In recent years, the world has seen the rise of a plethora of new technology players, including a growing number of innovative FinTech companies, who have recently entered – or are on the verge of entering – “unicorn” territory. For the largest firms, operating footprints now span multiple countries, with employees numbering in the thousands.
Despite impressive headline growth numbers, we have found that many growth and late stage companies do not have a robust Human Resources (“HR”) strategy and operating model in place to properly support their scaling aspirations. In particular, many of these firms lack robust HR policies, processes, and systems (“PP&S”) across the entire employee lifecycle. This is creating major productivity bottlenecks, sizeable regulatory and operational risks, and impacting future strategic planning efforts.
The risks associated with deficiencies in HR protocols cannot be underestimated. Our discussions with numerous large-scale FinTech companies revealed that many had run into considerable problems with national regulators, especially in Asia. Some were forced to suspend their hiring plans, while others have been slapped with punitive fines, severely hampering their growth efforts. Moreover, the reputational fallout with having a poor “people culture” has adverse consequences for employee morale and a company’s public image.
In addition, the absence of clear protocols around compensation, promotions, and performance evaluation, which are often viewed as a “black box” by startup employees, is having a material impact on staff engagement. This is typically exacerbated by loosely defined roles and responsibilities as personnel take on multiple tasks in response to rapid scaling and continued product and service pivots. As a by-product, employee satisfaction – and ultimately, retention – suffers, creating challenges around business continuity while driving up hidden costs. We estimate that some of the largest regional FinTech unicorns are spending up to USD 45 million p.a. on hidden replacement costs due to exceptionally high staff turnover – a figure they simply cannot afford to ignore.
While typically considered as an afterthought, we believe many companies need to take a more proactive stance with respect to their HR strategies and operating model, particularly with respect to their PP&S efforts. Not only does a sound HR strategy allow organisations to reduce their risks (in particular, by ensuring they are fully compliant with national regulations), but a renewed focus on the human factor is critical for any firm that is serious about attracting and retaining the best talent to support their growth ambitions.
