Beyond the Age of InnocenceCan Southeast Asian start-ups build world-class organisations?

Jointly Prepared by:6:30 PartnersEric Salmon & PartnersYale-NUS Consulting Group––May 2017

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ContentsPrologue: An Ecosystem In Transition 4

A Tale Of Two Trajectories 7

Growing The Executive Team 10From doers to managers 11

From generalists to experts 13

From local to global 16

Knowing what great looks like 19

There’s no one solution 19

The evergrowing CEO 21

From experts to innovators 22

Staff Management Strategies 24Two schools of thought 25

Controlling in the beginning... 25

… Empowering later 27

Management-staff communication 29

Employee motivation 29

Performance monitoring and evaluation 30

Hiring 31A difficult environment in which to hire 32

From hiring to hiring smart 33

Hiring fast vs. slow 33

Upgrading the interview process 34

Assessing cultural fit 35

Empowering staff 35

Finding the right channels 36

Improving the CEO's sales pitch 36

When And How To Fire... 38Firing executives 39

Firing staff 40

Fostering Company Culture 42Why is culture important? 43

Who drives culture? 44

Explicit or implicit? 45

Scaling culture 45

Challenges specific to Southeast Asia 46

Concluding Thoughts 48

Acknowledgements 50

Prologue: An Ecosystem in Transition

This report aims to support current and future start-ups' CEOs by sharing insights, successes and mistakes drawn from Southeast Asia’s pioneer generation.

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Southeast Asia is currently at a crucial

juncture in its development as a

start-up ecosystem. Having received more

than USD 3.4 billion in venture capital

and growth equity in 20161, many start-

ups are transforming from two-person

projects into substantial businesses. With

this shift come new and increasingly

complex demands on the founding team.

For instance, potential pitfalls arise as staff

size doubles in a matter of months, older

more experienced executives are brought

in, and operations are expanded from the

home base into multiple countries.

Confronted with all the burdens and

responsibilities of managing people and

shaping an organisation, it is not unusual

for a founder to question whether they are

fully prepared to be an effective CEO at all

stages along the way. And even the most

confident amongst them are still faced with

some tough dilemmas. Here are some of

the issues that many Southeast Asian tech

CEOs are grappling with:

• Who and where are the executives I

need to hire to reach my goals? Do I

invest in highly experienced foreigners,

or go for nationals who understand

the local context but have far less

experience? And if I look overseas,

am I better off targeting Americans?

Asians? Europeans?

• How can I manage my staff to

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achieve both high morale and high

performance? If I focus too much on

one of these, will it be at the expense

of the other? For example, if I assess

staff rigorously based on hitting their

KPIs, will that create an environment

that attracts the best young people?

And if I don’t, will they perform?

• What kind of culture best promotes my

vision? Should I try to duplicate what I

find most convincing in Silicon Valley, or

might that not work here in Southeast

Asia?

These are just a few of the questions

and dilemmas that start-ups in Southeast

Asia face today. In Silicon Valley, multiple

generations of businesses have wrestled

with these challenges over many years—

but in Southeast Asia, the reservoir of

experiential knowledge is far more limited,

and it’s unclear what aspects of the Silicon

Valley model (to the extent that there even

is a single model) translates to this region.

In a sense, one can say that the ecosystem

is undergoing “puberty”—the process of

coping with the new responsibilities of

developing effective leadership and smart

management systems.

Our hope is that this report may alleviate

some of these growing pains by sharing

the insights of the pioneer generation to

enable tomorrow’s CEOs to learn from

today’s successes and mistakes. It would

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be a shame if future start-ups have to

repeat the same trials and tribulations as

their predecessors.

With that goal in mind, we interviewed

a total of six venture capitalists (VCs)

and 32 CEOs or founders during the last

months of 2016. The start-ups they lead

have received funding in excess of USD 3

billion2. Twelve of these interviewees led

late-stage start-ups with a global reach,

while 11 operated mostly within the region

and two focused on their domestic market.

This report focuses on the five key

transitions that CEOs must successfully

navigate to guide their start-ups into

world-class organisations. Where possible,

we try to point out best practices where

these have emerged.

In Chapter One, we identify the two basic

mindsets that shape how CEOs in the

region approach growth, which we call

‘Hyper-growth’ and ‘Controlled Growth’.

We explore how these two perspectives

shape the challenges of each transition

and the approaches that CEOs’ take to

managing them.

2 CrunchBase, TechInAsia

Chapter Two looks at the challenge of

building an executive team, and how the

role of the executives including the CEO

changes over time.

Chapter Three focuses on building

effective management systems and how

the leadership and management model

must evolve through different phases of

growth.

Chapter Four addresses who to hire and

how best to hire them, and Chapter Five

looks at the mirror-image challenges of

knowing when and how to let staff go.

Chapter Six looks at organizational culture,

and how it can be shaped to support the

growth of the enterprise.

Each chapter includes some battle-tested

strategies that can hopefully educate,

inspire and influence. As always, your

company will need to find its own solutions.

Disclaimer: Everything in this report applies equally

to all people, regardless of gender. When we refer to

individuals, we have chosen to use ‘he’ to avoid the

rather cumbersome ‘he or she’.

A Tale of Two Trajectories

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A Tale of Two Trajectories identifies the two basic mindsets that shape how CEOs in the region approach growth.

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Why are Southeast Asian start-

ups today moving beyond the

age of innocence? Like a child dreaming

of being an astronaut or prime minister,

the local ecosystem started out with no

boundaries to its dreams about the future.

As the child matures, so do its ambitions:

it aligns them with where it sees its own

strengths and weaknesses, and where it

believes it can succeed.

“ You expect emerging markets

to grow up and become mature markets. But they don’t: they become better than the mature markets, in every single aspect. They become the future of the world. We need to be solving problems that are unique to emerging markets, not just resolving mature market issues. These markets will grow up to be more solid and vibrant that any ‘mature’ one.

The Southeast Asian start-up ecosystem

finds itself in just that phase of maturing

ambitions today. Founders have celebrated

their first successes, but many have also

licked their first wounds in the past years.

They have become acutely aware of the

great possibilities that their respective

market spaces offer, but are also aware

of the limits imposed by competition,

time, talent and money. As a result, they

are recasting their ambitions: some are

becoming much more ambitious than

they started out, others are reining in their

ambitions. But most understand better

what they can realistically achieve, both in

Southeast Asia and more globally. In the

age beyond innocence, it’s no longer the

time for play—it’s time to make serious

plans and execute on these matured

ambitions.

Start-ups’ ambitions have matured

differently. Through our interviews we

have identified two broad clusters of

companies: those going for massive,

accelerated growth, who boldly set their

sights on becoming truly world class, and

those who are building more gradually

and reliably, market by market, waiting

for the right moment to push the pedal

to the metal. We call these two clusters

“Hyper-Growth” and “Controlled Growth”

respectively.

Why have founders and CEOs adopted

one or another of these growth outlooks?

It comes down to the founding team’s

mindset, the nature of the market the start-

up wants to conquer, the degree to which

its product or service is groundbreaking,

and its early experiences with expanding.

Often, when things haven’t gone as

planned early on, CEOs have adopted a

more cautious approach to expansion.

Others were emboldened by early

successes. But our observation is that

the mindset of the founding team is the

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single biggest driver: some founders will

never be happy with anything less than a

global footprint and a true world-beating

offering; others are happy to ‘fill in’ niches

that have been successful elsewhere and

have not yet been exploited in Southeast

Asia.

Why do these differing approaches

matter? In the course of our research, we

have identified a number of challenging

transitions that virtually all companies

face as they grow. Depending on the

growth outlook they adopt, start-ups will

have to make very different decisions with

different tradeoffs when it comes to these

transitions.

For example: no CEO wants to fire or

demote a staff member who joined early

on and has been a loyal contributor. In

controlled growth mode, the chances are

higher that the company will be able to

keep early joiners, who are inevitably not

the best people attainable, without overly

compromising the success of the company.

Whereas a hyper-growth company has no

choice but to move average performers out

of the way to make space for superstars.

This in turn will drive many other decisions

about how to hire, how to evaluate, and

ultimately what the culture of the company

will be.

Indeed, their approach to many people-

related transitions will differ strongly. The

cumulative impact of all these transitions

determines the ultimate shape, quality and

character of the company’s organization.

We will not be arguing that one approach

is intrinsically better than other. The

best approach is the one that suits

company’s market, its unique offering,

and the character of its leaders. Instead,

our aim is to identify the challenges that

come with each model, and offer some

wisdom gleaned from the CEOs we have

interviewed. We hope that these insights

will help CEOs successfully navigate

whichever path they have chosen, so that

they can realize their maturing ambitions.

Growing the Executive Team

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Growing the Executive Team looks at the challenge of building an executive team, and how the role of the executives including the CEO changes over time.

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Start-up CEOs are understandably

obsessed with their revenue

growth. But in addition to revenues, there

is another aspect of growth that CEOs

should be equally obsessed with—but

all too often are not. This is the growth

in their senior leadership team. Although

not common, start-ups in Silicon Valley will

sometimes have fully-formed leadership

teams at launch—teams with the depth

of experience and range of skills needed

to see that company all the way through

to its ultimate ambitions. But in Southeast

Asia, this is unheard of. Most companies

have two or three hyper-talented but

inexperienced founders at the outset, and

lack both the confidence and the resources

to hire proven senior leadership for at least

the first two or three years.

