In this episode, we were joined by Frederic Joye, the Co-founder of Arcanys, a Swiss software outsourcing company based in the Philippines. Arcanys is renowned for its expertise in assembling top-tier developer teams tailored to the needs of tech-enabled businesses. For more than 20 years, Frederic has helped more than 250 companies through outsourcing in the Philippines.

During this conversation, we explored the strategies for constructing a high-performing engineering team and, notably, maintaining its longevity. Additionally, we delved into finding the optimal balance between an internal core team and external collaborators, such as agencies or freelance professionals.

Key Discussion Points:

●      What sets Feredic’s approach to outsourcing apart from traditional companies

●      What advice do you give to early-stage startups to help them navigate their initial challenges?

●      How can corporations enhance retention and foster better team dynamics?

Erik: Fred, thank you for joining us on the podcast today.

Frederic: Thank you for having me, Erik. I'm looking forward to this chat.

Erik: Yeah, so I'm really looking forward to this as well. We were chatting a bit earlier. And I don't get to speak with Asian entrepreneurs often, even though I'm based in Shanghai. You're not exactly Asian, but you've been in Asia for 14 odd years now in Hong Kong and the Philippines. So looking forward to hearing your perspective on the ecosystem and working with companies from here and with teams, in particular, in this ecosystem.

Before we get into the main topic, which is this topic of building technology teams, I would love to understand a little bit of your background. So maybe first with the backstory of how did you actually end up moving from Switzerland, that is, into Asia 14 years ago.

Frederic: Sure, yeah. So I've been working in insurance and banking for about 10 years in Switzerland before I actually moved to Asia. My first move to Asia was through a friendship I had for many years since high school with Alan, who's my business partner in the ventures in Arcanys. He's been an entrepreneur since very young. I think since he was 20, he was always toying around with business ideas. And so he left Switzerland to create his first business. That was buying and selling game currency in online games like Everquest, World of Warcraft and such games. He moved to Spain first. Then because all of the production of these assets were in China, he moved his business in Hong Kong. In 2006, they had a massive investment led by Goldman Sachs and other VCs in the company. That went bust. So the company kind of exploded right after that because there was so much money at stake. In 2006 or 2007, he started another company. That was not buying and selling currencies anymore, but we were buying and selling game accounts for gamers. He started this new business.

In 2008, because of my friendship with Alan, I was like, "Hey, I'm coming to visit you in Hong Kong and just see how things are in Hong Kong." I was curious. I always wanted to leave Switzerland. To my surprise, three days in after a few nights partying, one morning, he's like, "Hey, let's go for a run in the mountain." So we started running in the mountain. We stopped in the middle. He's like, "Hey, do you want to work with me?" To me, it was like, I couldn't refuse it. Because first, it was an escape plan from Switzerland for me. Because I had wanted to leave quite Switzerland for a while. The second one was, this guy has built a massive business as his first business that got sold at $300 million valuation in 2006, which were huge numbers. Now it sounds ridiculous. But back then, it was huge. And so I was like, yeah, I can definitely work with this guy. If he's asking me, it's an honor too. So I said yes. Can you take care of the design stuff like that? I said yep. Three months later, I had one luggage and landed in Hong Kong.

We kept on working on that e-commerce venture, buying and selling game accounts, for about a year before we heard about someone wanting to sell a small business in the same industry in the Philippines. That's how we discovered the Philippines. We went there to visit the business, which was really super tiny but has an interesting side or thing for us. And so we cannot close the operations in Hong Kong. In 2010, in January or February, we had set up a business in the Philippines.

Things weren't going really well with that e-commerce venture. The game industry had changed, so we didn't see any path forward. So we decided that we had to find another another thing to do. And because we left from an outsourcing company when we were in Hong Kong to do our development and weren't able to hire our own developers in the Philippines and really successfully do so, we thought, okay, maybe we could help some other people. Actually, we had friends asking us to find developers for them because they were struggling. So we did that. And so that was an opportunity. Since mid-2010, we started focusing solely on building Arcanys. 13 years later, I'm still in the Philippines.

