David Wu, Associate (吳戴文 / 投資經理)
David is an Associate mainly focused on investments. He previously lived in the US, but was drawn to the Greater Southeast Asia region by the growth opportunities and the wonderful people here. He spent the first five years of his career as a consultant at IBM, where he became intimately familiar with the enterprise software and services needs of Fortune 500 companies. Later, he focused on building predictive models and solving optimization problems for large companies, and gained an appreciation for the role of data and algorithms in our lives. He joined AppWorks in 2020 after receiving his MBA from Columbia Business School, and also has a B.S. in Mathematics from the Ohio State University. In his free time, he tries to stay active and is always looking for opportunities to hike or trek, often seeking the trail less traveled.
Hiring is a tricky thing no matter who you are and what the role is. But it’s doubly hard when you’re a startup founder and you’re making a key hiring decision in a new market you’re expanding to — you can’t afford to make any personnel mistakes this early on, especially when runway is limited and potential investors are gauging your execution on a promising new source of growth. And with advances in technology and globalization, the opportunity to enter another market has never been available so early, magnifying the importance of getting things right as a growing startup.
However, there are a few pitfalls that we as leaders and organizations succumb to at times, which can disproportionately impact hiring decisions in new markets. It’s good for leaders to be aware of these early on, well before you are ready to make such a hire, as it could take a bit of marinating to gain self-awareness. Here’s how people often go down the path of making the wrong hire:
Humans hate uncertainty… You’re expanding into a new market — a market that you’ve perhaps visited many times, whose people you’ve worked with and partnered with in the past, and on which you have done plenty of research. But let’s face it, if we’re being honest, when it comes to truly understanding the market, we can’t hold a candle to a native. And that’s totally okay! We can assess the uncertainty of the market, think of all the ways we might be wrong, all the ways we might fail, and all the ways we could hire the wrong people, and come up with a course of action which maximizes our expected return. Right?
You’re expanding into a new market — a market that you’ve perhaps visited many times, whose people you’ve worked with and partnered with in the past, and on which you have done plenty of research. But let’s face it, if we’re being honest, when it comes to truly understanding the market, we can’t hold a candle to a native. And that’s totally okay! We can assess the uncertainty of the market, think of all the ways we might be wrong, all the ways we might fail, and all the ways we could hire the wrong people, and come up with a course of action which maximizes our expected return. Right?
Unfortunately, that’s just not the way we are wired. Humans hate uncertainty. A 2016 study found that our stress levels were directly correlated to the uncertainty of the outcome, rather than the outcome itself. Not knowing how we’ll do on an exam is more stressful than being certain we’re going to fail. Receiving a call from your boss out of the blue is more stressful than knowing that she’s calling to fire you. And not knowing whether or not your startup will live is always more stressful than knowing it’s the end of the road.
So as humans, our instinct is to minimize this stress by suppressing the uncertainty. Despite the fact that external information is always incomplete and there are many types of uncertainties we have to deal with around hiring for a new market, in our mind we make things easy. We need to make ourselves feel in control. The kicker is that the same study found that our performance level increases with uncertainty. Feeling uncertain actually brings the best out of us, which makes quashing the uncertainty even worse.
…So we often latch on to our own organizational ideologies. Everyone has their own ideology based on what we have experienced in life. And when we are faced with key decisions to make, our ideology is what determines our decision. In the uncertainty of hiring for a new market, we suppress the stressful unknowns and default to something—anything to reduce the stress and give us some sense of control. So we default to our organizational ideology — it’s clean, easy, and certain. We hire the smartest person. And the smartest person, as we all know, is the one who most agrees with you — the one who conforms to your ideology the most.
Ideologies come to dominate organizations. And why wouldn’t you hire the person who fits the most into your ideology? Everyone successful at the company is like that. That is because of the systematic entrenchment of ideologies in organizations — through mentoring, feedback given to employees and through the interview process. People who don’t agree with the ideology don’t get in the door, and those who do get in the door are constantly pushed to conform even more. At some point you can’t even imagine working with someone who doesn’t share the same general views. Why wouldn’t you hire the person who agrees with your ideology? After all, the company has been successful and the ideology has worked so far. With everyone on the same page, it decreases the need for bureaucratic control and increases efficiency. There’s just one problem.
