Southeast Asia’s digital economy is accelerating at a breakneck pace, and firms are already struggling to find the necessary skillsets. According to the recently released “Southeast Asia Tech Talent Compensation Report” by Glints and Monk’s Hill Ventures, many founders and hiring managers are grappling to find strong technical talent in the fields of product management, engineering, and data science.
This talent shortage is particularly pronounced in Singapore. As more Southeast Asian startups are moving into late-stage and an increasing number of Big Tech companies are setting up shop in the city-state, hiring has become a battlefield. “With schools not churning out enough tech talents to meet the demand, poaching is the best way to fill those talent voids,” said Adrian Tan, Future of Work strategist at the Institute for Human Resources Professionals (IHRP).
Startups are already concerned that they are unable to compensate talent at the same level as Big Tech. How can they develop a sustainable recruitment strategy and scale fast enough to capitalize on the opportunities before others beat them to the punch?
KrASIA spoke with several tech companies to understand their strategies in battling for the best and brightest in Singapore.
Equity as compensation leveler
“The only and key differentiator for a startup when it comes to compensation is equity,” said Adrian Tan. “Employees are willing to put in 80 hours a week in hopes that the startup will become a unicorn and they can retire early. This will only make sense if they have an employee stock ownership plan (ESOP).”
Endowus is a local startup that has implemented employee equity options. The digital wealth advisor said it has managed to attract quality hires. Although it is relatively small and in its early stages, many of its employees come from notable companies such as Lazada, ByteDance, Redmart, Circles.Life, Grab, and JP Morgan. Prior to its whopping SGD 23 million Series A funding from Lightspeed Venture Partners and SoftBank, Endowus was wholly owned and funded by its employees.
“Over 95% of our employees have equity or ESOPs,” said founding partner Gregory Van. “Many of our engineers have been allowed to participate in buying equity when they joined, for immediate and direct ownership in the company. Some of our early engineers, who moved on, cashed out over SGD 250,000 by selling their equity—so the cash is real.”
“Many employees in Asia have not seen a material benefit from the ESOP programs compared with the US, where there have been numerous exits that employees have benefited from,” said Paul Endacott, founder of recruitment tech firm Grit. “Employees in Asia often prefer cash over equity as they have yet to see a trend of people cashing out their ESOPs, proving that the long-term sacrifice is worth it.”
A junior data engineer, who KrASIA spoke to under anonymity, offered his perspective. “Some people want to participate in the company’s growth. For me, I just want to get paid. If I found a job in an early-stage startup and am convinced of its long-term growth potential, I might consider taking equity as part of my compensation package.” Currently, he works at a company that is close to unicorn status and was presented the option of either two months of equity versus one month worth of salary as his bonus. He chose the latter.
And there are other motivations as well. Endowus CTO Joo Lee thinks that not everyone enjoys working for Big Tech. “There are numerous talented engineers out there who are more driven by their personal interest in the project and the opportunity to learn and work with the latest technologies than just short-term financial upsides,” he said.
Don’t go to them; they’ll come to you
Traditional recruitment models have been inefficient in generating applicants and successfully matching them with companies. The tech companies KrASIA spoke with have taken it upon themselves to innovate their search for new employees. Rather than letting recruiters and their companies reach out, they let potential hires come to them.
The recruitment platform Grit debuted a new service last year for organizations to approach available talent who have uploaded their CVs. This allows companies to find their desired match for the role they are looking for as opposed to the other way around, slashing the time to find a successful candidate by half, according to the platform.
Employee referrals are also well-regarded. Workato, which develops business automation software, said that the conversion rate of a referral into a hire has been over 80%. The firm created a referral bot, which tracks applicants to streamline the process. “Recruiters can view referrals and send emails to qualified candidates with a click of a button in Slack,” said the head of people ops Khoo Choon Yen. “Speed is critical when reaching out to quality candidates, and the referral bot has been instrumental in helping the recruiting team.”
On the back of a USD 110 million Series D funding round earlier in January, Workato announced that it will invest significantly in its own recruiting. It currently has 200 employees in the Asia Pacific and aims to double that number by the end of 2021.
Great talents can be made
Companies are even taking a macro approach when building their local talent pipeline, offering training or placement opportunities for those who may lack the experience but have a deep interest in entering the sector. “School internship programs allow us to identify high-potential undergraduates and graduates,” said Khoo. “We have converted 14 interns to full-timers over the years, and notably, four have become product managers.”
Customer relations software maker Zendesk sought to double its product development and engineering team over three years. As Singapore is its regional hub, the company partnered with the Economic Development Board (EDB) to invest in and develop talent. Zendesk boosted its regional workforce from 650 employees in 2019 to 880.
Local poster child Sea Group has equally made significant efforts to build a healthy pipeline of skilled tech workers. The firm recently gifted the National University of Singapore (NUS) with USD 37.1 million to support its School of Computing and other initiatives. “Education is close to our heart,” said founder and CEO Forrest Li. “We are one of the largest employers of local university graduates, and we are fortunate to have close to 900 NUS alumni with us, both here and in our offices abroad.”
With the university, Sea Group also launched a new bachelor of technology in computing work last August. Participants are hired as full-time junior analysts prior to the program’s start, and workplace-based training constitutes 30% of credits that count toward the degree. Sea committed to hiring 120 students after graduation over the next five years.
Paradigm shift required
Economics teaches us that when demand exceeds supply, it creates a shortage and drives the equilibrium wage rate up. However, it fails to teach us that offering obscenely attractive compensation packages will quickly kick-start a race to the bottom that will ultimately hurt a country’s position as a thriving tech ecosystem.
“Eventually, all these disproportionate adjustments to salaries or compensation packages are going to create higher benchmarks,” said Grit’s Endacott. “As salaries get inflated, companies will rethink where they want to set up their regional hubs, and if it hits a tipping point where cost outweighs the perceived benefits of being in Singapore, offshoring may occur.”
It could be more beneficial if companies adopt long-term views by opening their doors and investing in recent graduates or mid-career switches. Although the Singaporean government is widening the local tech talent pipeline with initiatives such as Tech Skills Accelerator and Professional Conversion Programs, it is still likely insufficient to meet demand. Based on estimates, there will be a shortfall of more than 60,000 employees that are needed in the information and communications technology sector in the next three years.