Perhaps the most important skill that every entrepreneur needs to learn is focus. A lack of of product focus leads to feature creep, a lack of design focus leads to weak user experiences, and a lack of personal focus leads to poor execution. Taking careful stock of your personal strengths and weaknesses and then zeroing in on how to leverage your strengths and mitigate your weaknesses will help determine your role in tackling the endless stream of challenges that you face when building a startup.
Focus on your strengths because that’s where you have the potential to be great, and winning at scale as a startup requires greatness. To identify your strengths consider what things are either inherently good at (ex. if you’re a naturally engaging public speaker) or things that you have built up expertise in through experience (ex. if you spent 10 years working in advertising and know the business inside and out). Next, aggressively develop these strengths, ideally to the point where you are materially better than your peers at them. Finally, ensure that a large part of your role in the company is centered around these unique strengths. This laser focus on identifying, growing, and leveraging your strengths will insure you’re making the greatest impact possible at your company.
In addition to strengths, we all have weaknesses. In the time and cash-constrained environment of a startup, time and effort spent trying to improve personal weaknesses should be minimized. Self-improvement is a long and difficult process, and chances are that even with significant effort you will not be able to turn your weakness into great enough strengths to be considered a competitive advantage. Instead, try to protect against your weaknesses. The easiest way to do this is by allying yourself with people whose strengths complement your own. It sounds simple, but you would be shocked at how many people, particularly in leadership positions, try to handle everything themselves. I’ve been guilty of it myself in the past, and I can tell you from personal experience that it does not end well! It should be noted that identifying your own weaknesses is fairly difficult, so I highly recommend enlisting the help of trusted peers to generate an honest assessment.
Mark Zuckerberg is a great example of someone who successfully focuses on strengths and protects against his weaknesses. I don’t know him personally, but my understanding through mutual connections is that Mark truly excels at product and engineering. However, prior to Facebook ,he had no real large-scale operations/management experience and doesn’t have a natural inclination for either. Rather than spend time trying to master all skills necessary to run a multi-billion dollar behemoth, he mitigated his shortcomings by establishing an excellent team of advisors with experience growing successful companies. Most importantly, he hired Sheryl Sandberg as Facebook’s COO. This was a brilliant move. Sandberg knows business and ops inside and out, and by letting her guide those functions at Facebook Mark is able to fully leverage his product and technology strengths. One tell-tale sign of a great leader is if they are strategic about surrounding themselves with complementary talent.
This week I was faced with a situation where a potential hire felt burned by their past compensation experience. They found out they were being substantially underpaid compared to their peers even though they were acknowledged as one of the highest performing employees. When they joined the previous company, this individual had accepted an offer that was much lower than what others were willing to accept, and that set them on a substantially lower compensation trajectory.
This raises an important question that all companies must wrestle with: how should you compensate your employees? At one extreme, you can pay employees the lowest possible amount they are willing to accept. On the other, you can pay employees the maximum amount you are able to pay someone with their skills. Let’s consider the pros and cons of these two approaches.
At first, paying employees the minimum they’re willing to accept appears to be the clear winner from an economic standpoint. However, that doesn’t hold up under closer scrutiny. In order to work, it relies on employee compensation remaining strictly confidential. Compensation will likely vary widely between employees with similar skill sets because they will each have different minimum acceptable amounts. If this disparity becomes widespread knowledge you risk a team crisis, particularly among top performers who discover that they’re paid less than their peers. Anyone who has worked in industry for more than a few of years knows that compensation is anything but confidential. People talk, and with resources like glassdoor.com becoming more popular it’s easier than ever to get a sense for what your peers are being paid. In addition, your best employees usually receive a steady stream of recruiting offers from other companies. If you undervalue them by only paying what they’re willing to accept you run a higher risk of losing them to someone who is willing to compensate them at a level commensurate with their abilities. Aside from risking employee morale and heightened attrition, I believe this style of compensation also speaks negatively to the type of company culture you’re trying to build. It makes it crystal clear that you value the bottom line far more than any individual, and that’s a great way to discourage loyalty and create a cut-throat self-centered organization.
Alternatively, paying employees the maximum amount you’re willing to offer someone of their skills is costly from a cash flow perspective. It is highly likely that many of your employees would have accepted more conservative offers. However, this has the potential to create a company culture that affords a level of productivity and loyalty great enough to offset the increased compensation costs. Instead of worrying about keeping everyone’s compensation under wraps, you can more openly discuss compensation and what it will take to move up to the next pay band. When making an offer, you can be clear about what you consider market rate for the position and how you’re adjusting it up or down by some amount due to the applicant’s specific skills and experiences. Employees will feel like their compensation is fair, they are properly valued, and there is a clear path to increased compensation. It is also less likely that outside recruiters will be able to offer dramatically higher compensation. This level of transparency and fairness does an excellent job of fostering employee loyalty and making them feel like they work for a company that cares about them as an individual. One thing to note is that this style of compensation is still viable in an early-stage startup that does not have the cash to pay market-rate salaries. In these cases, everyone should understand that salaries across the board are lower than market rate, but the lower cash compensation is offset by greater equity and potential for rapid career development. It should also be made clear that salaries will be adjusted towards market standards upon reaching profitability or taking in significant additional funding.
As I’m sure you’ve gleaned by now, I lean heavily towards the later style of compensation. I do not believe in overcompensating employees (that leads to its own unique set of problems), but I have seen first-hand that undervaluing employees is short-sighted and leads to serious long-term issues. Furthermore, if you don’t think someone is valuable enough to compensate fairly, then you probably shouldn’t bother hiring them in the first place.