broader manager mindset throughout the organization.
2. Rewards are NOT transparent.
This issue goes beyond startups and is one of the main reasons why
people leave. However, it's really an excuse to say there's nothing you can
do about it. One tip I suggest for startups is to provide clear guidelines and
tools to help educate employees on how to calculate the value of their
equity. Often, startup equity lacks a proper system or documentation, and
this becomes problematic when shareholders demand transparency or
potential legal issues arise. You can utilize simple tools to educate
employees on equity and demonstrate the growth potential if the company
succeeds. It's important for startups not to make unrealistic promises when
the management themselves are unsure of the values. This can come across
as deceptive, even if unintentional. Another aspect to improve in terms of
rewards is the benefits package. Refer to Chapter 6 for ideas on how to
improve your startup's benefits strategy.
While the actual content of your rewards is important, it's equally critical
to regularly update employees on your rewards philosophy and show the
progress you're making. If you're aiming to promote a rewards culture that
emphasizes ownership (particularly through equity), take the time to
explain the reasoning behind this approach and the expected outcomes.
Connect it to your business model and projected returns. Additionally, when
expanding into new regions, startups may initially have minimal benefits in
place. However, it's essential to provide consistent updates and a timeline
for improvement, even if they involve small additions like dental plans.
People feel better when they see the effort being made. Avoid making
excuses to delay announcing any rewards improvements just because you're
not fully prepared yet.

3. Toxic Culture
One of the most common complaints about startup culture is the lack of
work-life balance, which often leads to burnout. While it's expected that
startup employees need to take on multiple roles and handle heavy
workloads within tight deadlines, there's a distinction between working hard
and working smart. Encouraging a startup culture that only values and
rewards working hard will only exacerbate the issue.
To address this, start by examining your workforce planning, and
identify areas where you can streamline and optimize workflows through
the use of mechanisms and technologies. Finding ways to enhance
efficiency and productivity can alleviate the burden on employees and
create a healthier work environment. Additionally, promoting flexibility
within the startup can foster a culture of working smart. When employees
have the freedom to save on transportation costs or work remotely from a
picturesque island, they can utilize the extra time gained to contribute
positively to the company, such as writing positive reviews on platforms
like Glassdoor.
By prioritizing work-life balance and implementing measures to support
it, startups can not only mitigate burnout but also cultivate a more
sustainable and productive work culture. Remember, the well-being of your
employees directly impacts their performance and long-term commitment
to the company.
According to Bhavik Vashi, former General Manager, Asia of Anaplan,
"One of their best practices was to distinguish the influence of culture from
the profit and loss (P&L) statement. By granting regional leaders the
autonomy to cultivate their own unique subcultures, they were able to fully
embrace and appreciate the diversity within decentralized teams. This
approach allowed for greater empowerment and fostered a culture of
inclusivity within the organization."

4. Communication is imperative.
Job security is an ongoing concern for individuals working in startups.
While it may seem like everything is going well on the surface, there are
instances where cash burn exceeds sustainable limits. Achieving a delicate
balance between sharing pertinent information with your staff can be
challenging. However, it's crucial to prioritize transparency and honesty
in your communication efforts, or at the very least, demonstrate your
genuine attempts to do so.
 In times of economic hardship or when the entire industry is facing a
downturn, pretending that everything is fine won't provide job security to
your employees. Instead, it's essential to engage in authentic, action-
oriented communication that addresses the challenges at hand. By openly
discussing the situation and sharing your plans and strategies for navigating
difficult times, you can foster trust and provide your team with a realistic
understanding of the company's position.
While you may not have all the answers or be able to guarantee
complete job security, genuine communication shows your commitment to
addressing concerns and working towards sustainable solutions. This
approach helps build a resilient workforce that understands the realities of
the business environment and can adapt accordingly.
To keep people loyal to your startup, you need to address their concerns
and create a supportive environment. Attrition is bound to happen, but by
actively tackling issues and prioritizing employee satisfaction, you can
reduce turnover and build a committed team. Look for consistent themes
and make necessary changes, whether it's improving management, being
transparent with rewards, offering growth opportunities, or promoting
work-life balance. Conduct exit interviews to gather valuable feedback and
improve. By focusing on effective management, transparent rewards, work-
life balance, and open communication, you'll create an engaging workplace
where people are motivated to stay and contribute. Remember, investing in
your people is investing in the success of your startup.
 CHAPTER 9
Life after IPO
Congratulations on reaching a major milestone in your entrepreneurial
journey! All those sleepless nights and hard work have paid off. Now, let's
talk about life after reaching this point. While many promising startups
receive tempting acquisition offers along the way, some choose to stick with
the IPO route because they want to continue reaping the rewards of their
labor.
Before we delve into what comes next, let's discuss why you might
consider going public. Interestingly, there's a growing trend of IPO
resistance among venture-backed startups. While it used to be the coveted
prize in the 90s, nowadays, many companies prefer to stay private. They
enjoy the freedom and control that comes with avoiding Wall Street's
expectations. Private markets have proven to provide abundant capital,
sometimes even more than the IPO route.
However, let's not overlook the alluring perks of a holy grail IPO (aside
from the obvious ego boost). Going public can enhance your company's
branding and corporate credibility, particularly if you operate in sensitive
industries. It also allows you to convert your appreciated investments into
cash more easily by hitting the "SELL" button. Moreover, an IPO fuels
mergers and acquisitions, enabling you to renew your product cycle and
keep up with growth.
Not only does an IPO benefit the company, but it also brings joy to early
team members. For them, it's a kind of finish line. They may prefer to cash
out, take a breather, or embark on a new venture.
 Now, amidst all the legal and financial complexities swirling in your
head, don't forget to meticulously plan the people aspect of the equation.
This includes preparations before, during, and after the transaction.

