Episode Twenty Seven
Good Talent? Hard to Find!:
Antonio Mazza of WeNetwork
8 December 2020
Welcome back to Indo Tekno. This marks episode number 27 of our series. Selamat datang kembali semuanya! My name is Alan Hellawell. I'm founder of startup consulting firm Gizmo Advisors and venture partner at Alpha JWC Ventures. The RGF HR 2020 report reveals that "Talent Shortage" is far and away the biggest challenge for Indonesian employers with more than half, or 54% of respondents, considering it their most important problem. The next category, in fact, saw less than half of that percentage of respondents. We're therefore extremely pleased to feature Antonio Mazza, founder of WeNetwork, a leading recruitment firm in Indonesia, to address the many facets of the talent landscape surrounding Indonesia's tech ecosystem. It's a real pleasure to have you join us today, Antonio.
ANTONIO MAZZA 1:01
It's a pleasure being here, Alan.
Great. Now, Antonio, if I'm not wrong, you founded WeNetwork at the beginning of this year. I believe you're coming up on five years as a resident of Indonesia. What led you from your native Italy to your current home of Indonesia?
ANTONIO MAZZA 1:16
Thanks, Alan. To summarize it in one word, opportunities. I was born and raised in Italy. I studied Political Science and International Relations. My dream was to become a politician or to work for an international organization such as the UN or European Union. I didn't know a lot about these massive institutions during my uni years. After I realized these organizations work, I decided that that was not what I wanted to do for the rest of my life. I, as many others in Europe and the US, approached the job market when the buzz words were "economic crisis" and "recession", very similar to nowadays' environment. After graduating with my bachelor's degree, I decided to move to Southeast Asia, specifically Singapore. Often I've been asked why Southeast Asia. During my studies, I was heavily involved in writing articles regarding geopolitical issues, and my area of interest was Southeast Asia, which is why as soon as I had the opportunity, I leveraged my so called "expertise" in the area and moved to Singapore. After a while I was sent to Jakarta for a short assignment of six months, and I fell in love with the country, fell in love with a fantastic Indonesian woman and have never left since then. Indonesia is home for me now. I do consider myself a Bulè on the outside, but I'm a proud Indonesian inside. Anyway, going back to opportunities, I realized that there is a lot that can be done in the recruitment market in Indonesia. Hence, earlier this year, as you mentioned, we co-founded WeNetwork. WeNetwork is a fast growing, high quality recruitment business, with offices in Jakarta and Singapore. Our mission is simple: match great candidates with great job opportunities.
Fantastic. Now, Antonio, some 61% of respondents to this RGF 2020 survey that I mentioned earlier indicated that the top reason for their talent shortage was a "lack of candidates with necessary work experience skills and knowledge." I'm sure we could spend three straight podcasts just trying to "unpack" this issue alone. What perspectives can you bring to this issue, Antonio?
ANTONIO MAZZA 3:25
Where should I start? To be honest, I don't think three podcasts will be enough, Alan. Yes, the discrepancy between supply and demand of talent is really impacting Indonesian business, as well as affecting their growth. In one of our recent internal surveys with our clients, we found that 80% of hiring managers told us that the shortage of tech talent has negatively impacted their speed of product development. On average, it took more than two months to fill an open tech position. When I first arrived in Indonesia, there were no unicorns. A couple of years later, we have some homegrown "decacorns" and regional players with very strong interest in the country. However, the development of skill sets hasn't quite kept pace, resulting in a tech talent shortage. In recruitment, we refer to Indonesia as a "candidate-driven market," which means that candidates have a stronger decisional power compared to more mature markets like Singapore or Australia. So this adds another layer of challenge in matching talents with businesses. The upside is that this is why our business is growing so fast. I recall back when Grab was building up their marketing team in Indonesia, and they were looking for people with experience in fast growing tech consumer-facing businesses. Unfortunately, there were not a lot of options of talent available in the market at the time. For this reason, they hired mostly from top FMCG (fast moving consumer goods) companies, which was the closest set of skills for what they needed back then. Nowadays, things have improved, so this is now less of a challenge for a companies like Grab. So, to summarize, talent shortage is real, but I'm positive considering where the overall industry was five years ago.
That's encouraging to hear. Now, Antonio, in what specific job function is this shortage most acute in terms of across Indonesia's tech companies?
ANTONIO MAZZA 5:19
Gotcha. Now, Antonio, what is the most common assignment you're getting on the executive recruiting side?
ANTONIO MAZZA 6:52
Interesting question. Since our inception, we've seen an increase in demand for senior talents across mostly four categories: 1) software engineering, 2) people, 3) strategy and 4) product. It's worth mentioning our experience with people's roles this year. It seems like tech companies suddenly and finally realize, also probably thanks to COVID, that their main asset is their people, and that their success really depends on people that work for the business. I personally had five calls last month, with startups dealing in completely different business verticals; from e-commerce to medtech, from FinTech to logistics. What all these companies have in common is their eagerness in hiring senior executives for their HR team. Often these professionals will play a key role in three main areas: 1) talent acquisition, 2) engagement and 3) retention & culture.
