Don’t Forget to Scale HR!
Late night and weekend phone calls from founders are almost always HR issues.
A top performer made a mid-year comp request, instead of being the ‘rockstar’ we thought they were the new exec we hired is actually a culture mismatch, developers are now being hired at 2x the salary of developers in the early days that do the same job, we are outgrowing the capabilities of early execs, we are struggling to hire key roles, etc…
These conversations are difficult at every company, but they are infinitely more difficult at companies that forget to scale HR.
It’s not a coincidence that the top-performing companies in our portfolio are very intentional about scaling their HR function and they started in the very early days.
It’s also not a coincidence that their investment in the function followed this similar pattern:
Internal Recruiters
What do they do?
In addition to the obvious role of recruiting and managing the interview process, they also attend local entrepreneurial events serving as an evangelist of the business. You’ll quickly run out of time to attend dev meetups, weekend hackathon contests, etc. They should do this for you as well.
How many?
Two to three internal recruiters by $10m ARR. Sounds like a lot, but it pays to specalize (sales, technical, operations) in terms of candidate quality, and time to hire.
When?
Hire the first before you’re 20 employees, layer on 1 for each 25-30 employees.
HR Ops
What do they do?
Implement a review cadence to avoid mid-year off-the-rail conversations. Set salary ranges. Set equity ranges. Deal with disgruntled folks.
How many?
1 per 50 employees in the early days.
When?
By the time you’re 30-40 employees but this role is often the most neglected. The amount of leverage you will get out of a hire at this position is shocking.
Head of HR (or people, or talent, or whatever you want to call them)
What do they do?
Work with the founder and leadership team on company mission/vision/values. Manage the overall function. Succession planning (yes, you need this even in a startup) throughout the organization. If you make the right hire at this position they will help you identify which leadership team members are capable of scaling to the next level, which might not be, etc.
How many?
One
When? As early as 30 people. As late as 75-80 people.
Each startup is so unique that I’d never suggest that this works for everyone, but I’ve seen enough of it to know that it’s pretty close, and you can use these as good guidelines.
At startups so much thought goes into the repeatability of customer acquisition, pricing, churn, etc. but so little goes into the basic blocking and tackling of building a human capital business—which is what software companies really are.
So as you think about scaling your startup, don’t forget to scale HR!