Erik: I mean, this must be interesting for Alan. Because we started this chatting before we kicked off the podcast, about the reason that the first company went bust. It sounds like part of it was cultural issues or team dynamics issues. And now you're in the position of working, I suppose, with a lot of companies that are maybe in a similar position — the position of young, fast, growing, trying to put together the team and the culture. You're external, but I imagine that you're interacting with a lot of those challenges today.

Frederic: Yeah, I think the IGE part, the first business of Alan, was slightly different in the sense where it was just about money. There was so much money, so everybody was trying to get some for themselves. Some were screwing other people. So it really imploded at the executive level. Not saying that with the companies we work with, we see these problems. We do see them at the higher level. But as you mentioned, we also see some cultural issues sometimes. When we can, we help them navigate through founder issues but also more cultural problems or simple people issues down the road. Because at the end of the day, it's just about how to manage people in situations that are sometimes really complex.

Erik: That's a good differentiation, though. Okay. There are certain issues that are really founder issues, and then others that are more team dynamics. I'd like to dive into the team issue with you, because you're often in that process of helping companies put together their internal and external teams. Before we go there, you have a very interesting portfolio as an entrepreneur. I think that also reflects how you view teams and how you build culture building at your company. So I'd love to understand that a bit more. Your core company is Arcanys. Around Arcanys, you have Arcanys ventures, CrossFit, the Early Learning Foundation. Then you're also involved in Coinup and Sorento technology. So can you share a little bit? As an entrepreneur, how do you manage that portfolio? But then, also, as a team builder, what's the purpose of building these ventures around your core business?

Frederic: So with Arcanys, we have four identities, if you want — those that were all historical, I guess, things that built up over time and that were close to our core values with Alan. The first one, there's Arcanys where we do dedicated teams for startups.

Then we have Arcanys' Early Learning Foundation which is born from a passion for Alan and his dad around education, and also the need in the Philippines to have better access to early education, to get a good kickstart in school for these kids. We target especially very, very poor families in Cebu through coaching the parents to show that they have a really high impact in their kids lives down the road. We do this through game cards for early math. We've got some funding from UBS, the bank, and some other big corporations to help us fund the program, but also do some scientific studies to show that the method we're using really gives a head start to these kids for the rest of their lives, and empowers the parents to do the same thing with the following kids they have. We keep on funding that through Arcanys and some other donors. Our employees are funding it also through working out. I'll link this to Arcanys CrossFit in a second.

The third brand of Arcanys, if you want, is Arcanys Ventures where we help entrepreneurs getting ahead with their startups by investing work for equity. So we invest the time of our developers and, of course, our experience and our network into these companies. When they're raising funds, we participate in the raise and try to help them release the product faster, or better product, or new features for their users, increase their valuation, get them to the next round, and of course trying to do these certain percentages cost even in terms of not giving so much equity out for the founders. To date, with Arcanys Ventures, we've done 20 investments — with the first investment, from $100 to USD $400,000 worth of value. Then we could have follow-on rounds. The most investment we've done in one company is around $3 million worth of work. We're aiming at investing in maybe four new companies every year at the moment.

The last one, which we just recently launched in June this year really, is our tennis CrossFit. This is really linked to us trying to improve the company culture, but it's also linked to the passion that Alan and I have for CrossFit and health in general — health, fitness, good life balance as well. We're very big on that. We thought that adding this for our employees would also be not just being a healthier change of mindset. But also, because of COVID, having a new place where people can come and hang out without having for us to mandate the return to the office, which a lot of companies are doing. So it's kind of like a bit of a hybrid thing. It's incredible. Through this, we also have incentives for people to work out. Every time they work out, they get a small financial incentive. It can be done on their working hours. We also do that. We give them half an hour, three times a week, to do this on their working hours. Then also, every time they work out, there is a financial pledge that's made to the foundation. I think we've raised $50,000 in the last 18 months for the foundation through people working out, which equates to, I think, 12,500 classes or something like that or coaching sessions for kids and their parents. That's kind of it for Arcanys.

