HR Road to Scale up
The HR Roadmap for Scale-Ups show you when to focus on which part of the Employee Journey so you can be sure you have the best organisational strategy, and yes, the best organisational culture, for the right kinds of growth. It tells you by which stage you must have which elements in place, and which activities you need to be focusing on. If you have the time and the money to do more, that’s great, but at a minimum you must see to each of the three critical elements listed for each stage.
What can an HR function do to help scale-ups succeed? Since this is such a fundamental question, one could be forgiven for thinking that it must have been asked by now — and, more to the point, that some serious attempts must have been made to answer it.
The fact is, however, that there are precious few practically focused pointers out there — let alone any kind of comprehensive approach — that are designed to help scale-ups decide which HR activities they should focus on, and when, in order to maximize their potential.
Here at VIE, we’re ready to fill the gap by promoting an approach that we’re convinced can help scale-ups do just this. How can we be so confident? Because we’ve been developing and fine-tuning it for a number of years now with our clients, putting it through its paces and working out the bugs and the kinks.
VIE has also been closely involved over the years in a number of accelerator and incubator programmes, both in the Netherlands and elsewhere.
Our experiences in both of these domains have helped us pinpoint the emergence of a clear pattern, which can be summarised as follows:
As the number of employees in a scale-up grows, there are changes in which areas need focus. We’ve identified five stages, each pegged to a certain number of employees. For each stage, we’ve established which areas an organisation should put its HR focus on.
The result is what we call the HR Road to Scale Up
The Roadmap is for founders, CEOs, and leaders in organisations that either are scaling up or have the ambition to.
Now, at VIE, we also serve as investors, through VIE Tech Capital, working with a number of venture-capital funds. In that capacity we have seen, time and again, two critical success factors that make all the difference between success and failure: the effectiveness of founding teams within an organisation, and the culture that an organisation builds up and nurtures. And over the years, these insights have also found their way into the Roadmap.
The “Standard Wisdom” is rather vague
The standard wisdom is that an HR function should focus primarily on people and teams in order to ensure an organisation’s success. That is fine as far as it goes — which is another way of saying it is rather vague and woolly: What does it actually translate to at a practical level? What actually works, and what doesn’t?
The Roadmap is practically focussed, concrete, and specific. More important yet: these specifics are anchored in sound research and the aforementioned practical experience that we’ve gained from working with more than 100 businesses.
Key elements of the Roadmap
To see how the Roadmap can work in practice, let’s take a look at some of its key features.
For instance, we can see from the above graphic that some activities that need significant attention early on can more or less hum along on their own later on. Hiring is one example. Moreover, in the very first stage, almost no HR operations are needed: organisations can simply “copy and paste” what has worked before at other companies, or even get ideas from the Internet. The key here is simply to ensure that the basics are in place to keep the business up and running.
Perhaps less obvious is that, in the early going, there is no need to pour significant resources into fringe benefits, for instance. People generally join a young organisation for the adventure, and not because it offers flextime or allows occasional homeworking. There will be plenty of opportunities to focus on that kind of detail in later stages.
What is needed early on (in stage A), though, is a clear set of cultural guidelines, and a solid recruitment strategy. Similarly, a simple but workable onboarding process can add considerable value. Over the years, we have found that organisations start paying attention to these basics only when some alarm bell goes off. That’s a bit like deciding to paint your house only once the paint has started peeling and woodrot has started setting in.
A look at the bulge for “hiring” in stage A yields no surprises in itself. It’s obvious that any company on, or about to embark on, a growth path will want to hire the best people. But it’s not just a matter of “hiring the best people” and then working to ensure they stick around. What’s needed is a clear and actionable recruitment strategy that engages several team members, including the manager if there is one. It should also include the use of HR tech tools — and it needs to get both the longer-term vision and the ins and outs of day-to-day processes right. (These should be as light and nimble as possible.)
The recruitment strategy needs to be comprehensive, but like the Roadmap itself it involves a staged approach. Thus there will be plenty of opportunity in later stages to expand the hiring team, plug in new tech tools, and enhance your processes. And you may also wish later on to make more funds available for employer branding and so on. The point here is that making the right start with a well-thought-through and flexible strategy will make it easier to take your recruitment to the next level when the organisation gets to that level.
Two tips on this front. First, don’t go throwing money at headhunters. Instead, invest it in enhancing your own position on the job market and discovering how to attract and retain the best talent.
Second, even if your beginnings are modest, and you have to husband your resources super-carefully in the early going, there is no reason to think small. The recruitment strategy, and the Roadmap as a whole, are about growing into the success you’ve envisioned.
Stage A — 10 to 25 FTEs
- Onboarding is no longer automatic
- The cultural fit of new employees is key
- Figure out: Is the product truly scalable?
- Creating clear expectations for new employees (onboarding)
- Building your team around the organisation’s core values
- Setting up a future-proof hiring structure based in a sound strategy
In this stage, you sharpen your why, BHAG and core values, making sure your hiring strategy and onboarding activities are fully in line with them.
Hiring with care doesn’t mean lining up expertise with the requirements of the role. It means ensuring a good overall fit, including the cultural fit, and focusing on integrity, energy and intelligence. And ensuring a cultural fit doesn’t mean hiring more of the same: complementarity and diversity should in any case be a key part of the overall recruitment strategy.
And just as important as hiring well is firing quickly if it turns out you’ve made a mistake, especially in the beginning — something we’re all entitled to do once in a way.
If after all that you still have some strategising capacity, take time to figure out what organisational structure will help you scale. What fits the founding team, the CEO, and the product or service?
