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Startup Stories: A Passionate Affair

February 25, 2015

Part 1 of a 2 part series on incentivising staff. This blog post deals with finding the right people for your small business. Part 2 deals with vesting shares and awarding share options

Part 1

One of the conundrums all small businesses and startups face is attracting key talent at a time when financial resources are limited.  Put more simply, your business probably just can’t afford to hire the people it really needs to succeed. Or can it?  Potentially yes. Cash may be scarce in a business that is yet to generate any. Brains and talent should never be.

So how do we lure the VP of Marketing from a multinational in Central to our fledgling startup at the Science Park? This is after all Hong Kong. Well-educated people work in banks, law firms, and accountancy practices – environments that guarantee salaries, bonuses, (an element of) security, and other perks of the corporate world.  Startups often wonder if they will be around next month, let alone next year.

Of course, if you are reading this, the chances are high you are already running a business AND looking for staff to grow it. You know the answer to this question. The startup, you reply, nurtures an environment for smart people to really use their brains; to apply themselves in ways that are stifled in their corporate working lives.  It is simply a better place to work.  All true, and on a Monday morning in January very likely to hit a nerve with our Marketing VP, but sadly probably not enough to make her leave it all behind just yet and flock to your co-working space. The problem you see, is not what you are offering, it is how.

Odds are, you formed the company on your own or as part of a small team.  How do you describe yourself on your business card? Founder, Co-Founder? CEO? CTO & Co-Founder? However you do, it is clear that the company and vision is (at least somewhat) yours. Go on admit it. It feels good to know that you are the master of your own destiny and that there are no limits to what this machine you are building can achieve.  So our Marketing VP should be just as excited right? Wrong. She evaluates her role in your startup very differently and getting her to feel as passionately about the business as you do, is the key to getting her through the door.

Fortunately for you, passion – the passion that saw you voluntarily leave Goldmans to launch a clothes wear line from your apartment, is highly infectious. Your singular belief in your business is strong currency and people will want to talk to you. They will want you to create a package that makes joining you possible. So that’s good news. Equally fortunately you are not alone in this dilemma. Many great companies assembled high caliber teams early on, through a little creativity.

In this two-part article we focus on two key strategies your startup might use to attract our fictional VP of Marketing on a limited cash-budget:

  • ensuring the total package is broadly in line with other roles she is applying for; and
  • different ways you can make her a business owner.

In fact there is really a point (3) as well. It is the package PLUS the passion and it is what she will ultimately weigh up when deciding whether to make the leap of faith.

Know Her Market and Your Vacancy

Knowing who your VP is talking to; what her role is now; which businesses she aspires to join (and in what capacity); and how much other companies are willing to pay her is essential.  Preparing a job description cloned from a vacancy at Coca Cola for a Global Head of Marketing, with a headline monthly salary that is very substantially lower is not likely to garner the kind of candidates you seek, regardless of how passionately you may describe your company mission.

Take time to shape a role within the business that offers a remit for her to grow and make sure this opportunity is far in excess of any other offer she is currently reviewing.  A Job Description should make her feel excited about the role, even before she gets a sense of the passion of your team.

Equally important as headline salary is to look at the ‘perks’ offered by other potential employers.  For example do all the MNCs offer international private health care; localized Hong Kong private health care; or none at all. Is she likely to receive a guaranteed bonus or commission structure in addition to a base monthly salary.  Do employers pay “13 months” a year or is the market somewhat more internationalized with no expectation of double payments at Chinese New Year.  Thorough analysis of your competition (not just other startups or indeed probably even your business competitors, but in fact deep-pocketed corporates who may well operate in very different markets to you) is essential to be sure what you are offering is attractive and will start a conversation.

The Salary Gulf

So now you know what she is likely getting today and what she may well be offered tomorrow. This is probably disheartening news and unlikely to be affordable or indeed merit the cash expense at this stage in your business cycle. We need to work backwards to arrive at a package which is interesting for our VP. Real figures are always good for this, so let’s use some examples to make it clearer.

Let’s imagine, as VP, she currently earns HK$55k per month, with a performance-related bonus each year of up to one month’s salary. She has local Hong Kong private health care coverage. She is looking at various similar roles to her own, is comfortable and realistically is unlikely to move for less than a HK$10-HK$15k pay increase.

You have a budget for this role of HK$30k per month.  Currently your company has no plans to offer private health care to its employees.  It has until now seemed like an unnecessary expense and not to be implemented for a couple of years at least. A few quick quotes however tell you that cover at the level she currently affords is only HK$2.5k a month.  What if you were to offer slightly less headline cash but include the health care?

The package now stands at HK$27.5k per month but includes private healthcare. It is starting to sound more attractive on paper and appeals to our emotional need for security (not just a cash number). It is however, still a long way off being competitive.

In her current role, the VP is eligible for an annual bonus. This is performance related. An annual bonus is usually tied to the performance of the company, the group the employee works in, and to a large extent how the employee has performed during the year.  It is not guaranteed (although the VP may count it as such).  How do your financials look for the year ahead? How much impact does the Marketing VP role have on bottom line profits? Does her role merit a proportionately bigger bonus?  Could the business easily (and profitably) afford to pay her up to say three months’ bonus in a good year? If so, let’s add that to the mix.

We now have a package with a base of HK$27.5k per month that includes private healthcare and offers a discretionary bonus of up to three months’ salary. And we still have the Ace up our sleeve because we can offer something additional that the corporates ordinarily can’t. Find out in Part 2 how we can make our VP a business owner. How we can give her passion.

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