On the side, I think when we chatted earlier, it kind of happened. So I got dragged into these ventures. Coinup, I started it I think seven years ago with an idea to, also in games, try to help people gain coins and things like that. It ended up not being that, but the name stayed. We were just focused on helping software companies that produce Chrome extensions to monetize their users. I've done this with one high school friend as well when they asked me to help him out with that. Because of people we have at Arcanys, it was easy for me to come in and help for technology, and also finance and legal. That's the side I have for that company. And Sorento, which I just started a couple of years ago, happened. So it's the partners of my partners from Coinup who asked me to help them out as well. I said yes, and here we are.

Erik: That's funny. So there's a certain type of person who says, "I got dragged into these companies. I've been running them for the past seven years. It just kind of happened."

Frederic: It did. It really did. But it's super nice. Because at the end of the day, we're doing things with people we appreciate. So it never really — I mean, sometimes, of course, that's still work. And it is. But when you work with people with whom you share values, you appreciate how intelligent they are and how good people they are, then it it just makes everything easy.

Erik: Yeah, exactly. Right. You have so many hours in the day. If you enjoy doing it, it doesn't matter. You call it work, or you call it play. But it's just spending your life, right?

Frederic: That's right. Yeah.

Erik: Well, let's get into this topic of outsourcing 2.0. I mean, outsourcing is an industry that's been around for a long time, right? It's kind of evolved. I know you have a particular approach to it. How do you approach this differently than maybe a traditional company might have? What's your philosophy?

Frederic: We're extremely particular in what kind of setup we work. For us, it's like extremely human-centric. We work with companies who share our values around how you treat people, and how you motivate people, and how you make them better people themselves by giving them the opportunity to do meaningful work, to keep on learning and to feel like they're part of something that's really meaningful to them, as well as us. That's why we're very, very particular with the people who we work with. The rationale behind it was, first, whenever we add a client to our company's portfolio, it means we're strengthening our company. We're not adding problems. We're adding people whom we really want to work with. Just like I did with my friends, you share the same values. And with that company, we know we share their goals and that the people that they are going to work with from our team can understand their goals and value the same things. So I think it just starts at the value.

Then our clients, they give us their trust. Because some of them, if they make the wrong choice of a provider, they can go bust. It's such an important choice they're making. That's why we're also very careful on who we work with. Because when we say yes, we can help you, it means we really can do that. We won't let you down. So we do have a very thorough due diligence on who we onboard, a very in-depth technical analysis of where the client is trying to understand how their teams are working. When we feel confidence, we can really make a difference, then we start working with them.

Once we start working with them, what they really value from us, I believe, is to find the right people for them. Because most companies that come to us is because they're struggling finding the right people for them. Because it takes a long time. For example, if you're in Australia, in Europe, it could take up to six months to fill a role. It's also sometimes a lot costlier than working with us. But that's really not the main reason. The third part is, the retention rate is pretty low in Western countries, because people just jump from one job to another to get a raise after a couple of years. So the attrition rate is — I don't know. I think the last that I saw in Australia was like around 20% a year, which is really, really hard. Because older seniors in these companies keep on training new people. They train them. One or two years after, or five if you would get 20%, then they're gone. And so our job is really to create an amazing culture at Arcanys for employees where they feel like they don't want to leave because they got, of course, a good salary. Because that matters at the end of the day. But it's not just that. It's like, everyone cares about the people. We care about the people. We want our clients to care about them. Hence, the matching values.

Also, we keep on improving the company culture and the perks. For example, the Arcanys CrossFit thing was for us to give another avenue for people to keep growing a side of their work. What we've seen is, I think when we started talking about it, 5, 6, 7 years ago talking about health and stuff like that, we maybe had less than 20% of the company that was working out. I think now, through all the initiatives we've taken, we've got around 65% of the company that's logging workouts. So we track that. We have an app. We send them smartwatches, and then we encourage them to workout. We also have dieticians on the payroll that are helping people with their struggles around food. Because that's a common problem that everyone's facing around the world, and so on. So we keep on adding stuff where people feel like we help them grow, whatever path they choose. So there's no obligation in any of that.

