If I had a dime for every fast-growth startup with a shiny new funding round that promptly screwed up its HR, I would be a very wealthy man, indeed.
Beneath the hype of HR, marketing campaigns, and eye-popping valuations quite often lies a company riddled with a leaky talent pipeline, poor onboarding and employee experience, a host of compliance issues, little regard for diversity, equity or inclusion, plus expensive and shoddy benefits, haphazard policies and procedures, and underwhelming compensation structures—all despite consistent 80-hour weeks for staff.
Yet possibly worse than the dysfunction itself is the DIY approach and lack of sophistication from otherwise brilliant people about their people/culture/HR/talent function.
Frankly speaking, HR is not the second or even tenth priority for most founders and CEOs of fast-growth companies. Seen as somewhere between a four-letter word and blabber-mouthed paper-pushing (thanks to “The Office”), HR is usually the last executive role on board and the first one off when a crisis hits. And when it comes to running HR, the scales are often skewed toward tech, rather than humans. It’s as if SaaS is short for “software as a savior.”
Add to that a skeleton staff and budget (if any) and outsized expectations for magically clearing the company on a dime from toxic employees, poor retention, and deeply entrenched conflicts.
And the problem is not limited to founding teams hiring their frat brothers or hard-charging ex-financiers looking for every possible, minute edge at a high human cost. Even well-meaning, idealistic founders often stumble when it comes to building a great culture and empowering and trusting their employees. Startup culture prizes speed over mastery and bootstrapping over bloat.
The trouble is, “just ship product” and “move fast and break things” doesn’t work when “things” and “products” are people. They’ll leave if you treat them like a bug and not a critical feature.
Robust, strategic HR isn’t just some save-all provision for compliance, regulatory, and legal issues. Nor is it just about benefits and payroll and employee handbooks.
In that awkward fast-growth (teenager) stage, usually between Series A and B for VC-backed companies, the team must go from doing two or three core things well enough to get more funding to suddenly having proper management and oversight over all major departments, formalized policies and procedures, and dashboards and analytics for proper decision-making.
The trouble is, when it comes to people, early-stage companies are still mostly using their “gut” for hiring and firing, benefits and compensation, as well as giving rare and haphazard feedback to employees. That leaves little to no time or room for learning and development or for listening to employees’ needs or gauging their mental and physical health.
The result is a whiplash mix of idealism and cynicism, polish and carelessness. Little do most founders realize that company culture is a function of their deeds (and those of key team members) compounded over weeks, months, and years, rather than whatever polished corporate communication they send out periodically. Expectations for themselves and HR as agents of change must be adjusted accordingly.
So, what must founders do to get HR and culture right at this critical hinge point between startup and enterprise?
1. Acknowledge that what got the company to this stage will most certainly not get it to the next stage. Growth stage startups are just a different animal. All your ad hoc growth hacking to date doesn’t replace proper policies and procedures enforced by the professional managers you now have to hire. HR should be the first, not the last, strategic hire your company makes in the fast-growth stage.
2. Give meaningful attention (and a meaningful, devoted budget and leadership bandwidth) to DEI. If most people look and sound alike in the company, it may mean that you’re not paying enough attention to diversity, equity, or inclusion. Just as bad as the threat of lawyers hounding you for poor recruiting and promotion practices, you’re likely missing out on different ways of seeing your problems and growth plans by not hiring racially, culturally, and neuro-diverse talent.
3. Focus on mastery above speed. Up to now, speed has likely been your calling card. While you want to be careful not to scuttle speed too much through too many layers of bureaucracy and decision-making, you must focus most on mastery, beyond just speed. Get comfortable with documenting processes, developing intellectual property and thought leadership, and otherwise going deep, not just wide. HR is the first and most important front for mastery, since ignoring it will lead to many big (and avoidable) fires and distractions for leadership.
4. Before you make your CHRO or VP of HR hire, consider working with a reputable digital transformation consultant to build out your strategic HR function with a centralized, integrated, and automatable communication platform (such as Slack), robust and interactive onboarding (e.g., Trainual), employee engagement survey (CultureAmp, Qualtrics, etc.), performance management system (Lattice, CultureAmp, Peakon, etc.), learning and development, rewards and recognition, and benefits and payroll. This way, your head of HR will be empowered for success, rather than set up for failure.
5. Get executive coaching for yourself and your team. This will be the “glue” or “secret sauce” for you and your team to understand the impact of the coming change, as well as to prepare for it proactively. Employees need to understand how digital transformation will help them move forward in their career toward promotion and higher pay, as well as skill-building. Once more, what got you here won’t be enough to get you to the next stage.
6. Empower and trust your team to do their life’s best work with you. Don’t reinvent the wheel, but rather ask detailed questions about what they need to be at their best.
Fast growth is just as much science as art. It takes having the right people, systems, and incentives. Founders must pivot their thinking to succeed from here.
Yuri Kruman is the award-winning CEO of HR, Talent & Systems Consulting, a top-rated executive coach, keynote speaker, and author of “Be Your Own Commander-in-Chief”