1. Probably the No.1 thing is to reshape the

organization from top to bottom.
When it comes to employees who are determined to leave after the lock-
up period, there's little that can stop them. So why try to stop them? My
recommendation is to offer them a voluntary choice and a generous offer.
Remember, every product exists within an ecosystem, and those who
branch out may actually contribute back to it in some way, most likely by
building new products. Saying a cordial goodbye might actually benefit you
in the long run or present opportunities for future partnerships.
On the other hand, it's crucial to commit to the employees who choose to
stay and provide them with a new mission. Take a page from Alibaba's
book. After going public, they restructured their leadership team, giving
early founding members new responsibilities that they could get excited
about or had been longing for. This could involve transitioning from a CHO
to a CEO role or something that truly motivates individuals and reduces the
likelihood of them seeking opportunities elsewhere. For many, work is not
just a means to achieve financial freedom but also a source of joy and
personal fulfillment. Preserving your original team helps retain
institutional knowledge and brings stability to the organization.
As Scott Kupor, author of "Secrets of Sand Hill Road," wisely stated,
"You need to remember this might be a frightening time for staff, who have
in effect signed up for one company, and are now going to find themselves
working for another."
Similarly, average employees who still need to continue working and
moving forward in their lives should also be given a choice to explore new
opportunities in the next phase. This could involve changing business units,
shuffling roles and functions, or taking on new leadership positions. When
your company creates a buzz, your employees also made a name for
themselves. Be prepared for a wave of recruiter poaching calls coming from
all angles. Employees want to work for an organization that aligns with
their professional and personal goals. Conducting surveys, upgrading
missions, and evolving cultures are essential steps. If you have always been
committed to creating a sustainable environment for your people, the
impact of the IPO may not hit as hard.
However, if your organization has been plagued by toxic culture,
politics, and disengaged employees, these issues will only amplify after
going public. That's why it's crucial to address any underlying problems
beforehand. Having a contingency plan can help mitigate risks, but it's
equally important to stay consistent with your corporate culture-building
efforts. This signals to the market that your company has discovered a
successful model and, ultimately, is a reliable and predictable business.