Erik: So what is the average duration of a relationship with either startups, your startup clients, and then your multinational clients? How many months? How many years does that tend to be?

Frederic: It's kind of forever, unless the company goes bust or has financial issues. Or it happens very rarely. But in the first couple of months of the collaboration, we'd see very quickly if it's going to work or not. That's when we end the relationship — when we see it's not going to work out. Once the two- or three-months’ mark has passed. And even that is rare. But once the two or three months has passed, it's kind of forever. Because our success only is guaranteed if our client has succeeded. The goal is, when we onboard a client, they succeed so they can grow their team with us. So if we do a good job and the companies succeed, which is most of our clients, it just keeps on giving. They keep on adding people with us. And so it's very long term. The short answer to the question is, it's very long term. It never really ends.

Erik: I think it's quite interesting that you're designing a company that can provide greater stability of a team than your clients can provide internally, given the market conditions and maybe, also, to some extent, company cultures and so forth. Because I think most companies don't think through these topics as carefully as you have. So that's a very interesting proposition to the clients to say yes.

Frederic: Well, yeah, you're right. Our clients, their focus is the product or the service. It's like, they focus on that. Of course, most of them think about the company culture. But our company, the company culture is the product. That's our product. Of course, there's the skills of the people and how we select them. So we have high-level people who are doing that. But our product is the people. It's keeping the culture or building that culture where the clients then can look at us and say, "Okay. We trust you for this one." Then you are able to create stability for us. I think it's really well said, what you said. It's stability.

Erik: So let's think through this if we were to provide advice to two types of companies. One would be a startup where their culture is, it's a group of six people. As they grow, then they have to form that into a larger organization that somehow maintains. They have some choice. It's built around personalities initially, but they have choice in terms of crafting that. That would be situation one. Situation two is your larger clients like GE or L'Oréal. These are huge organizations that have already established cultures. They might want to evolve that culture, at least in particular teams. But it's much more like steering a tanker. So the change you can make is—

So if you were to advise them on how they can build more effective cultures that retain people, that motivate people — especially, if we talk about corporate venture building, for example, here in China, a lot of the frontline people of our clients are dissatisfied because they feel like they're not empowered. Every time they do something, they have to report back to headquarters. They have to get the next round of instructions. They lack that ownership. So there's things like this that larger corporates maybe don't think about. They don't think about, am I empowering and encouraging these people that are three levels below me? These guys are doing their work. Okay. Then somebody quit, and we don't know why they quit. Now let's just replace them. So if you were to give advice to these two groups, what would that be? Maybe we take the startups first. I think that might be a little bit of the easier one, actually. So how do you help to guide them when you're working with an earlier stage company?

Frederic: I think, rarely, in a small startup, the purpose is missing. I think when you're a startup, you're on a mission to do something. So it's pretty easy to rally people around that idea, which is I think a very important step for younger people. It's very important. I think the other part after that and that sometimes is missing in a startup, yes and no, is the growth opportunities, like having someone to help you grow. So it's like for mentorship of leaders or senior devs, for example, in our case, for tech teams. Sometimes, in some startups, the seniors don't have much time to take care of the more junior people. Maybe sometimes they're a bit left alone. That may be a bit difficult for them. They'd just end up feeling like no one really cares about them, or they can't grow as much and would maybe leave.

The other aspect is the budget they have in terms of the salary. Younger startups usually have a lot less money. When you're younger and you want to, I guess, get a secured job — because some really want that and are not entrepreneurs — they would leave for a better pay at bigger companies. In Australia, a lot of the startups, they lose people to banks. They lose people to Canva, or Atlassian, or things like that. But if you manage to, I guess, create a culture where people, as you said, feel empowered, giving them the options to learn, to make decisions on their own and feel like they're contributing, I think this is already helping a lot. But at the end of the day, it also depends on what the people want. So it's kind of making the right choice at the start. It's also selecting people who are more interested in working with a smaller, messier company. Or if they want something that's really a nine-to-five job and a lot of security, it may not be for them. So I guess the first step is to select the people with the same values and the same mindset. It's hard because people can say yes to things without being completely truthful as well.

