Mind the Gaps: Addressing Human Capital Constraints in Frontier Markets
What keeps social enterprises from scaling? A common first answer is money. There is no denying that inadequate financing can prevent early-stage ventures from expanding. But there’s another problem that grows with scale. Even as entrepreneurs land funding, they run into a second wall: talent.
As McKinsey & Co have shown, with data gathered by the social enterprise advising group RippleWorks, acquiring and retaining human capital becomes more and more pressing just as enterprises start successfully raising financial capital. This is a problem that is near and dear to us at Alter, an everyday reality that we’re working to overcome.
Deconstructing Human Capital: Talent, Skills and Knowledge
Working with ventures in frontier markets at different stages of expansion, we’ve seen the human capital gap first-hand. We’ve noticed that the needs of our entrepreneurs fall into a pattern that shapes how we understand and address human capital constraints. In our experience, there are at least three distinct types of “human capital deficiencies”, which we categorized as talent, skills and knowledge.
Talent. Many of our ventures, especially our later-stage companies — ones that have the greatest market share, the most employees, or the widest reach — view access to talent as their most serious barrier to scale. Despite profitable business models and real traction, these ventures struggle to fill vital positions with the right people at the right time. They need skilled employees for critical technical and executive roles. This is the purest of our possible problems with talent: there simply isn’t enough of it to go around.
Skills. At some of our partner companies, executives possess the experience and insight necessary to grow the business, but lack advanced management skills. We’ve found it useful to differentiate between skills that can be taught or transferred, and those that cannot. In this case, we’re dealing with the former, which makes for more of a “skills gap” than a “talent gap.” The right people are present, but they need additional training in order to grow with the company.
Knowledge. Some ventures — particularly early stage ones — face a third type of human capital challenge. We’ve recognized that our entrepreneurs may need better knowledge of a specific domain or market in order to scale. The problem at this early point in a venture’s development isn’t talent or skill. It’s specific knowledge that can be transferred from one organization to another, in the form of a one-time infusion of expertise.
So how do we solve our ventures’ need for talent, skills and knowledge? We start by acknowledging that multiple types of problems probably have multiple solutions. Instead of trying to address all of our ventures’ human capital requirements with a one-size-fits-all approach, we design different programs to meet specific needs.
Our Solutions: Expert Matching, Alter Fellows & Recruitment Services
For ventures that require expertise or knowledge, we have developed an expert matching program. Organizations like RippleWorks and Endeavor have succeeded in opening up expert networks to entrepreneurs in slightly more developed markets than the ones Alter deals with. We’ve taken a similar approach, and connected entrepreneurs with the market and operations expertise that they need.
To solve the “skills gaps,” we’ve designed a training program with some of our partner companies’ executives, in order to boost the performance of their senior managers. With the Alter Fellows Program, we provide one-on-one coaching to complement a curriculum sourced from the world’s top business minds. Over the course of several months of coaching, we’ve found that we’re able to equip our ventures’ executives with the skills they need to scale their businesses.
Finally, to solve the pure “talent gap,” we’ve launched a program to recruit qualified, full-time talent. We use Alter’s strengths — networks and positioning among highly educated students and professionals in the US — to complement the recruiting efforts of our partner companies. We also recruit and place students from top MBA and other graduate programs with our companies for immersive internships. The aim of our efforts is to fill the talent gaps that our ventures feel are holding them back from scaling.
Making it Work: Our Solutions in Practice
Having divided the human capital problem into segments, we’ve used the last year to design and implement solutions targeting these problems. We’ve matched 32 experts across various specialties with our ventures in Haiti, Myanmar, Cuba and Afghanistan. We’ve also coached nine executives through the Alter Fellows program, and we’ve placed one full-time employee with one of our companies in Myanmar, and interns in five of our partner companies across the world.
Some of our best results have come from a mix of programs tailored to meet ventures’ unique needs. For example, the CEO of one of our larger ventures needed top tech talent for full-time positions, but also wanted to enroll some of his senior management in our Fellows Program. Through Alter, he now has four managers who were coached through our initial Fellows Program, a summer intern from Harvard Business School, and a new US-trained software developer. What’s more, he’s asked for a second iteration of our Fellows Program to coach even more of his executives.
The guiding principle, of course, is to meet our ventures’ needs with the program, or combination of programs, best suited to do so. At every step of the process, we are mindful to evaluate our programs based on the outcomes our entrepreneurs care about, and tweak their design based on feedback.
Using the Diaspora to Unlock Human Capital
Despite our progress so far, we’ve found that recruiting talent for our ventures is probably the most difficult piece of the human capital challenge. The authors of the McKinsey piece hypothesize about the roots of the recruiting problem: social ventures can’t compete with the “prestige, pay, and job security” of larger, more established companies. We agree, and we also know that the talent gap is especially problematic in frontier markets.
Alter’s entrepreneurs do groundbreaking work in tough markets, like Haiti, Myanmar, Cuba and Afghanistan. The things that make their work impactful also amplify their challenges in attracting the talent they need to scale. To “prestige, pay, and job security,” we might as well add cultural barriers, physical security, and quality of life to the concerns that pull top talent to safer postings at bigger companies.
But we have reasons to be optimistic about recruiting for our ventures. The diaspora communities of the countries where we work are full of amazing individuals, with a sense of purpose which makes them ideal candidates. The missions of our ventures — to improve their communities and their countries — have resonated with them and been a significant draw. We’ve heard a common refrain among the diaspora that gives us hope as we attract talent for our ventures: “I feel like I’ll have more impact over there.” For people with the right skills and the willingness to move, Alter’s ventures offer the opportunity to play a pivotal role in their countries’ development.
We at Alter are proud to play a role in realizing our entrepreneurs’ dreams for their countries. In our line of work, that means helping them overcome barriers to scale, with human capital probably the most nuanced and complex barrier. For us, that’s less an obstacle than an opportunity to more precisely tailor our services to our partners’ needs. We put our ventures’ outcomes first, and we’re willing to adapt and innovate to serve them better. We’re happy to say that it’s starting to pay off.
