Finding and retaining the right talent for your scaleup (part one)
UK Tech News recently partnered with RSM to hold an event focused on the challenges facing scaleups when it comes to recruitment.
The panel consisted of David Blacher (head of technology, media and telecommunications, RSM UK); Ritam Gandhi (founder, Studio Graphene); Kelsey Carew (hiring partner, Hired by Startups), and Simon Adams (employer solutions partner, RSM UK).
The discussion was lively and insightful, with plenty of input from the audience. In this two-part article, we’re bringing you the highlights from the event, to help you scale up not just fast, but smart.
Incentivising staff in a heated jobs market
Scaleups need the best quality staff to help turn them into the metaphorical ‘rocket ship’ investors look for. But when you’re competing against bigger, better-resourced companies, it can be hard to offer competitive salaries. What else can you offer?
For Carew, the answer is something money can’t buy. “The thing people are looking for is trust,” she says. “Flexible working, working from home – that all shows you trust who you’re working with, and that’s a huge thing, especially for millennials at the moment. Showing them that they have the freedom to get the work done is rewarding enough.”
Gandhi builds on this sentiment. “The hardest thing is to make people feel they have value in what they do. More and more people are realising they want to have an impact, and that drives people wanting to work for smaller companies, they don’t want to just be one person among a thousand.”
Blacher adds that it’s important to make senior hires feel like they’re part of a ‘founder group,’ even if they’re not a founder. “Make them feel that they’re not just an employee turning up at nine and leaving at five, and they’re really there for the journey.”
Adams adds that offering a share options scheme can help engender this sense of shared mission. “Options are a really powerful way of making people feel like they’re part of the long-term journey.”
The pitfalls of options
It can be quite easy to set up a share options scheme, Adams explains, but it can also be quite easy to get wrong. “The subtlest error can lead to a very different treatment than that next rung of talent might be expecting.”
While share option schemes are a standard feature of tech companies in the USA and UK, Carew says junior or mid level UK employees don’t necessarily prioritise them when approaching a new job opportunity. “When I first started in recruitment, I thought everyone wanted to work for Facebook, for Microsoft, for these giants. But really people will leave £120,000 salaries for £80,000 just to see a company you can grow in, and be involved. In today’s climate, it’s really not about the money anymore.”
Blacher says share options are meaningless if staff don’t understand what they are or how they work. “I’ve seen companies spend an awful lot of money setting up share option schemes, and then they don’t tell employees what that means. They don’t explain that it’s management’s way of making them feel part of the journey and making sure they have skin in the game. While employees may not be motivated by money now, it’s important they know they are working towards something.”
Adams and Blacher say it’s important to make sure your share option pool is of the appropriate size. It should be big enough to incentivise staff, while keeping enough aside as motivation for yourself, bearing in mind that you may need to top up your pool at a later date as the business grows and needs to attract/incentivise new senior hires. .
Gandhi says there can be friction between founders and shareholders when it comes to giving out options. “A founder will tend to be really emotional about wanting to reward someone who’s done a good job, whereas a shareholder will want to know the return on investment for offering someone share options.”
Blacher adds that a share options scheme is something a good tech investor will expect to see implemented. Such investors know that growing a business to a scale that allows them to make a good return means retaining the best staff. And it’s worth knowing that if the company is sold, there can be a tax break for the acquirer if a HMRC approved option scheme is in place. This can help enhance value on an exit..
Get legal matters right, first time
When it comes to legal matters, the panel agreed that doing things the right way from the start saves a lot of hassle later.
Adams says it’s important to make sure you take good legal advice on your employment contracts. Blacher adds he has also seen examples where companies have faced big problems with share valuations when further fundraising activities were undertaken..
He gives the example of a company that submitted informally prepared share valuations to HMRC when the company was first incorporated, and then encountered difficulties trying to agree realistic later round values This proved extremely complicated for RSM to successfully unpick with the tax authorities at a later date when the company was raising a round worth tens of millions.
In part two of this article, we’ll look at what the panel discussed about hiring the right people, diversity, scaling internationally, and planning.