One of the biggest questions that early-stage startup founders and first-time entrepreneurs struggle with is when to hire someone to lead their People and Culture / Human Resources function.
As a bootstrapped team, where everyone is playing multiple roles and things are still up in the air, having too much system and structure (seen as bureaucratic and inflexible) seem counterintuitive to the process of ‘going with the flow’.
In small team sizes, adding an additional layer to manage this is an additional expense that can’t always be justified.
And I agree. Small teams and early stage startups don’t really need an HR team.
BUT — what you do need is a framework to manage your people and their ambitions. Here’s how you can think about this as an early-stage founder.
What’s so different about startup culture?
It all comes down to the idea and the execution – companies that have been around for a really long time have had the time to try things out, figure out what works and what doesn’t, and get things right without the pressure of time, performance and results.
Over the past ten years, the world hasn’t been so forgiving. More people are taking risks and coming up with great ideas, but they’re under more pressure to deliver faster, better, and do more with less (time, resources, mistakes, etc). So when someone decides to launch a new company to build a new product or deliver a new service, all they’re thinking about is getting it done – not really worrying about how they’re going to do it. But this how is extremely important if you’re looking to build a great business, and not just settle for a great product.
Here’s what you’d normally hear from startup founders or entrepreneurs when you ask them about their culture or about whether they’ve thought about the HR / People aspect of their company:
• “First, let me build my product, all of that people stuff can come later …”
• “We’re only five people, we don’t need formal HR and stuff …”
• “HR is a waste of time!”
• “I want to focus on CULTURE and making our workplace a cool workplace, not have a HR function!”
• “HR just doesn’t get it!”
• “HR is busy doing my hiring right now, we need people fast!”
• “We still have so much attrition in spite of HR – what’s the point?”
And probably the most common: “What’s the big deal? I can do HR – it’s not that difficult!”
On one hand, none of the above sentiments are wrong – they all depict a person’s experience and interpretation of what “culture” and “people” mean to them. On the other hand, they also highlight a dangerous trend in companies not taking the time to build their foundations before they go out and build their products – running pretty much right out of the delivery room (before learning to walk). Fixing something after it has broken is always more expensive.
If you have a fantastic idea for a product or service, the first and most important thing you can do is take a step back and figure out how you’re going to build it; and who is going to go on that journey with you.
The bigger the dream, the more important the team – we’ve rarely heard of celebrated entrepreneurs who have launched big ideas solo. There’s always a team behind the wins, and they have to believe in your vision and where you’re going in order to be ready to support you 100%, weather the storm and do what’s needed to break the rules and make the moves.
Okay, so you get why it’s important to focus on people and culture as you’re starting to build something great for the world – here’s a few tips on how you can go about doing this on your own!
Start as pirates, become a navy
This idea comes from Dara Khusrowshahi, CEO of Uber, who shares that at the start of a startup’s journey, you need people on board people to take risks, break rules, and be daring like pirates. You need to go out and conquer unknown lands, and have an “all hands on deck” mindset. However, with growth and the need to scale, there has to be some system and method to the madness, to streamline the chaos. And that’s when you organize youselves into a navy. This is the place where many early-stage startups fail because they don’t accept the need to systemize and introduce processes.
It may seem boring and it may seem like you’re losing the excitement of going where the wind takes you, but as you grow bigger and have larger goals, there has to be some sort of method to the madness. If you’re aware from the very start that you’ll need to guide your team and culture to shift from sailing the open seas to falling in line at some point and working within systems driven by a goal, it’ll help you figure out the best people to hire who can help you on this journey. And help you structure your teams and chalk out your org guidelines around the kind of culture you’d like to build.
Move fast and break things
When you’re starting up, you don’t have time to be perfect. There’s a different type of culture built around trying and testing and iterating, and a different culture built around speed, execution, and learning. If you’re ready to constantly learn and fix, then nothing is truly seen as a “mistake” – your culture allows you to build every moment as a learning opportunity. But your core founding team should be aligned around this area. And again, this can only take you from point A to point B, when you’ve had the chance to prove your concept. Once you’ve done that, you’ll need to shift from a move-fast-and-break-things mode to build-and-grow-and-try-not-to-break-too-much mode.
Become great at storytelling
If we’re being completely honest, you know people aren’t going to join you because of your fantastic salary or your great benefits package. The lure and attraction of working with startups, entrepreneurs, and young founders lies in the break from the norm of corporate culture.
What people look for the most when they are trying to escape that culture is purpose – a reason to work, a reason to follow, a reason to put in the time, effort and sweat. The beauty of startups also is that to a large extent, depending on the founder’s culture and people philosophy, they can attract a truly diverse mix of individuals — from experienced C-suite executives who come with decades of experience, to fresh-out-of-the-gate newbies looking for their first fun adventure, to mid-career staff who may have stagnated elsewhere and are looking for a change. What motivates all these different personalities and demographics also won’t be the same – but the binding force will be your culture story, your purpose, and your vision for your product or service. These will be the people who will carry on the legacy of your purpose and your culture when you grow bigger – so make sure you convince them right off the bat so that they’re ready to do what’s needed to make your dream work!
Here’s my take on what differentiates people and culture in startups v/s traditional established companies, and what entrepreneurs and new founders should keep in mind as they plan to grow their teams and businesses:
• Startups may be fine without traditional HR yet – but still need a vision
• Culture during the initial days of a startup will be very different from culture later on down the road – and that’s okay!
• People are expected to wear multiple hats – role clarity, org charts, structure and systems come later. Find people who are fine with the ambiguity to start with and give them a long rope!