As a result, complacency or inertia may set

in. Founders may think: we have come this

far with our founding team, so why can’t

we continue as we are? These founders

are likely in for a shock. They have failed

to realize a fundamental law of growth: a

company cannot sustainably grow faster

than the quality and depth of its leadership.

An important corollary to this law is that,

for growth to continue without disruption,

a company must at all times strive to have

the leadership team that it will need in

12 to 24 months—which is unlikely to the

exact same team that it needs to operate

today’s business.

These rules come with some heavy

implications: every company will at some

point outgrow some of its founders,

unless they themselves undergo several

profound transformations. Similarly with

senior hires. In this chapter, we look at the

challenges start-ups face as they seek to

grow a senior team that can successfully

lead them at every stage, and the difficult

transitions they face along the way.

From doers to managers

Before we talk about how executive teams

evolve, it’s important to first consider how

most Southeast Asian companies start.

Let’s look at the founders themselves. Our

interviews revealed that most founders in

the region ups fit one of two “moulds.”

The first is typified by a local, aged 25–28

years old. They have typically attended a

top local university such as NUS, or one of

the better American universities. They have

anywhere from zero to four years of work

experience, and typically no experience in

management roles.

These founders compensate for their

youth and inexperience with their

ferocious ambition, intelligence, and work

ethic. They are bursting with ideas and are

willing to take personal risk. Also, they are

fast learners: in addition to their excellent

formal education, they are typically

voracious readers about how to run and

scale a technology start-up. However,

this can never fully compensate for their

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lack of experience: most founders never

worked for a really well-run company, and

therefore lack any real-life experience of

having seen “what great looks like,” much

less in creating and overseeing it.

The second group is typified by a somewhat

older expatriate, aged 30–38, who has

ten or more years of work experience and

often an MBA. They generally have some

experience of managing teams, although

not necessarily in the same industry or

region as their start-up.

Both groups reported difficulties coping

with the changing nature of their

managerial and leadership roles as staff

numbers increased. One reason is inertia:

nearly all founders start out as doers, not

managers, since there isn’t anyone else

to do the work. They feel good and safe

because they have their hands directly on

everything happening in their company.

This stage of growth is actually very

comfortable for both leader and staff

member. During this stage, founders see

no reason to hire much more senior people,

whom they typically view as unaffordable,

and such senior people would demand a

level of autonomy that the founders are

not yet prepared to give. But soon this

model becomes a massive constraint on

growth.

First, founders become overstretched.

Being involved in all aspect of the work,

they soon become bottlenecks for the

teams beneath them if they are not willing to

truly delegate. Second, by participating in

everything, they inadvertently disempower

team members who are all too willing to

defer to a founder, but who themselves get

overly accustomed to acting as followers,

waiting for the founders to make a decision

rather than driving things on their own.

For all these reasons, the first transition

a founder must make is from doer to

manager.

The most successful founders are able

to transition consciously and smoothly,

letting go of their doer role at the right

moment. They recognise the need to begin

delegating, coaching and supervising

staff, rather than micromanaging each

employee and every aspect of the

company’s operations. Some noted how

their transition empowered other team

members, as in the case of this CEO:

“ All start-up CEOs are

understandably obsessed with their revenue growth. But in addition to revenues, there is another aspect of growth that CEOs should be equally obsessed with—but all too often are not. This is the growth in their senior leadership team. Although not common, start-ups in Silicon Valley will sometimes have fully-formed leadership

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teams at launch—teams with the depth of experience and range of skills needed to see that company all the way through to its ultimate ambitions. But in Southeast Asia, this is unheard of. Most companies have two or three hyper-talented but inexperienced founders at the outset, and lack both the confidence and the resources to hire proven senior leadership for at least the first two or three years.

But for the “empowerment” transition to

be successful, you need to have some staff

members who are capable of operating

with this level of autonomy. Too often the

initial wave of hires lack the experience

and maturity to take on this responsibility

—and they have been badly trained,

because they’re too accustomed to having

a founder tell them what to do at every

turn. This is why it’s essential for founders

to hire a more experienced and capable

cadre of team leaders before they embark

on the transition from Doers to Managers.

When do founders need to make this

pivot? Most founders answered that the

transition is appropriate necessary when

staff numbers exceed 20, and certainly by

the time they reached 30. Some founders

hung on to their traditional leadership

mode much longer, waiting until staff

numbers reached 50 or more, but this delay

in shift took a heavy toll on the company.

Many founders said that they struggled

with the adjustments to their own

behaviour that was required to make

this transition successfully, as it exposes

their inexperience as managers. At this

stage, struggling founders need access to

people who can give them feedback on

how they are doing and make constructive

suggestions. This can either be an informal

mentor or a professional coach.

Even though some CEOs feel uneasy

about having less control and doing less

“real work” themselves, they will ultimately

get much more done. With effective

delegation and intelligent management of

employees, they can focus on planning and

shaping the next phase of their company’s

growth.

From generalists to experts

Quite a number of our interviewees

described how their early management

hires were super bright and hardworking

generalists, often drawn from top

consulting firms or banks. These hires

typically don’t know much about the start-

up’s industry or the function they are being

asked to manage, but CEOs hire them for

their brainpower, work ethic and ability to

work in a structured way.

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Even though many late-stage start-ups

may still rely on these generalists, and

even though many of them do evolve

into specialists over time, some CEOs felt

strongly that they needed specialists who

had “been there and done that” to help

them scale their operations.

What helps a CEO know when to transition

from generalists to specialists? We have

identified three important considerations:

1. The nature of the role: Generalists are

suitable for roles such as marketing

because “the nature of marketing is

changing so quickly”. It might make

little sense to bring in a professional

with a decade of experience who could

be wedded to outdated techniques.

On the other, interviewees indicated

that CTOs and sales directors require

a depth of experience that far exceed

that of the brightest generalist.

2. The company’s stage of development: Many of our interviewees preferred to

hire generalists in the early days, in

part because they are easy to hire and

typically sourced through the founders’

personal networks. Also, generalists are

willing and able to get going quickly

when “thrown in at the deep end,”

and are good at shifting tasks quickly

as the company evolves. However, as

operations become more complex and

sophisticated, the situation changes.

As one CEO commented:

“ When I first started, I valued

generalists a lot more because we didn’t have the resources to have dedicated personnel to drive things. But no matter how talented an individual is, if you have not done something for many years, you’re not going to be as good as someone who has.

3. Financial resources: Senior specialists

usually can and will demand higher

salaries than mid-level generalists.

While salary costs are a major issue

for start-ups all over the world, this

concern may be even more salient in

Singapore due to high costs of living.

The generalists are normally younger,

mainly focused on developing their

careers, and thus may be willing to

accept significantly lower pay. In

contrast, specialists are typically in their

30s or 40s, thus more likely to have

families, and as a consequence less

willing or able to take too big a pay cut,

even if the equity and opportunity for

growth is attractive.

Another factor influencing this tendency

is the profile of the founders themselves.

In Southeast Asia, the vast majority are

themselves generalists, if only by virtue

of the fact that they are so young. That’s

quite different from Silicon Valley, where

it’s not uncommon for the founding team

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members to be in their 40s, with deep

industry and/or functional expertise. While

this may well be an argument for Southeast

Asian CEOs to accelerate the hiring of

specialists (to compensate for their own

lack of deep expertise), in practice it seems

that they prefer to hire in their own image,

at least in the early days.

And of course this strategy has worked to

a considerable degree, as evidenced by

the number of successful start-ups in the

region. We have been impressed by the

speed at which regional entrepreneurs have

developed expertise in their industries.

But in the long run these “quick studies”

can rarely match up to the capabilities of

a true world-class expert. This gap shows

up particularly acutely in B2B industries,

where long-standing relationships with

other industry players is invaluable, and

cannot be replaced just through “raw

smarts and hard work.”

As budgets grow and complexity increases,

the ability of the smart generalist to manage

and lead effectively typically diminishes.

Two CEOs commented:

“ If you want to grow your

company to five times its current size in the next few years, you have to find people who have experience growing a company at that rate. They will be comfortable with the speed.

“ While I highly value people

who grew up in the company and share the values and the vision of the company, we need different kinds of people at different times. Now I am bringing in senior people with more experience.

The challenge for many CEOs is that

their generalist senior execs, who have

performed adequately enough in the early

days, are long-standing and much valued

members of the core team—perhaps

even co-founders. How can a CEO move

someone like this aside to make way for

an expert without being perceived as (and

perhaps feeling) ruthless and disloyal?

The answer is in laying the groundwork. The

best CEOs see the need for this transition

far in advance, and mentally prepare all their

executives—including their co-founders—

for the need to make this transition when

the time is right. These CEOs are always

looking at least two years out, anticipating

what types of shifts in the composition

and roles of the leadership team will be

needed, and ensuring that current leaders

understand these future shifts and do not

become wedded in their minds or egos to

their current role. One important aspect

of this is for the CEO to role model this

himself: by clearly delegating some aspect

of his job that he used to lead directly to

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a more experienced specialist, and then

leaving that specialist to get on with it.

