One definition of Synergy is when several different parts come together to make a whole that is significantly bigger than just the sum of those parts – this could easily be a definition of the various functions or activities that go into making a startup. The various key functional areas like Sales, Marketing, HR and Finance have key roles to play in any organization but their impact within the context of a startup is more immediate and even more critical.
Given the resource crunch most startups are burdened with there is a natural tendency among founders to take every critical functional area on to their own plate. Founders think of their startup as nothing less than their own baby and who better to care for the baby than the concerned parent? While that may be true at the very infancy of the startup there comes a time in its life when denying it more specialist care can prove extremely detrimental to its long term well-being. This can be compared to an infant’s inevitable need to step out into school and learn from teachers specially trained in the science of expanding its horizons. This is even truer in bad times as illustrated by the infant’s need for specialist medical care when it is struck by a malady. The startup is also similarly placed – the founder would be well advised to recognize that inflexion point beyond which the baby should no longer be denied the specialist care of professional managers in the critical business areas outside of the direct range of expertise of the founder.
Let us examine a couple of these areas and the crucial role they can play in driving the growth of a startup when in the hands of capable leaders.
Most startup founders will readily name their people as their most valued assets – so much so that this is almost a cliché. Given how freely this is acknowledged it is perhaps surprising how few startups then take the next step and define a truly strategic role for the HR function freeing it from just recruitment, employee relations and day to day operations. There are several important areas where a strategic HR function could play an invaluable role:
- Defining and aligning the culture of an organization: Decoding the genetic map of an organization most likely to be able to realize the vision of the founder and building the systems and processes that ensure the continuing executing on that road map can have the most profound impact on the startup.
- Scalability: A successful startup wants to grow explosively and the HR function will have to play a key role in designing the organization and the structure in such a way that it does not become a victim of its own success. Recruitment, Training, Performance management and compensation practices will all have to reflect the changing needs of the growing startup.
- Change Management: Living with change on a day-to-day basis and reveling in it is the characteristic of the successful startup. Change is a fact of life at a startup and HR has the responsibility of ensuring that the systems and processes engender an appreciation of this fact.
The other function within startups that receives perhaps less than its due is Finance. The Finance function can play a critically important strategic role in driving the success to the next level.
- Given that most startup founders tend to be functional experts in their product or service areas there is a strange reluctance to draw the focus on what is the single most important reason for the existence of the startup – to make money. The Finance department is best placed to take the lead in driving that mindset across the length and breadth of the organization.
- A role that is absolutely critical to keeping the startup afloat that the Finance Department is most suited for is keeping track of the cash and doing everything necessary to keep the wheels turning – billing and collections and cash flow management being key.
- Investment is the oxygen that growth needs. The Finance department has the responsibility of drawing up the budgets and making sure the different parts of the organization adhere to them. Without this the startup runs the risk of indiscipline creeping into the way money is spent on competing initiatives.
- A goal for many startups is to be acquired or to go public. Should this event occur one of the key items potential investors seek is a comprehensive, honest record of the financial performance of the company and full disclosure of all the business attributes that may impact its future performance. Making sure a startup is investment ready is an important function the Finance Department has to fulfill.
In the severely constrained but highly energetic startup environment the importance of each function is magnified but in our view HR and Finance could be two that make the difference between a startup that really takes off and one that meanders along without really finding its feet.
Rashmi Khurana, Executive Director at Clarion Venture Partners. Rashmi has spent over 15 years in different roles including Business Development, Account Management, Sales and Pre-Sales Management, Client Service Management across multiple locations, End-to-end Operations, Management of Recruitment Solutions and Talent Acquisition.