2. Upgrade your talent strategy

Unfortunately, going public through an IPO means that every move you
make will be closely scrutinized on a daily basis. Fulfilling your
commitments to shareholders becomes an urgent priority. In many cases,
these commitments will involve business transformation and expanding into
new territories. The same goes for making changes to your personnel. You'll
need a team of experts and professionals to help deliver on these promises.
If you haven't already, now is the time to focus on strengthening your
talent acquisition (TA) team. If you don't have a dedicated TA team yet, it's
crucial to build one. If your current team consists of only three people, it's
time to consider adding layers such as experienced hires, campus recruiting,
executive hiring, and new functions like sourcing and employer branding.
You may also want to hire industry-renowned TA professionals to join your
new crew.
For most companies, the immediate concern is modernizing the
screening process. Whether you already have a systematic selection
process in place or not, you need to enhance it. The target candidate profiles
change after going public. You're still hiring smart A players, but this time
they need to contribute to scaling the business and bringing pragmatism to
the transformation. We all know that recruiting requires a collaborative
effort, so it's essential to provide training to educate, advocate, and elevate
your hiring teams. Like any other evolution, it's important to take one step
at a time instead of trying to replicate what works for Fortune 500
companies that are much larger in scale.
Companies that rush into the transformation journey often experience a
high number of departures. Newcomers may struggle to adapt to the fast-
paced scale-up environment, while existing employees may find it
challenging to keep up. When it comes to senior hires during the post-IPO
period, a rigorous interview process is vital, as they can either make or
break the next phase of development. When Amazon was scaling up, it
went through a similar challenge and that was the birth of the famous Bar
Raiser program.
Amazon’s Bar Raiser program
Amazon's Bar Raiser program is a group of exceptional employees who
maintain the company's high hiring standards. These experts, called Bar
Raisers, evaluate candidates impartially and ensure only the most
exceptional individuals are hired. They undergo rigorous training and
inspire innovation, fostering a culture of continuous improvement at
Amazon. The Bar Raiser program represents Amazon's commitment to
excellence and pushes the boundaries of what's possible.

3. Reevaluate your rewards strategy

As an employee, if you're thinking about cashing in on your newly
awarded shares, there's more to it than meets the eye. Before you start
envisioning that big payout, you'll likely need to deal with the tax burden
that comes with exercising previous stock grants. And for founders, guess
what? The IPO brings with it a whole wave of demands for paybacks from
various parties like VCs, LPs, boards, advisors, SPAC partners, and banks.
It's like settling a complex puzzle of debts, requiring both art and science.
Once you've cleared your IOUs, it's time to work with professionals to
figure out how to incorporate newly gifted equity products into your
rewards schemes. This will help attract and retain both existing and new
employees. But here's the thing: taking a long-term approach and
establishing a new rewards philosophy should be your very first step.
Think 3-5 years down the road instead of just reacting to the immediate IPO
buzz. In fact, it's wise to act like a public company and have all the
necessary tools and mechanisms in place before going public. Here is a
checklist you can reference back.
1. Establish a Compensation Philosophy:
● Define objectives, pay mix, market position, pay-for-performance
approach, equity usage, benefits, and perquisites.
● Consider including Board pay philosophy.
2. Develop a Public Company Peer Group:
● Select similar-sized companies with comparable business models.
● Ensure alignment for accurate performance comparisons.
3. Understand Equity Usage:
● Assess the amount of equity allocated for management.
● Consider longer IPO timelines and adjust equity allocation accordingly.
4. Assess Executive Compensation Competitiveness & Design:
● Evaluate equity program design to align with public company practices.
● Avoid overreliance on time-vested restricted stock and stock options.
● Consider performance-based equity programs for motivation and value
creation.
5. Investigate Board Pay:
● Review Board compensation practices and make adjustments as
needed.
● Balance equity and cash compensation to attract and retain qualified
Directors.
6. Study Proxy Advisory, Compliance & Disclosure:
● Evaluate how private company practices differ from public company
norms.
● Ensure compliance with proxy advisory firm policies and disclosure
requirements.
 The same goes for your performance management system, which should
be closely aligned with your rewards strategy. If you've been incentivizing
and promoting employees solely based on individual managers and teams,
it's high time to reassess those standards. Consider doubling down on
performance-driven short-term rewards to accelerate your transformation
journey. Simultaneously, it's crucial to play offense with your LTIs (long-
term incentives) to ensure that key people who have recently joined the
company stay on board, even during challenging times.