Most CEOs eventually and inevitably make

this transition, but many report making it

too late. As scale and complexity increase,

it’s tremendously important for the CEO

to have the necessary foresight to bring in

the expertise and experience they require.

They must act decisively, even when their

current team may feel uncomfortable

about how the new hires will affect their

own roles.

Or, as one CEO memorably said:

” Hire as senior as you can, as

soon as you can.

From local to global

It’s no secret that talent pools for many

key functions are terribly thin in Southeast

Asia. So the transition from generalists to

experts typically brings with it another,

equally daunting challenge: the need to

hire from around the world, not just locally.

In the early stages, start-ups typically

do most of their hiring through personal

networks. This has many advantages: it’s

fast; it’s inexpensive (no pesky headhunters’

fees to pay), and it feels “reliable,” in the

sense that typically a trusted employee is

vouching for the potential new hire, whom

they knew in the past. And generally it

works well enough for hiring the bright,

energetic generalists that are so important

in the early phases of growth.

But then it comes time to hire specialists

and experts, and the world looks different.

Many companies that continue to hire

predominantly through their networks,

as it has worked in the past and they

are distrustful of the value that recruiters

can add. But too often these companies

discover, sometime down the road, that

the “expert” they hired locally failed to

deliver the quality and speed of scaling

that they had hoped for. At this point they

have even more difficult decisions—should

they fire the person and try to get someone

better? Or should they stick with them and

try to coach them to reach the level they

need? Both options are imperfect, and

meanwhile the clock is very much ticking,

and precious time is being lost.

To avoid this unpleasant dilemma, the best

CEOs are taking the plunge to tap the global

talent pool early on. There is no doubt that

this requires a lot of confidence—not least

because the salary expectations are likely

to be out of line with the salaries of other

executives already on the team. So this

brings a whole host of difficulties.

Our research indicates that many local

CEOs waited far too long to tap the global

talent pool because they were reluctant

to pay up - even when they had plenty of

capital. Many of the VCs we interviewed

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made the point strongly that they would

have preferred their CEOs to spend more

money to get the very best people, as

opposed to taking the best local people

that their personal networks could reach,

but that the CEOs themselves were the

ones putting the brakes on spending.

There are many reasons for this reluctance

to tap the global talent pool:

• First and most important in our view is

the fact that the CEOs have never seen

what “great” truly looks like, so they find

it difficult to conceptualize how exactly

this imagined expert from abroad will

prove to be so much better than his

local, much cheaper counterpart.

• Second is the fact already indicated

that it creates a dislocation between

what the new expert earns and what

the existing leaders earn

• Third is that they (correctly) perceive

there to be “fit” risks when bringing

experts from abroad:

» Will they understand the local market

requirements?

» Will they fit in culturally with the rest

of the team, all of whom are local?

» Will they “roll up their sleeves” or

will they expect to have a large staff

of people to do everything for them?

• Fourth, some younger CEOs may need

to overcome a mental hurdle when hiring

executives much older than they are

themselves. In a culture where respect

for elders is critical, young executives

may feel uncomfortable managing and

leading someone significantly older.

This is one CEO’s experience: “At

different points in time, I have tried to

strengthen the management team by

recruiting somebody much older—and

I’ve consistently failed.”

It’s also the case that is has become

difficult to acquire work permits for

foreign executives, at least in Singapore.

One VC explained:

“ Singapore is feeling a little

bit of the paranoia with so many foreigners coming in, and getting work permits and employment passes is more difficult than it used to be… We have had work passes not being approved for talented people whom we needed, and where it would be difficult to find a similarly talented person in the local market. But you have to try.

Faced with all these risks and

uncertainties, it is tempting to fall back

on the trusted old method of hiring

someone local, often via their personal

network, who seems to have the right

skills and fits easily into the current

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culture and compensation structure.

The willingness to take a modest salary

seems to be a big driver for many CEOS.

As one CEO said:

“ If people come here asking

for equal to or more than what they were paid in their previous job, we say ‘no’ to them. It’s not that we cannot afford them. It is that we do not know if they are joining due to a lack of downside, or because they truly believe in your company. I’m looking for someone who wants to be invested in the company. Not someone who’s just there for paycheck… If they are willing to exchange their cash for equity, then that is one indicator of them truly believing in you.

But it’s much easier for a local to take

a risk on their salary: if it doesn’t work

out he can just find another job. For

an expatriate who may be bringing

a family to a whole new region, they

need a reasonable level of assurance

that they will live comfortably, and they

are therefore understandably less able

and willing to take the big salary cut

that many CEOs see as a testament to

their faith in and commitment to the

company.

In short, it is one thing to reject a

candidate because they’re just in it for

the money, and another to be blind to

their personal situation and financial

needs. As one VC pointed out:

“ People need a living wage.

It’s easy for founders to adopt an idealised conception of their candidate’s’ motivation and forget about the latter’s real needs.

Sometimes this process is easier for a

CEO who is not a founder, as they have

fewer loyalties to the old team. One

professional CEO (who was not a founder)

replaced the entire management team

with more senior people when he joined

the company and had no regrets at all:

“ We needed to bring in

people who have done it before, seen it before, smelt it, felt it and so can help to build and grow the team. With a young team like we had, it wasn’t just that they didn’t know their function intimately, that they didn’t know how to scale the function. That was a key aspect. But they also didn’t know how to manage.

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Knowing what great looks like

As previously mentioned, most local CEOs,

lacking experience, don’t know what to

look for in the first place. Never having

seen “what great looks like” makes it hard

to imagine how the international “crèmè

de la crèmè” are all that different from the

local best.

As one VC said:

“ CEOs don’t know what they

don’t know because they haven’t had the exposure. You can’t accelerate the 20 years into 5 years. It doesn’t happen. That’s why you see people with white hair who still have a job.

This is where the role of advisors comes in.

The company’s Board may have members

with many more years of experience who

can help the CEO to know when it’s worth

spending the extra to get a world-class

player and what such a person would

look like. And while it is true that many

recruitment firms are pure market makers,

connecting demand with supply without

much thought to quality, there is no doubt

that the best firms (almost all of which will

demand a retainer) are able to bring the

benefit of having met, interviewed and

benchmarked hundreds or even thousands

of executives in a given field to bear on the

challenges that the company faces to find

the very best person.

We believe that too many CEOs in the

region have settled for executives who

are more accessible, with the hope that

“this executive is probably just as good,

but costs half as much and already lives in

Asia”. Our belief is that “just as good” isn’t

good enough to get the most ambitious

start-ups to where they want to go.

Despite all of the obstacles, CEOs should

not shy away from hiring the very best

executives available globally, even if it

means paying the extra dollar. Given the

limited talent pool at home, they should

recruit and learn from experienced

foreigners, or they risk losing out when

they attempt to compete internationally

against the world’s best and brightest. A

‘great’ leadership team in Southeast Asia is

likely to be at best ‘good’ when compared

to the best out there worldwide. For CEOs

to bring in world-class people, they have

to take the time to expose and educate

themselves as to what world class really

looks like, and what impact it can have.

There’s no one solution

As mentioned, the majority of our

interviewees favour hiring bright 25- to

30-year-olds with a bit of management

experience. And the fact is, many of

them have achieved excellent results.

Even though such young managers may

not be ready on day one, they may grow

20

into the role quickly enough. Those who

are passionate, extremely adaptive,

and ready to roll up their sleeves may

prove themselves to be highly capable

executives. So no one solution fits all

situations.

However, it is notable that most of the

CEOs who advocated this approach were

themselves very young. This might point

to the limits of their experience, their blind

spot. It’s crucial that a CEO has ample

access to more experienced advisors who

can help them make these difficult trade-

offs. Another key test that advisors should

be considering is whether the CEO brings

in people smarter than himself.

We’ve argued that overseas executives

with deep experience can add the extra

expertise and leadership skills needed to

take a start-up to the next level. However,

we’ve also heard that it isn’t all smooth

sailing.

If the nature of the start-up is essentially

local, hiring foreigners might not help

because they lack a good grasp of local

markets. As one local CEO put it, “If it’s

a role that requires local understanding

and networks, foreign talent may not work

out.”

Further, executives who are used to working

for bigger companies, even if they are tech

“start-ups” like Google or Amazon, can

struggle to adjust to smaller organisations.

Some CEOs felt that the specialists they

had poached from larger companies had

been too pampered and weren’t prepared

for the grind and hustle of start-up life. The

sentiment was echoed by this CEO:

“ In an early-stage start-up,

executives wear a lot of hats, and regardless of your title, you’re a leader who needs to do a lot of things beyond your title. In more established companies, if you have a particular title, you basically only do that thing. If you’ve become used to the big company world, it’s difficult for these people to adjust because they don’t have their administrative support anymore…

Cultural differences may also represent

a challenge in assimilating global

executives. Foreign managers need to

adapt to local customs. For example, staff

bonding rituals based on eating at hawker

centres and going to karaoke bars may

be uncomfortable for a foreign executive.

Sometimes this disruption might outweigh

foreigners’ contribution to technical

and business expertise. It’s critical that

CEOs know how to extract value from

experienced executives and integrate

them into the local company culture.

