Scott Stirrett is founder and CEO of Venture for Canada. Parm Gill is managing partner of the Gill Group and chair of Venture for Canada.
In television shows such as Silicon Valley, fast-growing technology companies are depicted as employing predominantly software engineers. The reality of most companies is quite different, as these types of firms often have more business than just technical roles.
Consequently, many fast growing firms – often referred to as scale-ups – face more significant challenges recruiting for business people in areas such as sales, marketing and human resources than for engineering positions.
Training and developing more business/management talent adept at building scale-ups is paramount to catalyzing Canada’s economic potential.
What are scale-ups and why do they matter?
According to the Organization for Economic Co-operation and Development (OECD), scale-ups are defined as “all enterprises with average annualized growth greater than 20 per cent per annum, over a three-year period, and with 10 or more employees at the beginning of the observation period.”
These companies account for less than 5 per cent of all Canadian firms, but create more than 50 per cent of all new jobs. Catalyzing more scale-ups is essential to enhancing Canadian prosperity.
While scale-ups produce half of new Canadian jobs, Canada needs to foster more high-growth firms. According to the Impact Centre at the University of Toronto, Canada “dramatically” underperforms the United States in scaling private companies, although we do perform well when compared with European countries.
If Canada catches up with the United States in producing the same number of scale-ups per capita, there will be significant positive outcomes for Canadian prosperity. Consequently, it is very important for Canada’s future that there is a better understanding of why there are not more Canadian scale-ups.
What are the nature of the talent challenges facing Canadian scale-ups?
According to a Lazaridis Institute survey of Canadian startup ecosystem stakeholders, “the primary inhibitor to scaling up is the shortage of experienced management and/or executive talent, as identified by 53 per cent of those interviewed.”
The same report found that skills relating to sales/marketing, organizational design and execution, product management, operational finance and internationalization are most in demand. Although there are skills shortages across many different management areas, the authors note how there is a particular dearth of individuals with relevant expertise to scale sales/marketing functions in Canadian firms.
The Lazaridis Institute’s analysis highlights a myriad of reasons for why this talent gap exists, including survey respondents’ recommendations for postsecondary institutions to better serve the needs of scale-ups, through offering more tailored and relevant training in fields such as sales.
How can Canada develop more individuals with management/business skills to scale Canadian firms?
Given the importance of scale-ups to Canada’s future, we must not just explore why there are not more of these rapidly increasing firms, but how can we create the conditions to foster more high growth companies.
As the Brookfield Institute for Innovation and Entrepreneurship (BII+E) has found, “the propensity of prospective employees to demonstrate a growth mindset” is incredibly valued by scale-ups. According to Stanford professor Carol Dweck, those who possess a growth mindset “believe that their most basic abilities can be developed through dedication and hard work – brains and talent are just the starting point.” It is worth exploring ways that postsecondary institutions can embed enhanced “human skills” development – such as increased awareness about what is a growth mindset and how to develop it – into more programs.
BII+E has also noted that as much as 70 per cent of the internal training budgets of scale-ups go to supporting the development of senior-level talent. More needs to be done to develop scale-ups’ capabilities to train junior employees through work-integrated learning, with the goal that each new scale-up is a vehicle for training hundreds of top-performing employees with managerial/business skills relevant to high-growth firms.
One idea is to incent more scale-ups and postsecondary institutions to collaborate on training programs, with an example being Shopify and Carleton’s unique Dev Degree program, which “combines an accredited university degree with double the experience of a traditional co-op.” While technical skills are important, creating similar programs tailored to developing managerial or business talent will help foster a more significant economic impact.
To address our scale-up deficit, Canada must take bold action to address scale-ups’ pressing talent challenges. High-growth firms contribute disproportionately to Canadian economic growth and are in urgent need of the right talent to scale.
Through investing in the development of the country’s most valuable asset – its people – Canada can become the “scale-up nation” of the 21st century.