Introduction:

Leathwaite was a key sponsor of the 2017 Innovate Finance Global Summit. Innovate Finance is the independent membership association that represents the UK’s global FinTech industry, acting as a key driver of best practice for the sector.

Leathwaite was asked to host roundtable events throughout the summit to advise founders, CEOs and executives within FinTech organisations on the challenges they are likely to face as they enter different phases of growth.
Our team oversaw a series of vibrant debates and were thoroughly interrogated by those around the table on the sorts of solutions we might be able to suggest and/or implement for their varying talent related conundrums.

Below, we have focused on five areas which were the most heavily discussed topics:

  • The Interim Question
  • The Outside Director
  • Beware cultural misalignment
  • How to scale quickly

The Interim Question:

So, you have spent two years researching your idea, formulating a plan, launching a beta version, garnering various series of investment, making some key hires, on-boarding your first few customers and finally feeling like you have a business up and running.

Before you can take a breath, you realise that your achievement has created an ever-increasing list of snags and improvements – all of which need doing urgently, yet none require a consistent skillset or the costly investment of a full time resource.

The most effective route to consider is an SME (Subject Matter Expert), who can parachute into your business on an interim / fixed term contract basis, and solve these problems quickly and efficiently, as they have done countless times before for other businesses.

Yet, you have a business with a unique culture, where everyone is on a journey, working together to build and grow something special – and you fear bringing someone in who cares solely about a good day rate, completing a task and then heading home. Will this disrupt the culture? Will the individual deliver on time? Will the finished project be produced to the sort of standard to which the business is used? Fear not.

Just as with permanent hires, SMEs come from all manner of backgrounds and there are an abundance of high-impact performers who specialise in smaller business environments who not just appreciate but thrive within the culture you have created and of which you are rightly protective and proud.

Moreover, due to the transparent nature of the interim market, it is fairly self-regulating. Interims can be easily referenced, not only as a result of the number of assignments they have undertaken, but also due to current employers, particularly towards the end of a project, appreciating the need for them to find their next piece of work. It is within their interests to a) complete on time (both for reputation and planning the next move perspective) and b) complete the project to a high standard (to ensure a wealth of solid references and again for reputational purposes).

An experienced interim partner will be able to able to introduce you to a broad pool of SME talent which can add immediate value to your business, without placing undue pressure on your fixed costs or organisational structure.

The Outside Director:

Throughout even the early lifecycle of a business, the benefit of acquiring external business support cannot be underestimated.

This may result in the need to hire one or more external advisers who are able to accelerate business growth through a combination of their network, experience, status and credibility, and ability to make business / profitable introductions. Such individuals, particularly if they are a non-executive director or an adviser, may well be involved in some form of profit share or bonus.

The second reason you might hire one of the three below, is for advice, stewardship and navigational impetus surrounding audit, compliance, regulation and the dos and don’ts. These individuals should/would be far less likely to be part of any financial incentives program as it may conflict with the ability for them to carry out their role objectively.

Non-Executive Director

This is the simplest and most widely used piece of terminology. A non-executive director is someone who does not sit on the executive team but rather is part of an external board that meets, usually once a month, to offer advice and counsel to the CEO and sometimes CFO. Typically the individual is employed on a fixed term two to three year contract, at which point the board may change and he/she will either get voted back in or move on. This person is also paid an annual salary based on ‘x’ amount of days worked.

Independent Director

Differs to a non-executive slightly. Whilst the employment terms are similar, there are certain criteria that determines whether a non-executive is “independent”.

He / She:

  • is not a former employee of the company or group until five years after employment (or any other material connection) has ended;
  • has not, or has not had within the last three years, a material business relationship with the company either directly, or a partner, shareholder, director or senior employee of a body that has such a relationship with the company;
  • has not received or receives additional remuneration from the company apart from a director’s fee, participates in the company’s share option or a performance-related pay scheme or is a member of the company’s pension scheme;
  • does not possess close family ties with any of the company’s advisers, directors or senior employees;
  • does not hold cross-directorships or has significant links with other directors through involvement in other companies or bodies;
  • does not represent a significant shareholder;
  • does not serve / has not served on the board for more than 10 years.

If your business is VC backed, owned by a private investor or otherwise funded externally, they may request that you appoint an Independent Director to provide an objective perspective on a business; to guide and advise without any influence or colouring from other factors that may cloud the judgement. This can provide external (funding) parties peace of mind when businesses are in build and scale stage.

Adviser

These individuals are similar to the above however represent less of a fixed cost and can be called upon, and thus paid, flexibly. They can be used in conjunction with, or independent of, other non-executive and independent directors.

How do you remunerate outside directors?

Independent directors receive a direct annual salary. Advisers, non-executive directors, over and above receiving an annual salary, can also be incentivised via equity, bonus or related standard executive compensation models.

Beware cultural misalignment:

Everyone wants to join a start-up, or so the rhetoric goes. But in reality, getting what you wished for sometimes does not work out for both the employer and the employee. Someone might look great on paper, coming with an exceptionally strong track record of delivery, yet knowing how or if this experience will translate into your entrepreneurial environment is difficult?

Ask yourself and question whether the candidate exhibits some of the following traits. If they do, it may be prudent to exercise some caution before making the hire:

  • An over-obsession with base salary / remuneration
  • An over-interest in the job title
  • A keenness to “get their hands dirty” but an employment experience of doing quite the opposite
  • A worry about the size of the team that he/she will be managing, in reference to it being small / smaller than he/she may have had in the past
  • A history of working with or for organisations where the company culture is very different to the one in which you are considering employing them
  • A background of only ever working for (large / global) / well known) brands

How to scale quickly:

The question we were asked was, although it is quite easy to grow from 20 to 100 employees, over a sustained period of time, how do you scale rapidly from 100 to 200 employees, in a quarter of the time? How can this challenge be tackled?

The answer is to create a dedicated HR and Talent function.

HR functions are traditionally associated with larger organisations, yet now they are an essential ingredient to accelerate growth and scale.

Firms that struggle to make the transition from 100 to 200 employees often do so because they still rely on the same growth strategies they used in their early stages, ie. an over-reliance upon their directors’ network of contacts.
By developing a structured HR function and associated talent growth strategies at an earlier stage of the business lifecycle, the ability to deliver consistent talent should be augmented.

Final thoughts:

As discussions concluded there was a short debate about when a founder should step away, either to a non-executive or Chairman position or just to become less hands on, running the day to day operations; to become more of a sales front for the organisation.

It is a common complaint that as businesses grow, some founders find it hard to let go of certain aspects and feel the need to micro manage, which can become increasingly constricting as businesses grow.

As a small firm scales, outside input from a Chairman and an external board with perhaps advisers too should ensure that the founder is aware when it might be time to consider changes – it is also part of their remit to advise these founders of when the business has grown too big for them to manage in the same way. In some cases, a new CEO may also be required.

Talent needs to be top of all of everyone’s agenda, whether as a CEO recruiting new skills to grow your business, or as a policy maker looking to create an environment for success.
One of the reasons why the UK has become the best place in the world for FinTechs is our access to fantastic global talent.

At Innovate Finance, we’re working to secure the best possible environment post Brexit, to allow UK FinTech to remain one of the UK’s fastest growth sectors, as well as being a huge UK success story.

Natalie Ceeney CBE – Chair, Innovate Finance 

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