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The evergrowing CEO

“ A company cannot grow

faster than the growth rate in it’s leader’s mindset

We started this section by stating that the

best CEOs should be as focused on the

growth in their executive team as they are

on the growth in revenues. But what about

their own growth? Or, put differently, what

distinguishes a good CEO from a great

one, and how can a CEO remain great

as his company evolves through different

phases?

One key test: is the CEO able to anticipate

each of the necessary transitions and take

action well in advance, long before they

develop into a crisis? Or does he rush

blindly ahead, obsessed with revenues

and returns, only to crash full speed into a

wall and then pick up the pieces?

Self-awareness is also a key predictor of

future growth in a CEO. This requires a

move away from the “rah-rah” cheerleading

role that most start-up CEOs adopt to get

things off the ground, and towards a deeply

honest and rigorous reflection, both about

themselves and about their company. As

one VC said:

“ Would you rather have a CEO

who missed the budget by 20%,

but knows exactly why it was missed? Or a CEO who actually makes the budget but isn’t clear on why it happened? Self-awareness, that’s key.

We spoke to a CEO who is trying his best

to be an “Evergrowing CEO:”

“ I am always talking to other

entrepreneurs to identify blind spots and to get ready for future challenges. I figure out what I don’t know by talking to other entrepreneurs, by reading a lot of books, and by talking to my investors. Investors have been value-added in my case. I never found one super angel investor or mentor, but I talk to lots of people and I learn different things from each of them.

His observations raise a key point: it’s

difficult for a CEO to know what they don’t

know. Even the best of them have blind

spots. One way to systematically identify

potential pitfalls in advance is by using

experts, mentors and coaches. Experts

and mentors can point out the external

pitfalls. But typically it takes a coach to

help identify the internal pitfalls: the

patterns of thinking and behaviours, the

mental models that may ultimately create

these blind spots or give rise to new ones.

22

When we asked one VC how many of his

portfolio companies have a CEO who can

achieve the company’s five-year goals, he

responded: “All of them, except one, will

need some form of coaching to help them

reach their goals.” As he explained:

“ A lot of people are afraid of

coaching, because they think it points to their inadequacies and failings. But if you look at the biggest Silicon Valley CEOs, they would all tell you that they’ve been coached. If you’re a CEO, you’re… at the top and you’re alone.

Coaching and mentoring are relevant in

every start-up ecosystem, but they are

especially valuable in Southeast Asia.

First, because the ecosystem is in its

first generation, so local founders are

particularly young and inexperienced,

and their investors and board members

are typically also far less experienced than

would be the case in the Valley. As one

VC said:

“ I think executive mentoring

should be part of… any kind of start-up because you have a bunch of young people, especially so in Southeast Asia. In America, if an executive has already been working at Oracle

for eight years and then goes to a start-up… that guy’s now 35 and he’s been an executive since he’s 27. If you’re a start-up exec in Southeast Asia, you probably haven’t had that. If you’ve only been out of school for two or three years, there’s no way you have the operational and people management experience under your belt. Silicon Valley is further along in this regard.

From experts to innovators

However, even the most competent

leaders and experts aren’t enough at a

certain point of a start-up’s growth. The

journey of start-ups is far from linear, and

the longer they live, the more likely it is

that they find themselves on the other

end of disruption. Many companies run

out of steam when the initial innovation

which kicked it all off is no longer sufficient

to drive rapid growth. At this point the

company must start another cycle of

innovation. One would think that all start-

ups excel at innovating, but in fact many

of them become so singularly focused on

executing on the original innovation that

very little capacity for innovation gets built

in the organisation.

Managerial and functional competence

focused on execution is not enough at

this point. A start-up will survive only if

23

the executive team is able to thoroughly

investigate the company’s situation and

make hard decisions to revive innovation.

This often requires difficult decisions:

cost cutting may be involved to free up

resources to invest in the new direction.

At this point it’s crucial that the company’s

leadership team has a true strategic

capability. It no longer needs just experts

and managers, it needs strategists, deep

thinkers and innovators. As one CEO

shared:

“ The executive team can’t

only be in the details—strategic thinkers are necessary.

Again, if a CEO starts to build this

capability when the company’s growth has

stalled, that’s too late: it may take 18 to

24 months to get the company moving

again—and it’s a lot harder to attract these

innovators when the company has lost its

way. It’s crucial that the CEO can anticipate

this phase and start recruiting a few senior

change-makers before growth stalls.

The success of the company will depend

heavily on how well it anticipates and

navigates these critical transitions:

Founders shifting from being doers to

becoming managers, generalists giving

way to experts, and experts making way

for strategists and innovators. One CEO

shared a simple but powerful rule of thumb

with us for how to accomplish this:

“ Always hire two years ahead

of the curve.

Staff Management Strategies

03

Staff Management Strategies focuses on building effective management systems and how the leadership and management model must evolve through different phases of growth.

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25

It’s clear that there is no one perfect

management model. Our interviews

revealed that most companies have

adopted one of two broad models. Each

of these has unique advantages and

challenges, and each requires a different

set of strategies to succeed.

In this chapter, we present the two models

and explore how they function at different

stages of a start-up’s development. We

also share some strategies that CEOs

have shared with us to get the most out of

each model and mitigate its shortcomings.

Two schools of thought

The two main management models

can be summarised as 'Control' and

'Empowerment'.

In the control model, a few people at the

top run the show. They decide both what

to do and how to do it, and they take

ownership for virtually all of the outcomes.

We interviewed many CEOs who use this

model and find it effective.

In the empowerment model, senior

executives still set the direction and broadly

determine what needs to be achieved, but

mid-level managers and staff generally are

given more autonomy to decide how to

accomplish these goals.

Decision-making is typically different in

these two models. In the control model, the

senior team makes all the key calls. Here is

one CEO describing his philosophy:

“ A company is greater than

the sum of the parts, but the voting system is also detrimental in building the employees’ trust in the leader… Democracy is not always the best way to run everything.

The empowerment model is typically more

consultative: employees are encouraged

to participate in discussions about the

company’s direction. This clearly takes

time; however, several CEOs pointed out

that such a consultative process yields

better results because it addresses the

concerns of all stakeholders.

Each model has its strengths and

weaknesses. Is one better than the

other? The answer depends on the

stage of development of the company.

Controlling in the beginning...

It is perhaps inevitable that founders tend

to default to the control model in the very

early stages of their company. After all,

there is no one around to empower—or

if there is, they’re likely to be very junior

staff. Every minute of the founders’ time

is consumed with ‘doing:’ putting put

together a presentation for investors,

building the website, finding an office.

The control model makes sense when

26

the number of key tasks to be performed

is relatively few, such that each task can

easily be allocated to a member of the

founding team. By taking direct charge,

the founders can drive performance and

minimise (in their minds at least) execution

risks and co-ordination costs.

The empowerment model is difficult to

implement in the early stages of a start-up.

Areas of responsibility are not well-defined

and the tasks are constantly changing.

Precious time may be lost without the

clarity of a control approach. The principal

benefit of the control model at this stage

is that it is simple, highly flexible, and time

efficient.

However, as the company expands, the

limitations of the control model can

materialize relatively quickly. First, the

founders inevitably encounter technical

or commercial problems that they can’t

solve on their own. Second, they are likely

to become bottlenecks as the number of

tasks and teams they oversee increases.

Third, the founders might soon find they

are so busy “running the company” that

they have no time left to “hang out” with

their ever-growing staff, resulting in low

morale and a dilution of the culture.

Several investors we spoke with felt that the

limits of the control model were felt faster

in Southeast Asia than elsewhere. This is

in part because most local entrepreneurs

are tempted to expand internationally

at a much earlier stage than would be

the case in America, where the domestic

market is huge. But this expansion brings

with it the complexities of dealing with

multiple countries, languages, cultures

and government regulations. The only way

to cope with this is to rely more heavily

on executives with local expertise, and to

empower them to a significant degree. As

one CEO said, “The control model became

more difficult after we expanded across

Southeast Asia because I couldn’t be in all

our locations at once. Micro-management

was just no longer feasible.”

For CEOs who still want to run a control

leadership model as their company

expands, there are two strategies they can

adopt to mitigate its limitations. First, they

need to make sure they keep getting input

from advisors, coaches, and mentors, as

well as their own staff, to reduce the risk of

being caught out by their own blind spots

and biases.

Second, many companies have found it is

essential to hire a professional COO whose

job it is to oversee and direct most all of the

day-to-day task execution. A dedicated

COO has much greater capacity to do this

than a CEO, whose time is inevitably drawn

into fundraising, board meetings, external

relations, and other ‘non-core’ activities.

It also has the benefit of freeing up the

CEO and perhaps other founders to spend

more time on strategy, recruiting, culture,

innovation, etc. As one CEO observed:

27

“ I think a lot of CEOs at some

point discover that they don’t really want to do that day-to-day stuff. They’ve done it, they’ve built it. Now they just need someone to manage it, because there’s other stuff to do. I focus on the “what” and leave the “how” to my COO.

Contrast that with this CEO’s description

of his very explicit empowerment model

“ The executive team needs

to set the direction. Staff can give input into the process, absolutely. But the executive team will set the direction. But then we create a lot of space on autonomy of the how. This is what we want to achieve, these are the measures of success. How do we get from here to there? You create some spaces so that your team can breathe.