What we do at Arcanys really is, because 40% of I think our employees, at least in the past years, were coming through referrals, we already had a bit of a filtering. Then we do a lot of peer vetting. So there's a lot of interviews going with their peers, and people assess also their likelihood to match in the culture. So that's the first step. It's really people to the door. Then for startups who don't have as much money as the bigger companies, I think, what we tried to do is looking for the quick wins that have a huge impact on the morale, on the culture, that don't necessarily cost a lot of money. So it requires a bit of thinking, but there's plenty of things to do that don't cost so much money and actually have a huge impact on the feeling of belonging.

Erik: Give me two or three ideas. What are some quick wins that you've seen had a big impact on some of your clients?

Frederic: The Philippines is always a bit different than the West. For example, for health care. For us, for example, it's always a big question. We're paying health care for employees. Some companies would give health care only after six months when people are regularized, and then they have to wait for another few months to have one of their dependents or the wife or whatever to be covered. For us, we're like, it's a little bit of money. But when you work with us, from day one, everybody's covered in your family. It's you, plus everyone else. So you don't have to think about that. It's only small incentives with the workout. So the gym memberships is one thing. But behind that, we also had education around that. We had the Wednesday class as we called it. It's one hour per week where I would talk about fitness, or Alan would talk about some stuff and then try to help people through their journeys and have open doors. That's really caring about the people and showing that we're interested in their growth. It doesn't cost any money. It's maybe an hour taken out of work, but it's very simple to also transmit how much you care.

What else did we do? Depending on how it is, we give a half an hour three times a week for people to actually take that off work and then do an activity that benefits them. So health-wise, we have bonding, like small budgets for team outings and things like that where people choose an activity. They do it together. They have to spend it every month. Otherwise, it doesn't add up every month. If you don't use it, then it's lost. Then people would meet up and would hang out and would do things. It could be anything, or groups who like to go back. Then we help them with that part. Like if you want to go on a ride or whatever, or if you want to participate to a Spartan Race, we used to fund tickets and things like that. So it's not that much at the end of the day. Then I think it just helps to foster the sense of belonging and having fun with your friends. It may not work in every setup. Each country has very different ways to approach that. But in the Philippines, it's really the sense of community.

Erik: But it probably looks a bit different in every culture, in every setup. But this general principle of, if your employees feel like you care about them, they're less likely to feel frustrated. And also, if they have positive relationships, if they have friends, it's like, okay, you go to a place every day, and your friends are there. You like the people there.

Frederic: That's it.

Erik: Yeah, and if you go there and you have tension and you feel a personal strife with people, well, then, of course, you're going to start thinking about moving to another environment. So startups, I feel like, again, it's a little bit easier. You have a smaller team. The founder is may be in the same office as everybody else. It's easier for one person to come up with an idea and say, 'Hey, this is a good idea. Let's do it." Corporates, it's harder. It's like, okay, I've got to apply for budget and all of these things. What do you think corporates can do to try to also improve retention, improve team dynamics?

Frederic: I think what I've experienced working for big corporates — that was like 15, 20 years ago. But I think one feeling that a lot of people have is like, "Oh, I'm not working for purpose. I'm working for the company to make money or something like that." That's how it's been seen for a long time.

We are not in that position yet to be too big to not know people. But one thing that as we have grown, because now we have around, all in all, maybe 360 people. It's not that big. But still, if you lose a lot of that connection, and there's people. I don't even know their names. But we survey people a lot. When we want to feel the pulse and when we want to understand what's going on, we send surveys. I don't know. Maybe some months, we have two or three surveys. It's not a democracy, but it's running a company where you constantly ask for the pulse and then see what people feel and try to fix the gaps, where you see them. Then it's our way to really have people talk to us. Because they trust also that we're going to do the right thing if we have the results of a poll. So it's like listening. It's listening at a bigger scale. Surveying is listening to people by asking them questions and acting on that whenever we can. So that's like also one way.