• Get them on board with your vision, not your compensation and benefits!
Okay — now what?
Congratulations – as the leader, you understand and get the importance of why you should focus on People and Culture!
Here’s a quick guide on what exactly you should handle as the company’s founder and leader, and what you shouldn’t get into. Your time, effort and investment is a precious commodity in the startup phase – where you choose to invest it in should be directly proportional to where you will get the greatest return!
There’s a new term being bandied around recently when referring to all issues related to People – it’s called People Operations, and sometimes confuses a lot of folks who try to figure out what it means.
Here’s a great article that comprehensively explains what this term has come to mean in the context of overall employee experience – the world (and the workplace!) has started to realise that we are not just “resources” to be managed (in reference to the earlier term of Human Resources). Employees today want to learn, grow, be challenged and be able to bring their whole selves to work. This requires an integrated approach to meeting an individual’s needs – hence the term People Operations, which normally encompasses the entire lifecycle of services an employee needs from start to finish – HR for sure, but also administration, IT, and employee engagement.
As a founder, this should be the ultimate goal of your company – to have a way to offer and manage an integrated employee experience, not just run HR. Because ultimately, it’s the entire experience that an employee has that represents the company culture. However, given time and resource crunches, your immediate focus should start on identifying what aspects you can outsource and what you should in-house – control directly and be involved in the strategy and execution. This will help you structure the shape and form of what your employee experience will end up being down the road, when you can move to having a People Operations team!
Outsource the admin, in-house the people
Take advantage of companies that have sprung up over the last five years to make your daily operational activities easier – such as payroll, reimbursements, compliance, leave and attendance tracking. Keep close to your heart the activities that have an impact on your company’s vision, mission and culture – that especially means your talent.
As an early-stage founder, be 100% involved in recruitment, performance and disciplinary decisions. These send a clear message on what kind of people and behaviour are welcome, celebrated or not tolerated at your company!
As a founder, focus on People Development and outsource People Operations to start with. This will have the most immediate and lasting impact on your culture!
Culture can always be broken down into easily observable actions which guide how people behave and function in a workplace – a founder’s primary role is to direct and guide the direction of these activities.
- Spending your time too much on operational administrative work doesn’t help you build your team. Spending hours identifying the kind of questions you want to ask in an interview to understand if someone is “agile”, “works with integrity”, “owns” their work will end up paying off in the long run.
- In the same way, identify the kind of behaviours and also lifestyle you want to REWARD and RECOGNIZE – that will let people know what kind of culture this company expects. Will you sponsor late night pizza and beer for those often seen working late hours? Is that a sign of productivity and successful work ethic to you? Or do you value those who know how to balance their priorities and recharge and come back with better ideas? Will you consider unlimited vacation days or no leave tracking? There is no right or wrong answer – but the choices you make in these and other similar situations will set up and embed the skeleton of your culture in a way that posters and values never can.
- What does (or will) growth look like at your company? Do titles matter? Do promotions matter more than compensation? Will you evaluate performance strictly based on achieving targets or on other factors that contribute to building teams and driving innovation as well?
To summarise: you should be looking at FOUR key areas as you manage your growing team and set broad guidelines for how would will address issues that come up here.
- Performance Management – be transparent about company goals / targets and align employees to this
- Rewards and Recognition – find ways to recognize and celebrate achievements that are non-monetary
- Learning and Development – allow employees to learn on the job, make everything a “learning opportunity”
- Career Growth / Purpose – communicate your company’s purpose and allow employees to connect, don’t do the reverse
When do you need to hire a dedicated resource to manage these matters?
- When you are about to hit ~ 25-30 employees
- When you as a founder don’t have time to interview with the pace of recruitment requirements – you can outsource the recruiting but never the interviews early on
- When somebody from the core team moves on, carrying forward the initial values and culture you worked in setting up with them
- When you are about to expand the team significantly (new product launch, merger / acquisition)
- When you expect a multiple of growth soon – eg 1 to 5 to 50 to 100 employees
- When people start asking questions that you can’t answer!
Who should you hire as your People Person?
- HR systems and processes can be learnt – look for someone with passion and understanding of how to motivate and develop people
- Look for someone who challenges you – for the sake of your business, you may make impulsive decisions. They should push back
- Look for someone who isn’t intimidated by you – they should be able to give you feedback from the team about yourself as well
- Hire someone who is good in a crisis – early-stage companies will face problems, challenges and need a quick response. Done is often better than perfect, in this case.
- Supplement this with a strong advisor / external consultant / board member who has core compliance and policies knowledge
Look inside the org
This may often be overlooked / ignored, but sometimes the best person to handle your People & Culture may very well be another senior / core team member, and not an external hire! Here’s why:
- They were part of your founding culture – they get what you’re trying to do
- They understand the business – and will align people practices to have impact
- They can now juggle an additional role and grow their scope of work
- They align with your vision for the company
- They have credibility and buy-in from all stakeholders
In conclusion — you don’t need an HR team to do right by your people. Don’t make this a crutch or an excuse to not put in the time to figure out what your team needs to do their job well and grow with your business. It’s difficult to let go of some things as you grow but don’t hold the team or the company back by being unwilling to trust someone else to make the big decisions.
Focus on People Development, not People Operations. In a small team, HR is part of everyone’s role. It is – and should be – a key factor to consider when giving someone more responsibility and growth. Once you own this mindset, the lack of an HR team or an HR individual won’t bother you as much early on. Hire someone when things are going to get bigger, not when they already are, and empower them to take decisions on your behalf in the best interest of the company.