Founding to Scaling: A CEO Should Play a Role in HR

As companies scale, CEOs need to scale with them. It’s is no longer enough to be the charismatic, visionary member of the team who serves as the public face of the company to the market and investors. The time comes when CEOs need to demonstrate their capacity for what I call “People Ops” — everything from how to hire, compensate and supervise employees to dealing with the inevitable policy exceptions demanded by human beings to setting the right company culture. Over the years, however, I’ve noticed that many CEOs are slow to recognize that they need to change and adjust as their companies grow.

I was fortunate to help teach a course in HR for growth companies at the Stanford Graduate School of Business with my former co-founder, Matt Glickman. Matt and I grew several companies together. We’ve also invested and advised many others. This post grew out of Matt’s work in forming the curriculum for that class and reflects the common themes we saw that defined each part of the HR journey.

HR Themes Across Stages

  1. HR strategy must fit the business strategy
  2. Hiring, organization design, compensation and culture must all align and be internally consistent
  3. Leadership matters — set the culture and lead by example; faking it doesn’t work
  4. People are an asset, but they’re people too
  5. Managing people becomes a larger part of the job — it can be consuming and maddening, but it’s worth it (see point #1…people advantage leads to business advantage)

There are many stages of growth where these themes apply. I will write about the first 5 stages, moving from inception to hundreds of employees. Here I’ll start with stage 1:

< 10 employees, where the CEO = Doer

When a startup employs fewer than 10 people, HR strategy is all about hiring the initial team. As CEO, expect to take a very hands-on approach to the job and make every hiring decision. There’s not much time to ponder big thoughts while the organization is still in survival mode. The business strategy is relatively straight forward (after the hard part of market selection and problem definition); building product and possibly getting early customers. So, the CEO’s HR job is to recruit the team whose skills are fit for this task. Full stop. Org design is easy — it’s flat. Culture is also generally defined by the business situation: take risks, be accountable, get s**t done fast, and do it at low cash burn. The leadership task is to supervise doers, and be one yourself.

No surprise, there’s not much managing going on, except for project management which is done with intensity. If there is such a thing as Human Resources, it’s minimal or outsourced to a PEO that will handle regs, paperwork and payroll. Informality is the rule, rather than the exception. The team takes its cue from the founder’s behavior. The example to follow is being productive, fast, and making work your top priority in life. Staff communication is constant, across the table which serves as corporate HQ, or via Slack. At this stage in the company’s evolution, everyone is on straight salary — likely below market rates. Raises, if they exist, come with customer or financing milestones, not with the calendar. The big lure is the equity that employees receive upon joining at a very early stage (and the cred from being in the initial 10). Of course, those stock allocations may turn out to be worth their weight in gold — or worthless. Time will tell. But equity isn’t the only allure, as the right team is there for the camaraderie, the technical challenge, and, for certain personalities, it’s a genuine thrill to work this hard and with such purity.

At this stage, HR is not that hard — provided you have brought on the right people and have a trusting, productive partnership with your founders. The business strategy is to build product for the chosen entry market, and, don’t run out of money. People leadership is in persuading people to join the team that will build initial product, and being an example of productivity yourself. Comp strategy is to conserve cash by asking hires to take low salaries for higher equity. Org design is based on the prioritization in the product plan — who can take what stories? This is a straight forward and fun phase. Don’t overcomplicate it.

Stay tuned for part II in the series, 10–25 employees.