After that, again, maybe creating some micro communities around departments. But that's, I mean, I guess a lot of companies do that, of creating some micro positive cultures within departments or within business units. We see this with our clients. There is a very strong Arcanys culture, if you want. But every team from every client has a bit of a subculture where they're very proud of belonging to that subculture. They love their client, and so they do things together as well. I don't know if it's really answered the question.

Erik: Well, I think this idea of collecting regular feedback and doing it in an anonymous way where somebody feels comfortable. Because often, these are known problems, right? What are the problems? I can tell you what the three problems are. Okay. But the VP doesn't know about this. Everybody in the office here knows about it, but the VP doesn't know about it. How do we make sure that that person is getting it? I think one of the reasons they don't get it is that a lot of corporate people very carefully protect the relationship. So it's like, okay, if we're going to talk to the VP, the director is going to talk to them. But it's not going to be the manager or the analyst. And so, okay, the manager has the problem. But the problem might be the director. The director is not going to bring that to—

There is a concept that, okay, I don't know how much we should be looking to Elon Musk for team-building ideas. But one of the concepts, there's a recent biography published about him. One of the concepts that the author of that book was explaining was this concept of gap meetings, where you consciously have one-on-one meetings with people that are two or three layers below the people that would be typically reporting to you. I think that it's a very simple thing. You say, well, okay. I usually talk to 10 people that are one layer below, maybe two layers below. Just talk to the people that are layer below that, and have a lunch with them. Have a one-on-one. Touch base with them, and you'll gain a lot of insight into what's really happening in operations.

Frederic: Right. As we grew, we started cutting layers. Not every company can do this, but we try to keep the structure as flat as possible. Because in the past, we saw that some managers, as you said, were wanting to keep the relationship and creating some small fiefdoms. And so we got to the point where, at some point, we had a manager that was really disliked by everyone. Then people were starting to wear black T-shirts on Fridays. We didn't notice, until one day, 10 or 15 guys just gave us their resignation. We're like, what the hell is going on? And then we realized that it was a problem with that manager. So we called the manager, and we had to fire him right away after talking to employees. We did a lot of digging in crisis mode. Then we were like, okay, we can't let this happen anymore.

So as we grew, we restructured how the teams were functioning so that people know that when there is a problem, they can come to me, or they can go to Alan. We won't act necessarily on the spot, but we will do our investigation as fairly as possible. And that no one in the company has a say on someone's stay in the company. Like it can decide to fire someone just because they're the boss. This cannot happen. So we're creating also this open-door policy but also a safe space where people, they're not going to be judged by their boss, and the boss doesn't like them for whatever abstract reason. This cannot happen at Arcanys. That's something we really want to emphasize. People are safe. Unless, of course, if you make mistakes, or you don't follow the rules, or you're dishonest, we will find out obviously because people talk. We want people to be free to talk. But this helped us remove politics in the company by a level that we thought was incredible. So we're sticking to that.

Erik: Yeah, absolutely. If you can figure out a way to run an organization with minimum amount of politics, this is a huge win for the organization, whether it's small or large. Fred, I think it's a fascinating conversation around the culture that you've built. If folks wanted to reach out to you — I guess, this could either be reached out to you about the services that you provide or about the culture that you're building. I think also that could actually be a very interesting conversation — what's the best way for folks to get in touch with you?

Frederic: Yeah, sure. LinkedIn is the best. My name is Frederic Joye. If they type Arcanys, they will find me. They will find me on LinkedIn. I really love talking about culture. I think you've understood that. It's really a topic that we're so passionate about, yeah.

Erik: Yeah, cool. Well, thanks. I actually picked up some hints today that I should probably try to put into my business. Thanks a lot, Fred.

Frederic: Thank you, Erik. It's been really nice. Thanks.