Human capital comes with a memory
Helena Strigård, CEO Haeger & Carlsson Executive Search and Interim
As a biotech company, accessing the right human capital and financial capital in a timely manner determines your success. Both entities are key to building your company. They also depend on each other in a way that creates a bit of a catch 22 for any growing company in need of venture funding. Without the right team, your struggle to raise financial capital will be even more brutal. And without the latter, you might not be able to enroll the sharpest minds. For companies in new therapeutical areas such as cell and gene therapy (CGT) that are already perceived as high-risk, you might be faced with an even tougher challenge to convince investors that you and your co-workers have what it takes. As part of their due diligence (DD), investors will look into your management team, your Board of Directors, and your ability to attract key talent over the growth years ahead.
Over the last few years of ups and downs in the industry, the intertwined relationship of human and financial capital has become even more impactful on companies’ prospects of success.
The point of this article is to share some hands-on advice on how to cruise through the waves of access to capital through a clever, yet highly ethical way of dealing with human capital (with an emphasis on the ‘human’ part of this somewhat unempathetic term). As a Nordic-based recruiter specialized in life sciences, this is close to my heart.
The challenge many of you are facing, or have just faced:
You staffed up in 2022 based on the ways things were during the pandemic years. Access to capital in 2021 was extraordinary high and while this was not entirely unexpected, few were genuinely prepared for the sudden drop that came in 2022 when capital costs increased. For service providers, always lagging one or two steps behind the capital-eating R&D companies that they depend upon, there were less of an excuse to not hit the brakes in time. They should have seen it coming, but many continued staffing up well into 2022 with continuous growth in mind. However, by then, financial capital had become relatively costly and scarce, and the only way to stay in the game until the next inflection point and keep your investors happy was to cut down on human capital. This strategy was pursued with a sense of urgency that might not have permitted you to think twice about how it would affect your company, once (and if) the wheels started spinning again.
This is a scenario that will be all too familiar to many in the biotech space.
In some countries, cutting down on staff is a costly matter in the short run. Yet it is nothing compared to the cost of brain drain – of losing the key competences that you really needed to reach the long-term goals of the company. Having to let people go is awful, I know. It always is when we are affecting people´s lives in a way that is likely to be upsetting at the very least, and sometimes even devastating, and many people in this business have a loyalty with the company and its mission that goes beyond what could be expected. You most likely did not have a choice at the time. But how you did it mattered, and still does.
If your company is among those that are still standing, you might have to start thinking about bringing in key competence again sooner than you expected. Maybe your investors have already grasped that their whole investment is at stake unless the team is adequately staffed. However, your ability to attract talent moving forward will depend on how your company handled the recent downsizing. This is because human capital comes with a memory.
I believe this holds true regardless of whether you are operating in a hire-and-fire labor market such as the US, or a more regulated “flexicurity” market such as that in the Nordic countries. It is also about ethics, of course. The following is advice for the various situations you might be facing when dealing with either downsizing or attracting human capital.
When your team has to be diminished…
Provide transparency as far as possible. Explaining the underlying reasoning of the cut in human capital and what will have to be stripped in terms of activity builds trust.
Ensure a clear process. Set a timeline and stick to it. If you deviate from the process, explain why. Do not make promises you cannot keep.
Communicate! It is human nature to shy away from communicating in tough situations as people feel they do not have something constructive to say, or simply do not know how. Therefore, seek professional help if needed to be clear on your messages. Communicate even when there is no definitive news to impart. This is the ultimate stress test of your internal information cascade. Staff members who are kept well informed, and who trust that they will continue to be, don´t spend as much time and energy guessing.
Avoiding discrepancies in access to information is key. However, there will be substantial discrepancies in both the detail of information that various parts of your team access, and the timing with which they receive critical information. This means that processing bad news occurs at different speeds in different parts of the company. Although this is somewhat inevitable, it is possible to avoid unwanted loss of competencies by staying close to the information reality of your co-workers. Using emotional quotient (EQ) will sharpen your senses and has nothing to do with being soft. (Or maybe soft is being sharp?)
It might seem contradictory to work with employer branding during a downsizing, but that is exactly when you should stay true to your ethics and policies. Walk the talk.
When your team is growing…
When wheels are spinning fast in the other direction, you might tend to focus on the final candidates of your recruitment process and forget about the rest. How you deal with all candidates, or how your recruitment firm deals with them, will impact on your employer branding. And before you know it, a candidate who was turned down in your most recent recruitment drive might pop up again as the ideal one in the next, or at a client/partner company. It is important to remember that human capital does not only come with a memory – it has a voice as well.
Make use of your investors’ experience in building teams. If you don´t have the full team already, share what competences you need and ask your investors to help through their vast networks. Additionally, the buy-in generated through this approach might prove helpful down the line.
Make every head count! Many start-ups are led by a CEO who is also the C-everything, tasked with taking on an international market while reporting to a Board of Directors of approximately seven members. Those men and hopefully, some women, should be strategic players on this mission, too.
That leads us to diversity of perspectives. What is the use in having seven pairs of cloned eyes, all with the same experience, background, and reasoning when facing challenges? You could make do with just one set of those particular eyes and cut down on cost significantly. Although this is most likely something that is not within your control, keep in mind that the more diverse your board is, the more likely you are to find the strategic advice needed on the complex, ever-changing journey of building a biotech company.
And at all times….
Being respectful will take you far. You are dealing with people, not digits!
Consider whether those of your key competences that normally come at a high cost could be made available through part-time positions or interim consultants. In the Nordic life science ecosystem, the use of shared C-level staff and specialists is growing popular. For instance, a CFO of a start-up normally carries out a crucial role for operations and will matter when investors carry out their DD. You want your books in order and processes in place. So, how about hiring half a senior CFO, supported by junior staff, and splitting the cost with another company? For smaller ecosystems such as the Nordic one, this also opens up the possibility for knowledge-sharing and enables them to punch above their weight.