… Empowering later

The shift to the empowerment model has

many fairly obvious benefits:

• It helps to attract more senior people,

who typically expect more autonomy

than a control model allows

• It generates greater sense of

involvement and ownership amongst

staff.

• It facilitates localization of the business.

• It leverages the time of senior

management.

• It facilitates the flow of ideas from junior

staff. As one VC commented, “When

you have tight control in a start-up,

people will not share new ideas and

challenge old ones.”

• It accelerates the development of

junior and mid-level staff so that they

are better prepared to take on larger

management roles in the future.

With so many compelling advantages,

why do so many local start-ups resist this

transition? There are several reasons. First,

it requires courage on the part of the

founders. After two or three years of being

on top of every detail and every project, it

can be deeply scary to let go. As one CEO

said:

“ Push the ability to make

decisions all the way down where the problem is spotted. Escalate decisions. Give people the ability to make decisions. Let them take risks and fail. Fail fast. Let them learn from their mistakes.

28

But for most first-time CEOs, the idea

of giving people so much rope that you

know there will be some failures is deeply

counter-intuitive, particularly when their

companies are small and every dropped

ball feels like it could be life threatening.

Second, a successful shift to empowerment

requires having a layer of mid-level staff who

are mature enough to take responsibility

for their area of empowerment, manage

expectations, and deliver on their

commitments. Many start-ups get going

by hiring very junior staff who lack that

maturity and experience. So their first

experience of empowerment often ends in

disaster, with junior staff failing to deliver

on their commitments, leaving founders

thinking “we were right to hold the reigns

tight—we need to go back to a control

model.”

Third, empowerment requires an effective

measurement system that provides reliable

and timely feedback to all stakeholders

on how a given manager’s progress

matches up to expectations. Many young

companies lack these measurement and

feedback mechanisms. This makes it

impossible to hold anyone accountable in

a fair and objective way.

Fourth, empowerment requires that senior

managers learn how to provide effective

coaching without falling back into their old

habit of telling subordinates what to do.

It takes time and effort to discipine your

instinct.

Fifth, empowerment requires that senior

managers have the courage to provide

honest and tough feedback, which they

often find much harder than simply

stepping in and taking over when things

aren’t going well, as they were accustomed

to doing in the control model.

Finally, while employees usually say they

want to be empowered, they can’t always

deal with the consequences. As one CEO

said:

“ Autonomy is scary for a lot

of people. This is not unique to Southeast Asia, by the way. You can see this even in the US, where they think autonomy is great. Most people still prefer that someone above tells them what to do.

Ultimately, 80% of CEOs we interviewed

felt that they have moved towards a culture

of empowerment over time. CEOs can

tailor the empowerment approach to some

degree to accommodate the maturity and

capability of their team. Empowerment

doesn’t have to be absolute—it can be

introduced gradually, and the degree of

empowerment can vary across managers.

For CEOs who are starting to shift to an

empowerment model, it’s crucial to start

by understanding and evaluating honestly

the people who are to be empowered.

Some might quickly thrive with increased

29

autonomy; others may need coaching and

support, and still others won’t be able to

rise to the occasion.

Management-staff communication

Open communication between

management and staff also surfaced as

a recurrent theme. CEOs agreed that it’s

important to create plenty of informal

conversations and feedback across all levels

of the company. Such open communication

is seen as key to fostering company

trust and a sense of ownership among

employees. Several CEOs mentioned that

frequent town halls reinforce this culture

of open communication. These sessions

enable the CEOs to get a sense of the

morale and climate amongst staff and

helped staff to understand the direction

the company was taking.

But more advanced communication skills

are needed when there are conflicts to be

resolved. As one CEO advised, “You can

bridge gaps by force or by communication;

the latter is the way to go.” But not all young

executives have the skills to resolve conflicts

constructively through communications,

and some may default back to using

force. Learning the skills of conflict

resolution is an important part of every

executive’s professional development.

Employee motivation

Leaders devote considerable time, effort,

and energy to figuring out what motivates

employees. A number of our interviewees

felt that their staff, and in particular

their senior executives, were not driven

primarily by financial rewards, but more

by ‘emotional’ factors such as company

values and their own opportunities for

professional development.

But another CEO pointed out that

promotions are too often viewed as the

main way of measuring and recognizing

professional development, and that this

was too narrow and inflexible a view. There

has to be a much richer way for employees

(and their managers) to assess their own

professional development, and this in

turn requires companies to invest both

in systems to support this and in some

training and development for the managers

involved. Motivating employees, then,

is not as simple as showering employees

with money or promotions.

One CEO said that investing in better office

space and employee benefits helped to

make his employees feel valued. Similarly,

he has decided to invest in employee

coaching and training. Whatever specific

methods are employed, CEOs need to

consistently reinforce the message that

the wellbeing, happiness and professional

development of all of their staff is a top

priority for the company and for the CEO

personally.

30

Another CEO opted to demonstrate his

trust and motivate staff by allowing them

to take as many days off and to work from

home as much as they wanted. The CEO

noted that they “you need to trust people

for this to work, and for it not to be abused.”

Performance monitoring and evaluation

Some CEOs felt it was crucial to base all

key staff management decisions on their

performance against objective KPIs. Other

CEOs put more emphasis on how well staff

members were aligned with the company’s

culture and values as well as their loyalty.

Again, neither approach is clearly better

than the other, but it is important to be

explicit and consistent about how staff

performance will be evaluated.

In evaluating the performance of talent,

one CEO pointed out that the process

must be simple and fast to provide efficient

feedback loops. In a fast-moving start-up,

annual performance reviews are not nearly

frequent enough to guide and motivate the

best staff or to help ‘catch’ those having

troubles before they fail. Some form of

continuous review and feedback is crucial.

CEOs had differing approaches to the

challenge of ensuring feedback was both

meaningful and perceived as helpful. One

CEO felt it was important to ‘drop one’s

pants’ and be completely transparent,

even at the risk of offending, in order

to build long-term trust. Others felt

that, particularly in the Asian context,

communicating feedback more gently was

more likely to produce a positive result.

Hiring04

Hiring addresses who to hire and how best to hire them.

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32

The following quotes typify what we

heard in interview after interview:

“ Talent is by far the number

one priority for start-ups.

“ Money and capital is never a

big problem. Talent is.

“ Every start-up, every VC that

I talk to here, the top-of-mind issue is how to get the right talent in the right mix. It’s the limiting factor.

A difficult environment in which to hire

Talent is the most decisive asset of a

company, and start-ups must attract top

people to succeed. That’s equally true in

Silicon Valley, Israel, London and Southeast

Asia. But the local talent pools in these

places are very different—with Southeast

Asia generally the weakest by comparison.

Why is this? First and foremost, because

Southeast Asia’s digital start-up ecosystem

is still very much in its infancy, whereas more

mature markets have several generations of

predecessors, through which professionals

have gained invaluable experience. But

amongst the small number of Southeast

Asians who have been working in Silicon

Valley, only a handful have come back to

participate in the local scene.

Also, the best and brightest talents in

Southeast Asia are confronted with cultural

and family expectations that make start-up

careers less compelling. Joining a start-

up is still seen as far from a standard or

attractive career choice in most families,

and is generally considered too risky

amongst risk-averse Asian families.

Singaporeans in particular are often

brought up to follow established career

trajectories in finance, law or medicine,

professions that are seen as guarantees of

job security and a good salary. To top it off,

Singapore’s government often creams off

much of the best talent for itself through

scholarships and bonds.

Second, Southeast Asia lacks people

with deep technical expertise. As one

interviewee offered: “In terms of R&D,

without foreign talent we are at best a 6….

When it comes to marketing and IT, without

foreign talent we are at best a 5. The reason

is that we are a hub for everything… we buy

and sell. We don’t create.” Another CEO

stated that “Our IT students are trained

to do two things: support and sales. They

are not trained to build. They did not go

to the elite institutions. They are not well-

suited for the creative expectations of

start-ups…” It was suggested that there

is a lack of prestige associated with an

engineering degree in local universities

which discourages the very best students.

33

This has forced Southeast Asian start-ups

to look abroad for their talents far more

than European or American companies

have had to do. However, this brings its

own challenges, as we explore below.

From hiring to hiring smart

Most CEOs spend a huge proportion of

their time on hiring, particularly at phases

of rapid growth. The quality of their hiring

determines not only the success of the

company in the short-term, but also shapes

the culture of the organisation in the long

term.

Many CEOs reported that becoming

better at hiring has been a major focus of

their professional growth, and that their

improvement has had a commensurately

big payoff.

Through our interviews we identified six

core elements to an effective approach to

hiring:

1. Hiring fast vs slow

2. Investing in the interview process

3. Assessing the ‘cultural fit’ of a

candidate

4. Empowering staff to drive recruitment

5. Finding the right recruitment channel

6. Improving the CEO’s sales pitch

Hiring fast vs. slow

During the very early stages of a start-up,

hiring is essentially a trial and error process,

as very often the company neither knows

exactly what the staff member will need to

do, nor what type of person is best suited

to do it. Thus, hiring fast makes sense.