Antonio, broadly speaking, how have comp trends evolved from the beginning of 2019 to now?
ANTONIO MAZZA 7:52
What has changed is the way companies and candidates look at the salary package overall. The trend has been on a salary uplift of 20% to 25% when moving from one company to another. However, the total compensation evolved with time. When I first arrived in Indonesia, the usual compensation structure for startups was a mix of base salary plus annual fixed allowances such as transportation, meal, skill allowances; and lastly the annual variable cash, which is often a mix of variable bonus or sales incentive, depending on the industry. However, in the last couple of years, we have experienced a surge of interest from both candidates and companies in LTI, which stands for "long term incentives," as well as non-cash benefits. The LTI is a company policy that rewards employees for reaching specific goals that lead to increased shareholder value, and is given to the employees in the form of stock, restricted shares or share appreciation rights and more. Even though it is becoming more common, there is still a mixed feeling regarding LTI in the market. However, also because of COVID, companies will need to look into non-cash benefits. A common example of non-cash benefits is a company car or medical insurance.
Now, Antonio, what are your predictions around 2021 on the comp front?
ANTONIO MAZZA 9:20
Companies are realizing that non-cash benefits are becoming more and more important for tech talents. However, different people will have different needs. Money is very important, specifically in Indonesia. But in today's business environment, a majority of tech professionals will consider a smaller increment if offered the right benefits. There is usually a very wide range of preference, hence why my personal suggestion is to tailor the benefits based on each individual's needs. The lists of benefits that companies are offering are increasingly getting longer as they seek to attract and retain top talent. However, most employees only use us more part of the long list of the benefits that they're offered. This is not only ineffective in terms of cost, it also doesn't help fulfill the objective of attracting and retaining talent. Instead of a "one-size-fits-all" approach, in my opinion, companies need to adopt a more tailored approach and also look for creative ways to incorporate more flexibility into their benefits package. By allowing employees to maximize the value of their benefits, companies can show employees that they truly care for and value every single individual, which will go a long way towards improving retention rates as well.
Makes eminent sense. Now Antonio, bringing it a little closer to home for me: what are the most critical elements that a VC should diligence on the people side before investing in an Indonesian tech startup?
ANTONIO MAZZA 10:51
Great question. If I was a VC, given the limitation of the talent pool, I would probably carefully do my due diligence on the founding team before investing in any startup. By knowing the founding team, you will have a great understanding as well of the company culture. Despite the individual skills of being patient, precision and other qualities, in our experience, successful teams are the ones that are driven by leaders with a high degree of emotional intelligence. Nowadays, employees would love to work for leaders that can communicate in concise ways, and are driven to work for reasons that go beyond money or status. A propensity to pursue goals with energy and persistence is important.
Understood. Now, Antonio, what is best practice in the area of employee retention? What are companies that successfully keep their people doing right?
ANTONIO MAZZA 11:47
Companies are beginning to "work for their employees," not just the other way around. As I shared earlier, people teams are going "all-in" on employee experience to improve retention and employer brand. Beyond collecting feedback, companies need to actively collaborate with employees to create an experience that works for everyone in the organization. Analytics have promised to revolutionize recruiting and HR for decades. But until recently, only the most sophisticated companies have successfully gained from data. Now we're reaching an inflection point where data is basically accessible to all. Understanding and capitalizing on analytics is quickly becoming a must-have skill in HR, which will help your organizations to strategize your employment, engagement and retention. Successful companies are the ones that create a continuous learning process by providing training opportunities both internally as well as externally, but also offer mentorship for their employees. This is a great opportunity, not only for the mentees, but also for the mentors, thanks to the concept of "reverse mentorship," where the mentees will bring to the mentors new ideas to the table. Basically, to summarize, my suggestion is to think ahead and think through things thoroughly. A reactive retention employment strategy will never work well in today's business environments. If a company reacts too slow or too late, it will be very difficult for them to execute the strategy successfully. Fast growing companies will need to stress internally to their employees vision and mission as often as possible. Keep an open line of communication, and let your employees feel part of your growth and become your brand ambassadors. Moreover, 2020 was a very peculiar year. Brands and organizations found their voice. Empowering your own people to be ambassadors for your organization through honest and transparent communication is one of the most authentic ways to demonstrate your employer brand. It also reinforces their commitment, which will translate at the end of the day to higher retention.
That all makes eminent sense to me. I think that the soft elements, the culture and other aspects of the startup, are so important to focus on initially and to guard and cultivate with time. Now, Antonio, that survey that I've now cited a few times revealed that the second most common reason for the talent shortage, at 49%, is increasing competition from other employers. I remember during my years as Chief Strategy Officer at Sea Group, we and other well-funded companies such as Gojek, Grab and Tokopedia would often be accused of "cherry picking" the best candidates away from the more cash-strapped startups. Would you agree that this was a thing? And if so, has this changed in 2020?