The organizational ideology doesn’t always transfer to the new market. We don’t actually understand the local market that well. We don’t fully understand how it’s different from our home market, and that our ideology might not be 100% the best fit for our new market. As you’re interviewing candidates for key hires in the new market, they may express views about which users to target, how to market the product, and how to build the organization on the ground. Chances are, if the person is a native and the market is different from your home market, you will have some disagreements. This is normal and a product of you being an outsider and living in your ideology, so you should think twice before dismissing such a candidate as you would if you were hiring for your home market.
Joel Leong, founder of ShopBack (AW#13), APAC’s leading cashback rewards platform, now in active nine countries across the region, has often spoken to us about not just hiring a local person to lead the new market, but fully empowering them and giving them the leeway and resources to execute the plan that they have developed, as if they were a founder themself. Joel often moves to the new country himself for several months at the beginning of each market entry to fully grasp what’s happening on the ground, but always passes on the reins to the country manager after setting up the local team.
We reach for control over local creative units. What’s even more dangerous is that we tend to feel most strongly about creative units like marketing and local product design. Many founders and organizational leaders are well-traveled global citizens who may have even studied and worked abroad. We may overestimate how well we actually understand the customer and how they respond to the product or the marketing. When local managers are telling you something that seems totally unintuitive given what you know about something subjective or creative, our first reaction will be to resist. This is in contrast to non-creative units like finance, IT, or production — boring stuff where local requests are usually approved without a second thought. Of course, the success of entering a new market often hinges on the creative aspects, so leaders should be mindful when hiring or evaluating local resources here.
CK Cheng, founder of AsiaYo (AW#12), the Series B travel booking platform which has raised $10 million to-date, shared a few experiences with me on this topic. At the outset of market expansion, AsiaYo used a centralized decision-making structure. “I made the decisions whenever I had a strong opinion, and I would take responsibility for them,” he says.
But later, as they expanded deeper into Japan and Korea and now Southeast Asia, they shifted to a decentralized structure covering their large geographical footprint. Why? “I realized my hit rate was so low [making the correct decisions]” he laughs. “Now, it doesn’t matter if I feel strongly about something or not – I’m not the person on the ground. So I spend more time making sure that the decisionmaker has a good decision-making framework, and is connected to the right stakeholders in the organization, so that they don’t need to consult me.”
CK describes his current hiring approach in new markets as “trust over capability” – placing more emphasis on trusting the candidate over his own subjective evaluation of their capability. To increase this trust, he stresses finding people recommended within his close personal network – both his Japan and Korea country managers were second-degree connections. By hiring based on trust and track record, he doesn’t need to worry about being on the exact same page in terms of strategy and approach.
So what can we do?
I think the first step is just awareness — being aware that all people have certain tendencies that are ingrained in our psychology. And that sometimes it works for us, but other times we need to take a step back and be very conscious of our blind spots, such as when we enter a new market, whether that’s geographic or otherwise. This is not as simple as it sounds when you are a manager or running a company; making a wrong decision in a new market is a scary thought and can lead to major consequences. It is easy to acknowledge that everyone has blind spots, but only when one understands the root of our own personal management psychology can we truly make an informed, unbiased decision.
When you’re making the hire, you might consider giving a long look to that candidate who firmly disagrees with you on the approach but has a proven track record of success in the new market. This way, you’re conscious of your own pitfalls and can actually use it to your advantage, by finding someone who disagrees with you in certain respects. And you can have confidence and trust in their execution given their prior record. Feel and embrace the discomfort that will surely come with this decision which stems from natural human tendencies. Let go, trust, and empower. This takes tremendous mental discipline but could be a practical way to make better hiring decisions.
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Photo by Dylan Gillis on Unsplash