Several CEOs said that even if they had

taken time to hire carefully, they would still

only get it right half the time. They felt it

worked better to move fast and sort it out

later:

“ With hiring, you know that

you’re not going to retain everyone, so you see who’s a good fit once they come on board.

Another CEO put it even more bluntly:

“ Let’s just get people in the

door and maybe they’re great and maybe they suck, but we’ll figure it out.

As these quotes imply, a “hire fast” culture

necessarily implies a “fire fast” culture, and

this can have unintended consequences.

In an environment where staff are regularly

let go, it’s much more difficult to engender

the spirit of open communication and high

trust that CEOs regularly espouse (but

don’t always achieve). In addition, good

34

staff may feel demoralized or alienated if

their friends are fired, even if at the end of

they day they agree with the decision.

Other CEOs held the exact opposite

philosophy. Here are some of their

comments:

“ One of the biggest things

our advisors told us is don’t rush hiring because no matter how painful it is to take your time, it will be more painful later when you get the wrong person, and they can screw things up, which you have to clean up later.

“ I don’t think you get anywhere

by hiring fast. So, I would rather err on the slow side.

Even the “hire fast” companies start to

become more careful in their hiring as the

company matures and they begin to make

very senior hires. Then it’s natural to take

more time to ensure that the hire has the

right experience and is a good cultural fit.

Overall we felt unable to conclude

that one approach was better than the

other, but we would caution companies

with a “hire fast” approach to be very

attuned to some of the second-order

effects of their “fire fast” decisions.

Upgrading the interview process

Typically early-stage start-ups have an

interview process that can generously be

described as haphazard, and this leaves

much to be desired. As one interviewee

said: “We have hired people on a single

meeting, no reference checks. I know that

because that’s how I was hired.”

More experienced CEOs emphasised

the need for the company to invest in a

rigorous and methodical interview process.

As one said, “there’s no better way to

spend money than on training people to

do a better job of interviewing.” Another

interviewee shared how he went about

improving recruiting process and reaped

the rewards for it:

“ I realised that people don’t

know how to interview. So I created an interview guide with the questions, why you would ask those questions, reference checks, a minimum of three interviews in the company, including one person who would actually work with them, do a cultural fit gut check. So we put those in place to try and improve our selection process. We’re definitely getting much better talent.

35

Upgrading the interview process seems to

be a matter of continuous improvement:

it can always be better, and as the

company expands, the number of people

involved in interviewing new staff grows

exponentially—so the company must

keep investing in training its staff on how

to interview effectively, and must ensure

that interviews are conducted and the

results interpreted consistently across the

company.

Assessing cultural fit

Almost all of our interviewees agreed

that a hire has to fit with (or integrate

into) the company culture. This in turn

helps build and solidify the culture. Great

qualifications and a wealth of experience

are not enough. This is a critical imperative

for one CEO we interviewed:

“ I’ve always built teams of a

certain ilk. There are people that I interviewed whom I think will be phenomenal at growing a company, and will be great, but not with me, and not with the team that I built.

Assessing the cultural fit of a potential

hire at the executive level is particularly

important—a senior leader who doesn’t

get along with the others can quickly derail

the entire company. But it’s also particularly

difficult to do, as one interviewee explains:

“ It’s about understanding what

the executive culture is, which is not necessarily the culture of the entire company, and it’s not always obvious. For example, someone who believes in a lot of consultation may be a great fit for the team they will lead. But it drives me crazy and would also drive the people whose vision is aligned with mine crazy. So they would ultimately not fit into the team.

Very often, senior management teams who

have worked together for a long time fall

into a pattern of behaviour that defines the

leadership culture, but which they aren’t

even aware of—it’s been so much a part

of their daily existence for so long that it’s

simply like “the water they swim in.” But

for an outsider joining this group, these

norms and behaviours can be an unspoken

and somewhat impenetrable barrier to

fitting in if that fit doesn’t come naturally.

Empowering staff

How can you create a recruiting system that

continuously reinforces your culture? One

approach that some CEOs have adopted

is to empower people several levels below

them to drive the recruiting process.

36

“ We empower the teams

to hire; so it’s not like every hire goes through my door, or even my head of HR. We have 25-year-olds hiring 21-year-olds, and it’s actually working really well, because even more than me sometimes, they carry the company. They know what they need, whereas me hiring someone four levels below me won’t work.

A candidate is more likely to fit into the

team when they have been chosen by the

people they’ll actually be working with.

Finding the right channels

Typically a start-up’s earliest hires come via

personal contacts. But personal networks

rapidly reach their limits as the company

scales, expands geographically and

searches for more specialised skills. At this

stage many companies turn to LinkedIn

as well as local recruiters to find suitable

employees. But several CEOs told us that

they only started to find the right type

of staff when they tapped into the right

channels.

This is especially true for expatriate

CEOs trying to recruit local staff. One

such executive, who struggled to hire

top talents, shared the following insights

around how to engage with those he

wanted to recruit:

“ It’s not necessarily that they

don’t exist. It’s that you have to go through a different channel and approach it differently. We started to get better with being able to hire and attract good Singaporeans because we now advertise where Singaporeans look for work.

Other foreign CEOs said they found it

very hard to hire locals until they had

hired the first few locals—after that they

could leverage their staff’s own networks,

resulting in more quality local hires.

Improving the CEO’s sales pitch

How do some start-ups attract top talent

even when they can’t afford to pay top

salaries? The answer to that almost always

lies in the ability of the CEO to make the

pitch: to convince senior candidates of

the scale and importance of the mission,

the potential value of their equity, and the

scope they will have to make a big impact.

While CEOs mostly focus on what they

can get out of a candidate, they do better

when they understand that it’s a two-way

street. The candidates want to work with

teams, values, and problems that resonate

with them as well. As a result, CEOs must

37

become not only masters of the sales

pitch, but also masters of discerning the

underlying motivations of candidates—

because it’s never just about the money.

Armed with deep insights, it’s easier to

make an offer the candidate won’t refuse.

For example, here’s one CEO talking about

how he brought on a superb CTO:

“ For him, it’s about working

on the most complex technical problems that he can find. I said we have exactly what you’re looking for here. The work here can get seriously complex and he loves it.

Here’s another typical pitch that a CEO

used to bring on board his current

management team:

“ It’s gonna be painful. You’re

losing a third of your salary. But you’re gonna have a phenomenal ability to define your trajectory, your future. And if we kill it, you’re gonna make a lot of money.

When and How to Fire...

05

When and How to Fire... looks at the mirror-image challenges of knowing when and how to let staff go.

+

39

Undoubtedly, one of the toughest

challenges for a CEO is when he

concludes that a senior executive needs

to be let go. This challenge is multiplied

tenfold when the executive is a co-founder,

with the moral authority and significant

equity ownership that that typically brings.

Firing executives

Many CEOs try to sidestep these situations

to avoid the pain and fallout—particularly

when the executive is a co-founder. Most

CEOs are understandably reluctant to

remove a co-founder even when they are

holding the company back in important

ways. Firing a co-founder risks losing

other key employees who are loyal to that

founder. “You risk losing the co-founder’s

second layer of management, who are

close to him … so the guy who replaces

the founder often has to rebuild the entire

second line of leadership.”

One CEO kept an underperforming co-

founder involved because he believed

that this founder “was the heart of the

organisation.” Some try to support

weak co-founders by hiring a competent

manager to partner with them. One CEO

we interviewed tried to help a founder by

“recruiting somebody with expertise in

scaling an organisation” to work directly

with him. Such a strategy can on occasion

be effective, but it also creates a number

of problems. There are now two people

doing one job. Employees frequently

game the system by approaching whoever

will be more sympathetic to their point

of view. These costs typically eventually

outweigh the benefit of hiring a supporting

manager.

These moves typically only stave off the

inevitable, and rarely resolve the issue.

As the company grows, new stakeholders

including investors board members and

newly hired senior executives will demand

that the CEO deal with the issue. In the

end, it’s just a choice of when to deal with

the inevitable. Unsurprisingly, virtually

every interviewee who had been through

this unpleasant process felt that they

should have dealt with it earlier.

What CEOs must come to realise is that

the letting go of executives is a natural

part of an executive team’s evolution.

One CEO highlighted the importance

of responding swiftly to sustain a team’s

maximum performance: “We can’t play

the game of striking a middle ground and

giving second chances. We need the right

people in. We’re ready to move whenever

we need to remove an average performer.”

For senior executives who are not co-

founders, this is a painful decision but one

that typically resolves itself soon after the

decision is made. But with a co-founder

the stakes are much higher. For this reason,

CEOs typically look for a role that keeps

the co-founder in the company, but gets

40

them out of their executive capacity. This

typically works well as long as the founder

is happy with his new role. But the CEO

needs to ensure that the successor is given

sufficient autonomy and is not shadow-

managed by the co-founder.

Once again, the success of this critical

transition depends in large part on

how far in advance the CEO can see

it coming, so that he can help people

get comfortable with the options and

their implications over time. Typically a

mature and experienced CEO will have

the edge on a young first-timer in this

regard. As one VC said: “I want mature

CEOs, so that when they’re put in difficult

situations, they will do the right thing.”

Firing staff

To what extent should CEOs tolerate

underperforming employees? Many CEOs

feel uncomfortable firing underperformers.