4. Uplevel your comms.

Going public comes with a whole new level of responsibility and
scrutiny. Suddenly, you're managing other people's money, and every little
thing you do or say can sway your stock price. It's like living under a
microscope, where even the slightest leak or commentary can have a
positive or negative effect on your company's value.
This heightened attention means you need to up your game in
communications. It's time to beef up your communications team to handle
the flood of correspondence from investors and the public. Externally, you
need to be on top of your game, crafting clear and timely messages to keep
everyone informed.
But it's not just about external communications. Internally, it's crucial to
help your employees understand the new reality of working for a public
company. They need to grasp the importance of sticking to the goals
discussed externally, engaging in careful forward planning, and reaching
material milestones. It's like a crash course in the language of being public.
What does SOX mean? What's our hiring plan? What does it really mean to
be a public company? Instead of focusing on what can't be said, let's
empower them with what they can say.
And let's not forget about insider trading. It's vital that everyone
understands the concept and the rules. No buying or selling stock if you
have material, non-public information. It's a whole new level of stock
market education for your employees. They need to understand how stocks
and options work, their value, and the restrictions that come with them.
After your IPO, your company becomes an open book, and everyone needs
to adapt to this new reality. Confidentiality goes out the window as you
produce prospectuses and external reports, disclosing information that was
once kept under wraps.
So, buckle up and prepare for this rollercoaster ride of being a public
company. Manage your communications wisely, educate your employees,
and embrace the transparency that comes with going public. It's a new
chapter, and with the right mindset, you'll thrive in this brave new world.
"Over the short term the market is a voting machine, but over the long
term it's a weighing machine." – Benjamin Graham
Life after going public can feel like a rebirth—a chance to showcase the
incredible work you've done and the value you've created. But it's also a
moment of truth, a market correction that weighs the sustainability of what
you've built thus far. It's a test of resilience and adaptability.
So, as you navigate life after IPO, stay true to your core values, continue
to invest in your people, and adapt to the changing tides of the market.
Remember, the long-term success of your company will ultimately be
determined by the value you bring, the impact you make, and the trust you
earn from your stakeholders.
 CHAPTER 10
When bad things happen to good
people
Going through a down round is undoubtedly one of the toughest
moments in the startup journey. It's like sailing through a storm, facing
strong headwinds that can bring your company to its knees. It often
involves raising funds at a lower valuation than previous rounds, which can
lead to cost-cutting, layoffs, and even the possibility of sell-outs or
bankruptcy. It's a challenging time, but not all hope is lost.
There are various factors that can contribute to a down round, and it's
not always a result of mismanagement. Sometimes, macro-economic forces
are simply too powerful, or the market develops slower than anticipated.
However, there are also stories of companies that defy the odds and rise
from the ashes, stronger than ever, a few years down the line.
So, what happens after a down round? Most likely, your company will
go through a recapitalization led by either new investors or existing ones.
This involves not only accepting a lower valuation than before but also
potential reductions in the liquidation preference and even reverse splits of
the stock to adjust equity ownership among existing investors.
Some founders and boards may try to take a seemingly easier route, such
as bridge financing or venture debts. These options provide temporary
liquidity, but they often fail to address the underlying challenges. In fact,
they can be the beginning of a series of nightmares to come. It's important
to learn from the experiences of others, like the SVB crack-down and
subsequent down rounds, and recognize that shortcuts rarely solve the
deeper issues.
 Let's say you manage to raise a new round of funding and decide to
weather the storm. The ramifications of a down round extend beyond just
investors and the board. Your customers and suppliers will be affected, and
employee morale and people-related challenges will arise. It's crucial to be
transparent with your people and provide them with honest answers.
Whether it's your early adopters or your dedicated founding teams, any hint
of deception will further erode the trust that remains.
So, it's time to face the harsh reality and have an open conversation with
your employees. Acknowledge the situation and tell them, "We are where
we are, and something needs to change." It's by embracing the truth and
working together that you can overcome the challenges ahead and build a
brighter future.
Remember, it's not the end of the road. Many successful companies have
faced down rounds and emerged stronger on the other side. It's through
resilience, transparency, and a commitment to adapt that you can navigate
these rough waters and set sail for success once again.

