Starting Up - An Economic Times Special (post 1)

The Economic Times has introduced Starting Up, a special page every Friday for those of you who want to strike out on your own. It will bring you up close and personal with the smartest entrepreneurs. Special reports will give you a whiff of the most exciting start-up opportunities. Where’s the killer app? Where’s the money that can support your big idea?

For people who missed the Jan 19th Edition, do read the 'Starting Up' posts.


Q: I am a founder of a mid-sized, recently funded, six-year-old company. We are planning to recruit a CEO. As you know it’s difficult to get good people. The people we like are mostly senior to me and sometimes even better qualified to run the business. Should I hire a person more qualified than me ? Should I pay him higher than what the founders are currently paid?
— Name withheld on request
Subroto Bagchi(COO, MindTree Consulting) replies: For a founder such as yourself , there is a shining example of Azim Premji. He hired people like Ashok Narasimhan, Ashok Soota and, more recently, Vivek Paul. All three were better qualified than him and he let them run his information technology business. Looking at him, you realise that the smart thing is not in being the smarter than others. The smart thing is to be able to hire someone smarter than you. That way, the CEO can manage your business better than you can. It’s OK even if you have to pay them higher than what you pay yourself, provided they can build bigger value for the organisation. That comes back to you many times over as return on your investment. However, you must have the ability to question them and create porous boundaries for them. You must also develop an ability to let go and the mindset to tolerate dissent. I remember one of Premji’s presidents used be often unnecessarily critical of him and used to make uncharitable remarks. He knew it and ignored it as a routine. Once I asked him, how he tolerated the man. He told me that it was simple: the professional had the unmatched quality that enabled him to turn around loss making businesses. To Premji, that and not the man’s idiosyncrasies mattered. Coming to compensation, please do not fix people’s compensation with you as the benchmark. Compensation needs to be decided based on the following criteria: the role, the competence, the market rate and the ability of the business to pay. It has absolutely nothing to do with what you pay yourself. The much bigger issue that you must settle is the post appointment role for the individual. Any professional will have a lot of anxiety about your ability to let go. You would do well to settle that with the incumbent upfront. Openly discuss the issues surrounding the business, outline clear expectations and goals. Have measurable, time bound deliverables, state where and how much help the individual may expect from you and the manner in which you would hold performance reviews. Ask the person to outline his space requirements. Make sure you understand his or her style of working, do reference checks to determine these. Once the person is on board, have a well planned assimilation and then, let her work in an atmosphere of transparency and trust. If the individual makes a few mistakes, do not breathe down the neck. And finally, do not second guess the person. Seek a business plan upfront and spend a lot of time in collaboratively fine tune the same. Thereafter, let the system know that there is a new boss and a new game plan. In short, set her up for success. Remember, your job is to get the best person to run the business and for heaven’s sake, do not compete with the individual. Good luck!