They may feel that if an employee is

committed and works hard, what price

should he pay for not meeting his targets?

Others are happy to fire underperformers

at the drop of a hat.

The majority of the CEOs we interviewed

were in favour of tolerating a hard-working

underperformer. They claimed that letting

go of such employees could pose a

danger to the stability and morale of the

remaining staff and reflect negatively on the

company’s values, thereby undermining

the culture in the long term. Some CEOs

proposed a “second chance” process in

which they place the under-performing

employee in another role to give them a

new opportunity to prove themselves.

For the most result-driven CEOs, patience

runs thin that much more quickly. CEOs

embracing this philosophy defended it

as fair as long as it was properly set up

and explained. “Cold-hard numbers and

targets… are usually agreed upon with

the person upfront in the very first week

of them joining.” On this basis, failure to

meet targets provides a valid justification

for firing a staff member. Some CEOs

justify this by pointing out that start-ups

have scarce resources. “We can’t afford to

play the game of striking a middle ground

or giving second chances.”

In order to make the parting of ways

amicable, CEOs should make sure

in advance that there is clarity with

regard to the measures of success for

which candidates are accountable. One

interviewee offered an example:

“ We’re hiring VP of Sales now.

For me, that’s the best role, because that’s about as metrics-driven as possible. I need you to hit x dollars, and if you don’t, we’ll have to part ways.

Evidently, CEOs approach the challenge

of firing under-performing employees in

41

different ways. Some CEOs prefer to rip

off the band-aid quickly, while others take

it slow. Many, however, regard the process

as an important piece of a culture that is

grounded in honesty and transparency.

From this perspective, the unpleasant but

necessary deed can be seen as a healthy

act that serves the company’s overall

wellbeing. If employees also understand

this then that mitigates the risk a firing

undermining employee morale. In short,

a strong company culture supported by

open and transparent communication

provides a a solid foundation for even the

most difficult aspects of staff management.

Fostering Company Culture

06

Fostering Company Culture looks at organizational culture, and how it can be shaped to support the growth of the enterprise.

+

43

The term ‘culture’ in the context of

start-ups often conjures up images

of nap pods, pool tables, and well-stocked

pantries. However, it encompasses much

more than that. Culture is a company’s

identity, its norms and its working practices.

As one CEO said, “culture shapes

everything you do… it tells people what to

do when nobody’s looking”. In this section

we explore the challenges of shaping and

maintaining a healthy company culture

through different phases of growth.

Why is culture important?

Culture aids in retaining and attracting

talent. How do young, cash-strapped

start-ups get the smartest minds on board

and then prevent bigger companies from

poaching them? This is what one CEO

said:

“ Someone’s always going to

be able to pay more. How do you stop them from taking your best talent? Culture. They can copy your business model, your technology, and can offer you more, but they can’t recreate your culture. So it’s important to create a unique environment that people love and want to be a part of. People are attracted by our culture, our unity, and our passion; so it makes it easier for

us to convince potential hires.

Through a culture that helps staff develop

a feeling of belonging to the organisation,

start-ups get more dedication from their

staff and also promote loyalty. “Things

like cookouts, barbecues and family days

not only lead to strong company values,

but also strong emotional attachments.”

Cultures that emphasise the importance

of job satisfaction are also productive.

For one CEO, the constant emphasis on

“opportunities for personal development

is what keeps the attrition rate low”.

A strong culture also helps employees

to understand and stay true to the vision

and goals of the company. As one CEO

explained, “You can only give so many

instructions per day, and people’s duties

go way beyond that. So most of the time,

they work based on the existing culture.”

Culture also plays an important role in

promoting growth. One CEO thinks

of his employees as “missionaries, not

mercenaries,” arguing that strongly

purpose-driven companies will always

outperform others. Another CEO makes a

similar connection:

“ We have a culture of

autonomy, growth, and trust. We give people enough room to make their decisions, and this ends up in better performance.

44

In fact, one of the reasons why we have grown as a start-up is due to this.

Two-thirds of our interviewees highlighted

the importance of culture in helping the

company scale.

Who drives culture?

Culture naturally begins with the founders,

and is carried (or not) by the full leadership

team as the company expands. While this

may seem obvious, several CEOs stressed

the need to constantly remind their

leadership team members of their role in

shaping company culture.

CEOs and other executives, through

virtually all of their words and actions,

convey the company’s culture to

employees, setting a model for other

aspiring leaders in the organisation. This is

how one CEO projects culture:

“ As a CEO, I lead by example. I

come to work at 7.30 and I leave at 3.30 or 4. I just don’t care about the amount of time you’re in the office. It’s about the work that you do. If you’re the type of the person to want to beat me in the office and stay until 1 am, I think it’s pointless because I won’t see it. If it takes you 16

hours to do your job, I think there’s fundamentally something you’re not doing right. This has created a culture where people work efficiently and effectively.

Another CEO told us, “We have a culture

that emphasises four things: be responsible

to yourself, your family, your team, and

your company. These are more important

to me than KPIs.” This balanced approach

helped him to create a low-stress working

environment and has engendered a high

degree of loyalty.

Influence isn’t limited solely to the

founding team. One of the CEOs we spoke

to highlighted the positive impact a newly-

hired executive had on the company’s

cultue: “When she came in, she brought

a lot of organisation and professionalism

to the company, and that is now reflected

in our culture.” Through their experience,

executives who come on board at a later

stage can contribute to the existing culture

or even alter it.

However, the impact of bringing in

experienced executives from outside

can also be negative. One CEO

explained that he tried to strengthen

the team with an external hire, but that

there was a massive culture clash, and

eventually the executive had to leave.

45

Explicit or implicit?

Every company has an implicit culture,

but only a few CEOs invest the time and

energy to distill their culture into words

and make it explicit, hoping to carve out

a unique identity for their company. One

advocate of this approach went so far as

to say that “if employees cannot recite the

mission and the values, it’s a failure of the

leadership team”. Is there any tangible

benefit to openly and explicitly defining

the start-up’s culture?

Our view is that explicitly addressing

culture encourages people to assess how

well they are aligned with the company’s

values and norms, and to either abide

by these or self-select out. An explicit

company culture can also facilitate the

ironing out of conflicts between people. As

one CEO explained, “the reason behind

actively enforcing our culture is that some

people had very different cultural notions,

which unfortunately created a hostile

environment within the company.” He

was convinced that explicitly stating the

values and culture of the company could

help bridge the gaps between people

and make the company more tightly knit.

Scaling culture

Nearly half of the CEOs we spoke with

described their struggles with maintaining

and evolving their culture as their company

scaled. One CEO pointed out: “When you

are a small company, having barbeques,

sleeping in the office, spending time

together on the weekends is great and it

works. But when you are 500 people, it’s a

completely different set-up.”

Finding ways to shape the culture through

different stages of growth is key. For

some, it’s an organic process—one that

is stimulated by new hires, new office

spaces, new objectives, etc. For others,

it’s a process that requires a conscious

effort and an adjustment of expectations.

One young CEO told us, “We went from

being a bunch of guys walking around

in t-shirts, and running the whole show,

to wearing shirts and attempting to be

more professional.” This was the result

of a conscious effort on his part to pivot

towards a more formal culture in response

to the growing size of his company.

As companies expand into multiple

countries, the cultural differences across

these countries also plays a significant role

in shaping culture—or diluting it. Start-ups

operating in different countries, regardless

of whether they have a centralised or

decentralised organisational structure, find

it hard to maintain common values and

identities across the different countries.

“Cultural differences across countries is

one of my biggest problems.”

What are some strategies for addressing

this? One CEO told us that he combats

the issue by having people travel as much

as possible. While this seems to work,

46

not every company will find it feasible

or affordable. Another CEO said that he

“actively tried to drill the culture down in the

country managers.” However, he admitted

that this is only a partial solution: “You can

never completely bridge the cultural clash.

What is important is to educate people on

ethical standards and values. I think local

leadership is the key to success. Because

that is when you get the best decisions.”

As long as everyone knows the values of

the company, allowing regional leaders to

operate reasonably autonomously enables

them to balance local business and cultural

practices with those of the head office.

Such a decentralised leadership structure

allows country heads to act as a cultural

bridge between the head office and

regional staff—but it does require a very

skilful and culturally aware local leader.

Challenges specific to Southeast Asia

Southeast Asia comprises 11 countries

with very different cultures and attitudes.

It is also multi-ethnic, with most countries

having a diverse local population. This can

lead to tensions, misunderstandings, and

inefficiencies. As one CEO said:

“ Frictions usually arise when we

have to work across countries. Our Singapore execs operate in a vastly different context from

our Indonesian, or Malaysian ones. Getting alignment between these different cultural contexts is extremely difficult.

An American CEO explained that he

grossly underestimated the cultural

differences within Southeast Asia: “I had to

take the time to learn the local conditions

in these places, before I could do business

properly. Then I had to get my local staff to

do the same!” Even local executives need

to familiarise themselves with the nuances

of different cultural contexts and adapt to

them.

In addition, the cultures of Southeast Asia

also plays a large part in determining

the CEO’s behaviour. For example, one

CEO remarked that the Asian custom

of respecting elders has caused him to

maintain more distance from his young

employees than would have been his

natural instincts.

