The CEO’s Role in HR from Founding to Scaling: 10–25 employees: CEO = Player/Coach
Earlier in this series, I discussed the CEO’s role in HR when there are fewer than 10 employees. The CEO is the doer — recruiting the right team to build product and sign early customers. Once the company reaches the 10 to 25 employee stage, an organizational structure begins to form and the CEO role in HR begins to shift. Still in the early startup phase, the business objective of shipping product and landing initial customers hasn’t changed. But functions have been created, and team leads or managers exist, so the CEO can afford to hand off some of the workload — even while remaining deeply involved in core product and customer work.
The organization is a cluster of teams, with some individual roles filling entire departments (e.g. the finance person). There’s the genesis of a formal communications structure, since for the first time, not everyone is in every meeting. Knowledge gaps form easily without work to stave them off. This structure includes a leadership team meeting, weekly all-hands sessions for the staff, email and Slack standards, a first pass at OKRs and post-mortems.
Build an exec team.
A key decision for you will be when to form a leadership or exec team and who should be on it. It’s a good idea to get this going at this stage as the days when everyone in the company interacts with you daily have likely passed. You’ll need to ensure your teams are aligned and priorities and plans are communicated and well understood. Your job will be to create the team, ensure your agenda is efficient and clear, and that the leaders are communicating downward and outward so balls don’t fly between racquets. You should ensure project ownership, goals and deadlines are committed to (where possible, you should be more of an inspector than direct owner now), and you should do skip-level meetings to test signal accuracy from team leaders to rank-and-file staff. A lot can get lost in just one level in an organization. Once you form your leadership team, be aware some of the rest of the staff may feel excluded. Just months before, everything happened in all-hands meetings, and now there’s a closed-door private weekly meeting. It can seem suspicious and counter-cultural to some. But people get used to it, provided you continue to report out key decisions, remain visible and available yourself, and keep having all-hands meetings regularly.
As a manager at this stage, there’s more “coach” in the player-coach management role, and leadership precedents are being set.
This is an important moment for setting an example. You should consider modeling giving and receiving real feedback, doing post-mortems, setting rigorous standards for project updates, and not avoiding hard conversations when they’re needed. You’ll still know everyone and will be working with everyone, so hopefully there’s a relationship foundation to make this easier.
Watch the culture as the org structure gets layered.
As employees take on specialized roles and teams form, they may find themselves reporting to real managers for the first time, albeit managers who still don’t have a lot of experience. While the corporate culture remains a work-in-progress, you start to see the first seeds coming to fruition with a few core values taking root. The CEO should be sure these are not accidentally formed by the personalities of a few vocal employees, but reflect his or her vision for the culture. There’s no time or great need for a lengthy values definition process, but the CEO should set the tone in daily and weekly behavior — for example, exhibiting candor in meetings, holding teammates accountable for work output and quality, and raising ethical questions and landing on the right side of them.
Adjust recruiting process and compensation scales.
While the CEO is still involved in interviewing each hire, sourcing will now come from team leaders, in house recruiters, or search firms. On the pay front, the company is now in a position to offer different compensation scales, may offer bonuses and raises, and frankly, has to do it to hire and retain people. The benefits package starts to improve, and recently hired employees really do care about whether their primary care doctor is in the network.
Variable compensation will start to turn into a real issue, as along with function formation, come different models for pay. For example, if you have AEs, you’ll add a commission plan, which means you’ll have a program of comp that’s heavily tilted toward shorter-term, measurable results. You’ll have managers, some of whom may want bonuses since they got them in their prior job. You may be able to hold off until the next phase, but the pressure for a more complex and diverse comp structure will grow. Be ready and have good reasons for delaying the inevitable. A strong approach is to focus on the equity early employees are getting vs. cash. Remind people that cash comp gets adjusted over time, but a new hire’s initial stock grant is usually their largest, and early hires generally get the best grants.
Be the communicator in chief.
The financial challenges have now become real, as the fixed, salary-heavy expenses in your income statement are larger, without certainty that the revenue forecast will be hit. The people challenges are larger too. New hires are often being paid more than the early ones, work hours are variable and can lead to unspoken resentment, and the CEO is spending more time on people issues. This is the phase where the CEO needs to take a more disparate set of human beings, with their variable motivations and emotions, and help them form as a team. This is best done by defining what success looks like (milestones and victories), setting clear objectives, communicating the “why” behind decisions, creating a healthy work environment, recognizing achievements (“catching people doing something right”), and living the company’s values. And of course, you need to spend lots of time with people individually, so they know you and your good intentions.
You now have the foundation of early-stage People Ops.
Don’t worry about making it perfect, or getting too dogmatic here. You’re likely in an expense valley now and you need to be pragmatic above all else. Advancing your product, securing and pleasing initial customers, forming your go-to-market approach, and ensuring you’ve hired and onboarded well are essential. Still, sowing the seeds of a People Ops program should begin now, and it will be more important in the coming stages.
Stay tuned for part III in the series, 20–50 employees.
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