Many entrepreneurs find it hard to hand over their “babies” to outsiders who can help them achieve the next growth phase.
Not so Raghav Bahl, CEO of Network18 group. Bahl is recognized for his vision in transforming a small setup into a giant media powerhouse. He built such a successful business not through individual effort, he says, but thanks to the contribution of all the employees of the Network18 group.
Mr Bahl had the vision to bring on Haresh Chawla as Group CEO as early as 1999 to assist him in building his media group.
Looking at the explosive growth expected of India’s media industry, entrepreneurs need to understand that failure to take on board the best talent this industry offers might come at a very high cost.
From Internet and print to outdoor and cinema, overall media investment is growing at an annual compound average of 21 per cent according to GroupM, a global media investment management company.
“India is currently contributing 3 to 4 per cent to annual global media investment growth, which is comparable to Japan, Canada or the largest European countries” states GroupM director Adam Smith. India’s media industry is expected to be worth $US10 billion by 2011 and it is the early movers who will enjoy the best opportunities to take advantage of this growth.
New market entrants such as UTV, Reliance Entertainment and 9X are diving in to tap this phenomenal growth. Existing players are expanding; for example, TV18 acquired MTV while NDTV launched NDTV Imagine.
Top media-savvy talent, particularly those with international experience, are therefore in exceptionally short supply, leading to executive churn at the highest levels. In one year alone, C-level changes were seen at STAR, Walt Disney Television International, Yahoo! and McCann Erickson.
This environment has only made it harder for start-ups to attract experienced executives, especially when candidates are expected to take on some risk in exchange for an exponentially larger payout later, by agreeing to a cut in their salary packages. While the economy may have raced ahead, it would seem that attitudes to bringing on world-class talent to local start-ups are still lagging behind.
Traditionally, start-up executives have accepted pay cuts as a means to demonstrate their entrepreneurial mindset and their commitment to wealth creation at the start-up. In a market as hot as India, however, it is increasingly challenging for young companies to convince executives to come onboard when they are offered salary increments of as much as 30 to 50 per cent elsewhere, often at companies with brand names that are already recognized, and respected, internationally.
A start-up CEO’s compromises go beyond immediate financial rewards. In closely-knit communities, one also has to consider social implications and family pressures.
“You could be working just as hard as your old colleagues, but you feel the stress and pressure a lot more,” says one start-up executive. “Also, the perks of working at a start-up are very different, or should I say, non-existent. This becomes very apparent when you meet friends at the airport, only to move down to economy class when they travel on business or first class. Sometimes you do ask yourself if it is all worthwhile. Such sacrifices can be a drain on motivation and morale.”
While the upside of any investment has exciting possibilities, the potential downside for an investment gone wrong can be acutely damaging for an executive.
Rajat Jain, Managing Director and Chief Executive Officer at Mobile2Win explains, “Taking on a start-up leadership role is similar to walking a tight rope. There’s the clear opportunity of wealth creation if you reach the other side, but this path is mired with very different kinds of challenges; most of which you may not have faced before. It needs a different set of behaviors. The hit rates globally are not high and it is not everyone’s cup of tea.”
Start-ups must address the issue of personal risk if they are to attract the executive leadership needed to take their businesses to the next stage of growth. To do this, investors and entrepreneurs can consider several approaches.
With such open tripartite conversations, it is possible to structure executive compensations and wealth creation mandates that are better aligned with their interests.
Offering roles in other portfolio companies and clearly outlined severance packages in the event of failure is another approach. Such safety nets help them look at start-up opportunities more favorably.
Budget for hot-shots
Most of all, investors and entrepreneurs need to realign their expectations and budget for start-up CEO compensation so as to more accurately reflect market rates. Where the success or failure of a business largely depends on the quality of human talent deployed, there should be no compromising on the quality of executive leadership.
A good fit and open relationship with start-up entrepreneurs and investors is the first step in the right direction for India’s enterprising executives to start earning their stripes in the world of media.