1. Hold off that backfill

When it comes to managing human capital after a down round, a smarter
approach is needed. It doesn't always have to involve drastic measures like
downsizing. Inevitably, down rounds already result in voluntary
resignations, which will require backfills. However, if you've been diligent
in your workforce planning from the start and have brought in versatile,
adaptable talents, there are ways to reskill or upskill those talents.
The first thing to consider is optimizing team efficiencies. With
adjusted growth targets following the recapitalization, you now have a bit of
breathing space to explore new growth areas or delve deeper into
improvement. Instead of immediately rushing to hire new skills, you can
pivot people's portfolios and reskill quick learners to take on new
responsibilities.
However, communication around workforce optimization needs to be
handled with care. If your company has been accustomed to a hiring spree
during growth phases, suddenly tightening belts can be a shock. Managers
may need to take on work that was previously delegated. It's important to
provide a radically candid explanation of your thought process and the
rationale behind the changes. Give people time to shift their mindsets and
adjust to the new reality. Rather than abruptly halting hiring, carefully plan
out the groundwork for communication efforts.
While workforce optimization is crucial, it's essential to avoid simply
assigning people new tasks or combining vastly different job categories
without giving them a choice. It's important to consider factors such as
people's strengths, willingness, and aspirations before making decisions
about workforce optimization.
There may be instances where hiring is absolutely necessary to fill
backfills or acquire new technical capabilities. In such cases, consider
Recruitment Process Outsourcing (RPO) or outsourcing services, as an
alternative. Numerous vendors today offer cost-effective and hassle-free
hiring solutions. Additionally, outsourcing some capabilities to equally
talented but more cost-efficient locations (such as moving the R&D team
offshore) can be considered.
When my previous telemedicine startup faced a down round, we turned
to offshore RPO services to help us with hiring our blue-collar contingent
workforce. These were the part-time healthcare professionals who assisted
with online consultation for our customers. Despite initially hiring them in-
house, we struggled with high attrition rates that negatively impacted our
customer retention. And the RPO results were remarkable. Not only did we
experience reduced attrition but also saved us valuable time and resources
that were previously spent on managing this workforce. Instead, we were
able to focus our energy on more productive tasks.
It's worth noting that a down round can have a negative effect on your
brand, including your employer brand. Not only is your valuation diluted,
but attracting and retaining new talent may require extra effort. However, if
the down round occurred because of missing key people or a bad hire,
commit to allocating resources to hiring immediately. Look for
opportunities for internal promotions and become a sourcing magnet
yourself to attract key talent.

2. Rebalance your rewards

If you've been down-rounded and find yourself spending like a Saudi
prince, it's time to reassess non-essential perks that are not crucial for
survival, such as free breakfast or in-house massage therapists. People who
choose to stick around and see how the company can bounce back
understand that these things may be temporary. While a sea-view office
might enhance creativity, it becomes trivial if the company is struggling to
make it through the day.
Alongside adjusting corporate benefits, a significant focus should be on
employee rewards. When the company's value decreases, the original
employee equities are diluted. With recapitalization, new shares are issued
at a lower price. To meet employee expectations, consider increasing equity
grants through rightsizing the company. This is an effective way to attract
and retain existing employees. Another option is providing a cash payout
for stock options, offering employees immediate liquidity. Then, you can
issue lower-priced shares or create room on your cap table for investors
who seek a larger ownership stake in the company.
Additionally, renegotiating terms and strategies with the board and
investors can be explored. This may involve dilution for founding members
or investment committees in proportion to the increase. If investors believe
in the company's future plans, they often agree to this adjustment to align
economic incentives properly. Another mechanism to consider is
implementing a management incentive plan (MIP).
Management Incentive Plan (MIP)
A management incentive plan (MIP) is a strategic approach to motivate
and align the interests of key executives and managers with the long-term
success of a company. It typically involves offering incentives, such as
stock options or performance-based bonuses, to reward top-level
management for achieving specific goals and driving company
performance.

In the context of a down round in a startup, where the company's

valuation decreases, the management incentive plan can be utilized
strategically. During a down round, the value of existing stock options or
equity grants may be adversely affected, potentially demotivating key
employees.

To address this challenge, the management incentive plan can be

leveraged to mitigate the impact of the down round. It may involve
adjusting existing equity grants or offering additional incentives to
compensate for the reduced value of stock options.
By recalibrating the plan, the company can provide alternative forms of
compensation or rewards that maintain the motivation and engagement of
key employees. This could include cash bonuses, performance-based
incentives, retention bonuses, or even revised equity grants that reflect the
new valuation.

Ultimately, the goal is to retain and motivate talented individuals during

challenging times, ensuring their continued commitment to the company's
success despite the temporary setback of a down round.
While these measures may be tough, if winter is here, it's necessary to
readjust bonus policies. This could involve temporarily pausing bonuses,
implementing pay cuts, or freezing salary increments. These contingency
measures are typically explored in sequence, starting from top executives to
employees. Communication is vital throughout this process, as you're
asking people to sacrifice a piece of themselves for the mass. Being a good
role model yourself sets a positive example.

