LATERAL MOVES

Dozens of top managers have moved from established companies into startups.
Shelley Singh takes a look at how are they faring

Ritu Khanna, 39 joined online insurance seller policybazaar.com in December 2014. Much to her surprise what she was doing on day one was different from what she was hired for. In the three months gap between quitting the country’s largest business services player Genpact and joining online insurance startup Policybazaar.com her role had changed. Recalling those days, she says, “that’s what startups are all about–they can grow 2x to 3x even before you know.“

From being hired to develop the sales organization she was doing customer experience & supplier operations integration on her first day.

Quite unlike the way it was at HCL, GE and Genpact where she put in a total of 14years before joining the startup. “You have to be flexible to change orientation and be prepared for the unknown. Else you are not startup material,“ says Khanna, an engineer and IIM Calcutta MBA. Khanna is among the growing tribe of professionals leaving their comfortable jobs to walk into startups. Last fortnight Vivek Patankar quit as head of financial planning & analytics at Unilever London to sign up with Snapdeal.com as vice president, finance, in Delhi. While last week Idi S Murthy joined Snapdeal as senior VP , marketing from GlaxoSmithKline where he was regional director, marketing based in Africa, spearheading GSK’s portfolio in 44 countries.In January Harshvardhan S Chauhan, quit his job at Godrej to join ShopClues.com as associate director, categories. At Godrej he handled business P&L and brand marketing strategy for Rs 3,600 crore portfolio.

This trickle of lateral hires is turning into a flood with many like Khanna, Chauhan and Patankar leaving their well paying jobs at global companies like Citibank and Unilever for startups like TinyOwl and UrbanLadder, transported into anuncertain future and stock options worth only on paper as companies are notlisted.

When Chauhan left Godrej to join ShopClues he got his parents to office on the first day. Says Radhika Aggarwal, cofounder, ShopClues, “that was important to ensure he was not working for a shack on the road.“

Startups launch their uncertain journey with just the founders and even friends filling in technology and product development roles. But as the startup grows there’s a need for an organization areas -HR finance, marketing technology , businessdevelopment and so on. “With no existing pool to tap in the e-commerce space, we have to scan the whole landscape for talent,“ says Aggarwal.

Adds Alok Bansal, co-founder & CFO, Policybazaar.com, “ As the startupstarts to scale, there’s a need for experienced people or lateral hires as they understand process and scale.“

Importing Talent

Besides the lack of talent available within ecommerce and the internet sector, fresh hires from campus are no good as companies need the experience and exposure of large companies combined with the fire-in-the-belly of a young recruit to take up positions.

Says Rishi Das, CEO, CareerNet, a Bangalore-based recruitment firm, “The startup story is all about imported talent. You don’t see startups on campuses as don’t see startups on campuses as they need experienced hands.“ According to CareerNet about 25,000 were hired by new internet companies in2014 (less than 5,000 were campus hires) and this will increase in 2015 as funding has grown two fold since last year.

Das believes if a startup is at Series A funding it won’t have a big brand name and if it needs an operations head they will go in for project managers in large companies and make them head of operations. A sales manager in a large multinational could be hired as business development head.

While fancier designation are a carrot to draw experienced talent to unknown startups, a feeling of hitting a dead end makes the decision easier. Says Khanna, “there’s lot of inertia in large companies. They are rule oriented and top driven. In startups it can be bottom up.“ Besides Khanna wanted to be part of a growth story and saw the startup as a place to unleash her entrepreneurial spirits as well. Says Khanna, “I wanted to put myskin in the game -be as responsible for growth as the founders.“ AddsPrithvi Raj Tejavath, 32, vice president, category management, UrbanLadder.com, “at large companies there’s little risk taking. I needed freedom and fast pace of work and that got me to Urban Ladder.“

Tejavath worked at Coca-Cola and Diageo before joining the furniture startup.