ANTONIO MAZZA 14:36
Yes, this is definitely a thing. Talent shortage and limited talent pool drives competition between companies. I've seen candidates receiving four or five offers at the same time by different scale-up businesses. This trend did not change in 2020, and I think will still be here in the future. Being in a market that is facing a talent shortage, often companies are accused of going after each other and poaching the best talents from smaller businesses. Unfortunately, nothing much can be done in terms of so-called "cherry picking." The demand is way-too high compared to the supply available. I've seen companies creating boundaries and barriers via non-compete agreements, which in my experience, are often not enforceable. Nowadays, the real challenge for companies is to build loyalty and trust toward their brands. As explained earlier, constantly engaging with employees and external talents will definitely help in building a sense of ownership for your business.
Now Antonio, Cento Ventures estimates that 2.8 billion US dollars were invested in startups in Indonesia in the first half of this year. This is nearly twice first half 2019 levels. And all of this happened despite COVID this year. And it's almost 18 times first half 2017 investment levels. We clearly have seen a massive increase in startup investment. What elements have startups overlooked in this incredible heating up of the market? Has it been building a healthy company culture? Has it been discipline in hiring the right candidates? What would you like to see them go back to and fix, if you could go back in time?
ANTONIO MAZZA 16:14
This will probably sound controversial coming from someone who is running a recruitment business, but hiring more-and-fast is not always the solution. For example, internal mobility will need to become an essential part of any hiring strategy, and not only a nice thing to have for employer branding. Every time I speak with candidates that are actively looking for a new challenge, I ask them a simple question that often blows them away: "Did you talk with your HR team or your manager for an internal move?" Most of the time, the answer is a straight "No." There is a chance that if you're a founder or a senior leader in a start-up, you are overlooking often a promising talent pool: your own people. Currently, most internal hiring happens thanks to proactive moves from employees. It's time for recruiters and line managers to create a formal internal hiring program, and work with the learning and development team to build the skills needed for the future. Role changes within organizations have increased consistently by 10% over the last five years, according to some of the LinkedIn research. So my suggestion is to look internally first before going out.
That's a great point. Now a big picture question. The quality of secondary and tertiary education must be an important input into both our business at WeNetwork and the success of the industry at large. Are there any recent policies or initiatives that you feel might have a longer term impact on the quality of Indonesia's tech workforce?
ANTONIO MAZZA 17:43
More than a specific policy, I guess that the appointment of Nadiem Makarim (Founder of Gojek) as the Minister of Education and Culture of Indonesia last year was already a great message from the Government in regards to the effort that they'll put in preparing young talents for the new labor market. One of the main challenges for the Indonesian education system is a lack of open mindedness. This will probably sound weird coming from a political science grad that recruits tech talent: not enough Indonesians are studying empirical science. More and more people prefer, and have interest in, social science, which is great, but I strongly believe that the government can help and support students through their policies to increase their interest in empirical studies as well. I guess a more open mind from families will help the process as well, specifically for tertiary students. You know, I'm Italian, and Italy and Indonesia are culturally very similar in the sense that families will always have a say in regards to your study. I still remember how disappointed my family was when I told them that after my bachelors degree, I wanted to go straight to work and take a sabbatical from studying. So a more open-minded social and cultural environment will definitely help. Will Jakarta be the next Silicon Valley? We're still far, but things seem to be progressing quickly considering where Indonesia was five years ago.
That's encouraging to hear. Antonio, let's go back to the "here-and-now" of 2020. What had been the most fascinating changes in hiring patterns since the onset of COVID?
ANTONIO MAZZA 19:12
Well, definitely virtual hiring and remote working are here to stay, Alan. We've seen companies hiring and onboarding candidates completely online, without ever meeting their future employees. And I'm not only talking about startups right now. We've also seen very traditional businesses adapting to this new way of recruiting very quickly. I believe that a hybrid solution is the way to go. The company's challenge will be in finding the right balance between in-person and virtual. The same goes for our workplaces, which are likely going to be a mix of on-site and remote employees. The real test for the organization will be how to perfect their virtual processes to make the technologies as seamless and as human as possible. They will also need to be decisions about when virtual is best, and when in-person is more appropriate. In our experience, candidates for entry-level positions may experience a completely virtual learning process. No setting foot in the office until they're on boarded. Executive candidates on the other hand will continue to receive a more bespoke process with numerous on site visits.
This has been a fascinating discussion around what I feel to be the singlemost important input to the longer term success of the Indonesian tech ecosystem, being the "human factor." Thanks so much for joining us today, Antonio.
ANTONIO MAZZA 20:33
Thanks for having me, Alan.
Terima kasih telah mendengarkan. Sampai jumpa lagi!