Further, Southeast Asian start-ups have

attracted a large Western expatriate

population. As already discussed, this can

introduce cultural difficulties. One CEO

told us, “We had a tough time with our

American hire. He couldn’t fit into our Asian

work-life cycle, and our hawker centre

outings, etc.” Issues such as adjusting to an

“Asian work-life cycle” may seem abstract,

but are a real challenge faced by many.

Another CEO stated: “Western attitudes

are difficult to adjust to, here in Asia. They

47

have different ideas regarding work-life

balance. Not that they work harder or less

hard. Just that there are differences.”

What this reveals is the importance of

the CEO in continuously sensing and

influencing the company culture and the

need for him to pay particular attention to

potential cultural ‘boundaries’. As a start-

up grows and expands geographically, it

must be able to modify its company culture

to respond to new influences and get the

best out of everyone.

Concluding Thoughts

07

The success of start-ups largely depend on how well CEOs navigate transitions.

+

49

Our research confirmed our initial

hypothesis that Southeast Asian

start-ups are at a crossroads. Companies

that in recent years have been pursuing

'Controlled Growth' strategies in relatively

uncompetitive markets are finding they

need to rapidly raise their games, as they

increasingly encounter competition from

international players and better-funded

local firms. Market pressures are forcing

these CEOs to focus on rapidly upgrading

their leadership teams and management

systems - a process that many have under-

invested in in the past.

Companies pursuing 'Hyper Growth'

strategies have always felt this pressure,

and are pushing harder than ever to build

world-class management teams that can

stay ahead of the company's growth curve.

In both cases, the challenge for CEOs is

to guide their companies through the

transitions we have outlined in this report.

This requires wisdom and foresight.

Transition too soon and you're stuck with

an expensive executive team that is top-

heavy for the job at hand. But the more

common mistake is to transition too late,

leaving companies with leadership teams

that can't move and grow as fast as they

need to.

The success of Southeast Asian start-ups

in the next phase of the ecosystem will

depend largely on how well CEOs can

manage these transitions, and how rapidly

they can 'grow themselves' to lead this

process.

Acknowledgements

The sponsors would like to express their deep appreciation to everyone who has contributed to this study. 

51

Yale-NUS is an autonomous liberal arts college

founded jointly by Yale University and the National

University in Singapore. It admitted its first class

of students in 2013, which is due to graduate in

May 2017. Students take courses in a variety of

subjects during their “common curriculum”,

ranging from philosophy to the physical sciences,

before they choose a topic to study in-depth. The

college seeks to innovate and redefine education

by integrating ideas and intellectual approaches

from all around the world, strategically taking

advantage of its location in Asia and drawing on

the traditions of its two parent institutions.

––

More information is available at

www.yale-nus.edu.sg/

The Yale-NUS Consulting Group believes that the

skills, the approach, and the ideas of a consultant

are valuable in any career path; it kickstarts

students’ path into business. Next to organising

training workshops, the group harnesses Yale-NUS’

deep student talent pool, leveraging their unique

understanding of the desires and pressures faced

by young adults to bring real value to organisations

in Singapore and Southeast Asia. After training

40 students, the group has completed two

client projects and is currently undertaking four.

––

More information is available at

www.yalenusconsulting.com/

52

About the student team

Aaron KurzakAaron co-founded YNCG and

is a member of Yale-NUS’ inaugural class, graduating in 2017. He oversaw the group’s first six projects with clients in Singapore and Hong Kong,

and previously worked in government consulting and

renewable energy.

Bosen XiaBosen has completed multiple

projects with the Yale-NUS Consulting Group and is

pursuing a career in the start-up sector. He is interested in

entrepreneurship, technology and innovation.

Marissa FooMarissa has experience in partnership-brokerage for

SMEs in developing regions pertaining to business

strategies for sustainability. She has a keen interest in emerging

financial and technological trends.

Bernie ChenBernie is the lead consultant on

this project and is part of the YNCG’s business development

team. He has interned with IBM in Hong Kong and has a keen interest in consulting in the Southeast Asia region. He hopes to one day run his own

business.

Dhivesh DadlaniDhivesh has interned with Lazada and is part of the

YNCG’s business development team, where he actively seeks

to expand the YNCG’s clientele. He is interested in economic

research and consulting.

Pogaru SaisrikarSai previously served as an Instructor at Officer Cadet

School and is currently working with SafeMotos in Rwanda. He has interests in strategic

consulting and marketing, and hopes to one day run his own social enterprise in emerging

markets.

53

About the sponsors

Rob BierManaging Partner, 6:30 PartnerOver the course of his career, Rob has

been a successful entrepreneur, venture capital and private equity investor, and

strategy consultant. Today he is an executive coach and mentor to several

of Southeast Asia’s leading high-growth technology companies and start-ups.

T +65 9643 4200 E rob@6-30partners.com

6:30 Partners is Singapore-based Leadership Advisory Firm offering Talent Management, Team Coaching and Individual Coaching services to technology and other high-growth companies across Southeast Asia. It is committed to helping its clients move the dial on their performance by helping their individuals, teams and Boards perform at their very best. We facilitate this through executive coaching, team development, and strategy facilitation.

––

More information is available at www.6-30partners.com

Eric Salmon & Partners is an international executive search firm active in the technology, digital, e-commerce, and start-up sectors. The firm helps its clients to identify, attract and retain successful executives and to develop effective leadership teams. With a unique global footprint and a strong presence in Asia, Eric Salmon & Partners delivers diverse missions globally. Some of the most prestigious searches of the past few years have carried the discrete signature of Eric Salmon & Partners.

––

More information is available at www.ericsalmon.com

Dimitri TsamadosPartner, Eric Salmon & Partners

With over 20 years’ experience in the technology sector as a search

professional based in Asia, Dimitri has garnered extensive knowledge

of the region and its cultures. Dimitri is actively involved in the world of

start-ups, utilizing his knowledge and understanding of the industry and

region to help companies as a coach and investor.

T +65 9875 7672 E dtsamados@ericsalmon.com

54

Aung Kyaw Moe Founder & Group CEO2C2P www.2c2p.com

Kris Marszalek Co-founder & CEO Foris www.foris.co

Shailesh Naik Founder & CEOMatchMovewww.matchmove.com

Roger Egan Co-founder & CEORedMartwww.redmart.com

Tim Norton Founder & CEO 90 Seconds 90seconds.com.sg

Kelvin Teo Co-FounderFunding Societieswww.fundingsocieties.com

Richard Koh Chief M-DAQerM-Daqwww.m-daq.com

Stephanie Nash Chief People OfficerRedMartwww.redmart.com

Charles Wong Director, Head of Asia Aura Group www.auracapital.com.au

Romain Voog CEOGlobal Fashion Groupwww.global-fashion-group.com

Peng T. Ong Managing DirectorMonk's Hill Ventureswww.monkshill.com

Michael Smith Jr. PartnerSeedPluswww.seedplus.com

Achmad Zaky Co-founder & CEOBukalapak www.bukalapak.com

Andre Hesselink CEOGoBearwww.gobear.com

Snehal Patel Co-founderMyDocwww.my-doc.com

Andrew Khoo Co-founder & CEOTessa Therapeuticswww.tessatherapeutics.com

Quek Siu Rui Co-founder & CEOCarousell sg.carousell.com

Mark Britt Co-founder & CEOiflixwww.iflix.com

Lai Chang Wen Co-founder & CEONinja Logisticswww.ninjavan.co

Nathalie Benzing COOTradeGeckowww.tradegecko.com

Victor Lavrenko CEO Coc Coc www.coccoc.com

Georg Chmiel ChairmaniCar Asia Limitedwww.icarasia.com

Sas Parmanand Founder & CEOOne Animationwww.oneanimation.com

Eric Barbier Founder & CEOTransferTowww.transfer-to.com

Fazal Bahardeen Founder & CEO Crescentratingwww.crescentrating.com

Amit Anand Founding PartnerJungle Ventureswww.jungle-ventures.com

Jeremy Fichet CEOOramiwww.orami.com

Joel Bar-El Co-founder & CEOTraxwww.traxretail.com

Dmitry Levit Founder & General PartnerDMPwww.digitalmedia.vc

David Gowdey Managing PartnerJungle Ventureswww.jungle-ventures.com

Joseph Phua Co-founder & CEOPaktorwww.gopaktor.com

Chua Kee Lock Group President & CEOVertex Ventureswww.vertexventures.com

Mark Suckling PrincipalDMPwww.digitalmedia.vc

Tim Rath Co-founder & CPOLazadawww.lazada.com

Jeffrey Tiong Founder & CEOPatSnapwww.www.patsnap.com

Eddie Chau Chairman EC Frontier www.ecfrontier.com

Alexis Horowitz-Burdick Founder & CEOLuxolawww.luxola.com

Hari Krishnan CEOPropertyGuruwww.propertyguru.com.sg

The contributorsThe Sponsors would like to express their deep appreciation to everyone who has contributed to this study. Our interviewees, listed below, shared their time and thoughts with us generously.

DesignDavid Chia Jun Weng

––

This work is licensed under a Creative Commons Attribution 4.0 International License

All rights reserved © 2017