Stage B — 25 to 60 FTE
- Employees are changing focus, and their expectations are shifting
- Changing requirements for leadership
- Sharing and transferring knowledge internally
- Reinforcing the organisational culture and structure, and the growth mindset
- Ensuring that the overall strategy, values and BHAG remain crystal clear
- Seeing to it that all of the basic HR processes, such as benefits and remuneration, are in place
Focus on creating an effective organisational structure. There is no one-size-fits-all organisational form for every company. Rather, the form needs to be aligned with your service, your product, the stakeholder landscape, the CEO’s preferences, the location(s), and the time.
Most companies are in stage B when their annual revenue is somewhere between EUR 2.0 and 3.5 million. This stage is sometimes called the black hole — when the organisation is growing apace and there’s nothing for it but to invest in further staff and more infrastructure before you can really afford to. But get this right, and it will pay off: putting time and effort into designing an effective structure will likely lead to gains not only in terms of improved productivity but also of higher morale and even greater cultural cohesion — not monochrome cohesion, but cohesion nonetheless.
But why does culture need such close attention? The truth is that, even if you have a whizz-bang strategy down on paper, getting the cultural elements wrong can be really expensive: Culture eats strategy for breakfast, as they say. And let’s face it — no two people’s definition of culture is likely to be the same. That’s because it’s a grab bag of different elements. Some of these are of the heftier core-values, variety, while others work at the level of the nitty-gritty and the day-to-day: who gets to interrupt at meetings? What kinds of chumminess are OK? One key point, at the largest level: nothing about the culture you foster should be seen to excuse anyone from getting their jobs done as effectively as they can.
And just as with anything else: get the basic principles down pat now, and you’ll save yourself a lot of headaches down the road.
Now it can happen that, as an organisation grows and begins to show some swagger, staff might begin to expect “normal and competitive remuneration and benefits”. If the organisation’s doing well, staff will want to have a share in that success. And suddenly you can have a new and urgent agenda item on your plate.
Staff may assume that you have a well-thought-through remuneration and benefits package waiting in the wings. And, while you’ve wanted to be as nimble as possible up to now, they should be right, in a way. It makes only good sense to have prepared at least a draft pay and promotion structure that is simple, fair and clear to everyone. And now would be the time to roll it out.
And when you’ve hit the 60-employee mark, make your HR focus areas (see employee journey) are at basic level (that means really effective and still simple).
You should also keep upgrading the capacities of your staff and of course your own, including your capacity to learn and so you can be the best leader you can be. Keep in mind that that can mean hiring another CEO who’s better suited to the role, and who will have more fun leading a company.
Stage C — 60 to 100 FTEs
- Non-performing early employees and leaders
- Employees expect growth opportunities
- A bumpy employee ride becomes costly
- Creating well-designed internal development paths
- Ensuring a smooth, well-oiled employee journeys
- Making sure that HR processes and guidelines are clear and have universal buy-in
At this stage, some people, such as early leaders, with whom you’ve built your company will likely be leaving, either because they don’t fit into a more structured organisation or because they can’t keep up with the pace.
This phenomenon may be difficult for those staff who joined early, so make sure you keep focus on the relationship. Employees need to perform or else move to another position (perhaps outside the organisation). These situations should be handled gently but firmly — they must be faced head-on, and with one eye on the future. The key thing here is to be clear about what you expect from whom, when, and at what level.
At this stage, you should also be improving the processes and guidelines that support the employee journey. Make them future-proof and ensure that the why, BHAG, strategy and values are firmly in place and have buy-in.
Keep asking: Is this complexity necessary? Can we do this more effectively? Why do we need this procedure, this policy, or that guideline? Can we solve this issue on the spot, or do we need help from the team? And remember: just because a “solution” looks good on paper, that doesn’t mean it’ll work in practice. You also have to trust your gut.
Oh and don’t forget, grow as a leader yourself ;-)
Stage D — 100 to 150 FTEs
- Internationalisation issues
- The current leadership can’t cope with strategic demands
- The founders are still too essential to the organisation
- Implementing an international business strategy (having paying clients)
- Making sure there’s an organisational scale up model in place
- Checking quality and new requirements for competencies
So here you are: You’ve reached the milestone of 10 million dollars in annual revenues. Very few entrepreneurs bring their companies to this level. So take a moment to congratulate yourself, the management team, and all staff.
In the current international market, as a scale up with the potential and the burning desire to achieve World Domination :), you are probably already entering foreign markets. It’s time, then, to focus on how to build your team abroad.
Make this initiative part of your people strategy and think about how you train the current team to be ambassadors in other locations, and about how you negotiate the entry of the organisation’s core values, culture and strategy in other climes.
Doing this may require a further a look at the organisational structure and the form you’ve chosen earlier on. Is it still appropriate. Does it need minor, or perhaps even major, adjustment? Whatever is required, do it now. Now’s the time to choose and implement changes, so you don’t have to do any expensive tinkering down the road. Get this bit wrong, and you might see that that the world you’ve conquered can become unconquered in a hurry.
See what new talent you need — what upgrade in competencies, especially when it comes to roles that you may not have needed as a locally bound start-up. Make your talent-development plan a road to growth for your teams, so that they can develop easier. Show them how to become the best in their fields. Find inspiring stories, and shout them from the rooftops. Check your hiring strategy once again. Are you still doing all the right things in recruitment? (The things that were right when you started may not be right for this stage.) Use your marketing of your products and services marketing to reach potential new employees (and vice versa).
Above 150 FTE
If you think it’s been challenging up to now — well, it’s time to roll up your sleeves and get ready for 150+.
More on this in our next post — so watch this space.