3. Winding down as the last straw

Unfortunately, there are times when you have to wind down your
company and say goodbye to some amazing employees. But it's important
to remember that off-boarding doesn't just impact current and past
employees—it also affects your future customers and your company's brand
(and even your personal reputation if you plan to start another venture).
First and foremost, communication is key. Keep your employees in the
loop and be transparent about the situation. While it may be disheartening
for them, they understand that working for a startup comes with
uncertainties. Make sure to uphold your company's positive culture and
values even as you navigate the exit phase. Show compassion and empathy
by offering thoughtful exit strategies. Consider providing benefits like
reimbursing unused vacation days or extending health coverage for a
period. While saving money is crucial, investing in a smooth transition can
save you from potential legal issues and reputational damage in the long
run.
Avoid the temptation to deceive employees. It's never a good idea to
make up excuses or tell lies during a difficult time like this. Everyone is
aware that things aren't going well if you're going through a down-round.
Trying to save a few bucks by ending things on bad terms will only harm
the company and your reputation as a manager. Seek legal guidance to
ensure you comply with regulations and avoid any missteps. Review all
employee liabilities regularly with the board to prevent any unintended
negative consequences.
Remember, treating departing employees with respect and kindness not
only protects your company's image but also shows that you care about
their well-being. This goodwill can benefit you in your future endeavors.
It's never easy to wind down a company, but by following these practices,
you can navigate this challenging period with integrity and compassion.
"Bad companies are destroyed by crisis, Good companies survive them,
Great companies are improved by them." - Andy Grove.
As much as it’s disheartening, tough times can actually be opportunities
for growth. With grit, adaptability, and smart choices, a company can not
only ride out the storm but come out even stronger. It's during these
challenging moments that exceptional companies rise up, learn from their
missteps, and use the crisis as a springboard for progress. So, instead of
shying away, embrace the challenge, think outside the box, and let this
experience propel your company towards a brighter future.
 SUMMARY
Thank you for reading, I hope you enjoyed the book and its essay type
of format. Like I mentioned in the introduction, I wish this book can be a
practical guide to anyone on the scaling up journey.
The book is organized to follow the different stages of company
development, so you can easily navigate through the content based on
where you're at. Of course, not every company will reach every stage
discussed, and that's totally okay. The key is to gain a long-term perspective
on talent strategy by exploring the various chapters and understanding how
they apply to your unique situation.
Just like humans, companies go through phases of growth and change.
These days, it takes around 10-15 years for a company to go public, which
is like watching a child grow from a baby to a little kid. It's not an easy road
to get there, but there's still a long way to go. By gaining insights into the
future and learning from the experiences of others, you can make smarter
decisions and avoid potential pitfalls along the way.
One important thing to remember is that talent strategy is not just about
recruiting or rewards or organizational design. It's all interconnected. The
book is structured that way to make it easier to digest, but in reality, these
elements work together as a unified system. So, take a holistic approach and
think about how each piece fits into the bigger puzzle of your talent
strategy.
The tools and examples I shared in the book are meant to inspire you
and serve as a reference point. But don't be afraid to get creative and think
outside the box. There's no one-size-fits-all solution. You need to adapt and
tailor the strategies to your specific context and challenges. And with the
rapid advancements in AI, there's even more room for experimentation and
innovation in areas like HR operations, recruiting, and communication.
So, go ahead and try new things, be bold, and stay up-to-date with the
latest trends. Treat your talent strategy as an integral part of your overall
business strategy, and don't be afraid to learn through trial and error. It's all
about finding what works best for your company's unique needs and goals.
Lastly, feel free to subscribe to my SCALE UP newsletter, where I
continue to interview thought leaders in the field and share insights on
contemporary talent strategies. And if you ever have any comments or want
to start a discussion, just reach out to me on LinkedIn. I'm always happy to
connect and chat about these topics.
 ABOUT THE AUTHOR
My name is Jerry Hu. I am a people
enthusiast when it comes to scaling startups.
From San Franciso to Beijing to Tokyo to
Singapore, I had the best luck 0-1 building
teams, scaling talents and transforming
organizations, across the life-span of companies
from seed-round, series B, to post-IPO, trillion-
dollar market cap tech giant and hundred-year
legacy corporation. Some of the companies I
have worked for include Amazon Web Services,
Alibaba Group, Singtel Group, Doctor Anywhere and Groupon. Started
from an entrepreneurial background, I always connect people challenges
with underlying business challenges, and bring business-centric and long-
term thinking into HR solutions.
Because of this passion for startups and having been through the blood-
and-tears of the startup life, I created the SCALE UP Newsletter & Video
Series hoping to democratize the access to information and share/inspire
best practices. Recently I also collaborated with Academy to Innovate HR
(AIHR) and am currently teaching a course in strategic talent acquisition.