For Ranjan Aggarwal, head analytics, Lenskart the shift from American Express helped him get out of a single task into multiple areas at the eyewear startup. “Startups provide the opportunity to try out different hats and give room to take responsibility outside the job description,“ says Aggarwal. On the other hand Aakratee Vajpai, head HR at Lenskart where she moved from Airtel, the shift provides “an opportunity to create the founding blocks“ that will help the company scale. For Sharad Khise, head of production at the less than a year old personal care division of Soothe Healthcare the move from Kimberly Clark was prompted as the startup offered a `step up role with reasonable salary hike’. Says Khise, “it’s an opendoor policy . I can walk up to the managing director’s cabin or whatsapp him even in the night and I’ll get a response.“

The compensation is no less attractive. An executive from Unilever might have to take a 5% cut or at most get a 5% increment„ but will get stock options valued at say Rs 1 crore today . If the startup does well this could balloon to Rs 8 crore to 10 crore in just three to four years, making the risk worth taking. Says Das, “wealth creation opportunity without taking the risk of starting a company is also attracting laterals to startups.“

The Downside

While the upside is huge if the startup goes through multiple rounds of funding, getting a better valuation with each round, laterals may run into culture and adaptability issues. Says K Sudarshan, managing partner, EMA International,“If you carry a Citi or Unilever card it gives easy access to lot of places. Besides you are used to business class travel, five star hotel stays and support staff in office.Startup is unlikely to offer such perks.That needs huge mental adjustment.“

Besides, the wealth creation vehicle, stock options, are worthless unless funding keeps happening or the startup eventually lists. “The downside can be cruel,“ he adds.

For a mid career manager moving from ITC, Tata Motors, Amex the shift could mean moving from a cabin to an open area apart from putting in long and unsocialhours at the startup. “Still people do join startups as they might have reached a dead end or want to test their own skills,“ adds Sudarshan.

Tejavath agree there are risks, “but at the end of the journey there are gains as you hit milestones.“ Adds Khanna, “We are yet to see the landing but I believe it’s a risk worth taking.“

Apart from giving up cabin to sit in the open, risks include lack of clarity on roles, the problem of running into the `the founders club’ where the founder is always right and management style could be perception driven. Explains Das,“someone staying till midnight in office is perceived to be working more than another person working 9 to 6pm while the latter might be delivering more.“

A bigger problem at startups is that the lateral hire could be superseded. According to CareerNet half of the lateral hires are unable to scale up themselves and hence leave or are superseded. Startup organization structures also change as it grows say 4x to 8x and from 100 employees to 2,000 employees. Says a head hunter who wished not to be named, “we have seen that happen at Snapdeal, Myntra, Flipkart and others where employees either left as they were superseded or grudgingly accepted a new head, waiting for stock options to vest.“ Says Sudarshan, “to avoid being superseded you need to keep pace with the organisation’s goal. You need to believe in the startup story and be aware of the risks involved before joining it.“

At fashion e-tailer Myntra, Neeraj Seth who joined as CMO from Nestle quit in 15 months. “His case was different as he had a clause inbuilt in his appointment letter to vest his options in under two years. Every lateral hire may not get all terms in his or her favour but be careful of what you sign on and see the exit route upfront in case it doesn’t work out,“ says thehead hunter quoted earlier.

A Win-Win Case

Though not all lateral hire stories will end up as forgettable moves. Several 30-year old executives at traditional companies see merit in joining startups as this is where they will get the best digital experience.

Says Das, “A 30-year old in a traditional company will be irrelevant in less than a decade if he does not have digital experience.“ Today in the US Wal-Mart insists on digital retail experience for its new recruits.

In future 70% sales of brick and mortar companies could also come from online.“An employee with no startup experience will stare at a dead end if he sticks to his job at the traditional company. On the other hand switching to a startup today will make him more sought after even by a Unilever or Amex orWal-Mart if he wants to return,“ adds Das. Even if the stock options don’t pay off, the spell at a startup will still come.

Source: Economic Times

Date: 12/05/2015

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