There are several home-grown challenges that entrepreneurs face when launching in the Indian market. From navigating bureaucracy to raising capital, the list is endless.
Here at EE we speak to Madhur Ramani, Co-Founder and Managing Partner, Stratum Consulting who aims to enable FMBs, SMEs, Startups and other businesses achieve goals through a strategic implementation of HR and treat it as a business discipline that focuses on employee motivations and financial profitability.
Madhur throws light on some of the challenges plaguing the Indian start-up industry and suggests ways to resolve them.
EE:What are the challenges faced by start-ups in India?
Start-ups face challenges in a number of areas such as funding, mentorship/ecosystem and talent management amongst others. Although these hurdles are faced broadly by every start up, yet the nature of the challenge varies from sector to sector. For instance a software based start-up requires lesser capital than a manufacturing unit whose requirement is to raise a higher capital.
A common challenge faced by start-ups irrespective of sectors is of talent management. While talent management consists of many aspects, three interesting problems that stand out are:
Most of the times,mid & junior level people (employees) do not fully comprehend the business objectives and goals of the Start-up. This is due to poorly or miscommunicated information from the founder’s end.
I feel there is lack of an objective performance evaluation mechanism in most Start-ups. Those Start-ups that do have performanceevaluation end up make it very rating-driven where the end goal is the annual appraisal. Here the rating-driven performance evaluation mechanism in-turn creates a negative environment for people. This is a primary reason as to why many organizations are altogether scrapping the performance evaluation mechanism.
I would say that the culture in an organisation gets built in two possible ways – intentionally or accidentally. Usually organisational culture ends up being accidental, however, founders must understand that if a start-up’s culture is intentionally built it avoids a lot of issues in the future.
EE: What according to you are the solutions to overcome these challenges?
I would begin by saying that ‘business objectives, vision and mission’ must be defined clearly in writing at the start (and as they evolve). Once they are defined in writing, they need to be constantly communicated to people from the beginning and reiterated time and again. Infact, when candidates are evaluated during the hiring process, the fitment must be judged from the perspective of alignment with the vision, mission & objectives as well in additon to hardskills and softskills required for the role.
Once business objectives are clearly defined and communicated to people, their individual goals must be cascaded all the way downards and linked to the organisational objectives in a quantifiable manner. This is the only way to ensure a fair evaluation to some extent.Also, the performance evaluation mechanism should be oriented to actual performance improvement and creating an environment of learning & growth, rather thanjust ratings for the purpose of appraisals. Most founders forget that many a times the issue isn’t with the performance evaluation system itself, but with the people implementing it.
Most founders do not understand the importance of ‘intentionally’ building a certain kind of organization culture from the start. As organizations grow, there are chances that the internal culture can also go haywire. In addition, fitment from the perspective of this defined culture needs to be checked during the hiring process as well.
EE: How start-ups in India are different from those in other countries and what can we learn from them?
A stark difference between start-ups in India and abroad is that most start-ups abroad receive the right kind of guidance / mentorship and undoubtedly a fantastic ecosystem. Besides that, barring the new age tech start-ups in India, a lot of them in India are not looking for an exit, whereas, most start-ups abroad look for an exit after a few years. This ensures that their entire focus is on creating max value in a short amount of time.
EE:What financial issues do start -ups face in India and how can they be solved?
While there are multiple, process related financial issues in start-ups, a very interesting one is where founders usually have a misguided impression of profitability in the first few years because of not fully accounting for their own cost to company. Many founders forget about the opportunity cost they are losing by not being fully employed elsewhere.As an example, if someone who earned 20 lacs per annum before starting his business draws 5 lacs per annum as salary now in the first year of business,he / she is ignoring the lost opportunity cost of 15 lacs per annum. Ideally, this needs to be factored into the expenses of his / her business before calculating profitability (which would lead to reducing the Start-up’s profibaility by 15 Lacs).
