What’s the difference between a strategic People function and a perfunctory HR function?
A perfunctory HR function is reactive, a strategic HR function is proactive – a perfunctory HR function responds to issues as they arise. This means you’re only ever addressing the symptoms of a problem. On the other hand, a strategic HR function is proactive, anticipating potential issues and implementing solutions in advance. They not only address the symptoms but also the root cause of the problem.
A strategic HR function creates systematic, preventative solutions – to ensure the same issues do not recur. So while a reactive HR function might approach onboarding with an eye toward ensuring laptops are ready on time and administration is set, a strategic HR function will create a comprehensive onboarding process that can scale as you grow.
A strategic HR function has a long-term Focus – a perfunctory HR function tends to focus on short-term fixes, akin to playing “whack-a-mole” with issues as they pop up. In contrast, the strategic HR function is focused on long-term solutions, building systems that can scale and adapt as the company grows.
When should you hire your first full-time People employee?
Hire a people FTE when HR admin work is taking too much CEO time – for example, if the CEO wants to spend more of their time on building a predictable sales and marketing engine, they might hire a director of people to handle functional HR tasks. When the organization is small and HR needs are simpler, the CEO might handle administrative employee tasks themselves or outsource them to a fractional HR services firm.
When should you hire a People leader?
Typically, companies with 35 to 50 full-time employees bring in a People Leader – by that scale, you have a bunch of first-time managers who still play functional roles, and you need a strong people executive to play a strategic role and advise that layer. If you have an experienced executive team, you might not need a true people executive at this stage and can wait until you have around 75 employees.
You’ll hire a new People leader several times as you grow – the person who gets you from zero to one might not be the person to get you from one to n. You might hire a first HR leader to put together the first employee guide or onboarding process. But as you grow and mature, you want a more mature people leader to come in.
How many total People/Talent FTEs do you need?
HR headcount is typically around 3-5% of total full-time headcount – so if you have 100 employees, you probably have 3-5 full-time employees—and the ratio persists as your organization grows.
What are the different stages of scaling your HR function?
| Very Early | |||
| Approximate FTE count | 0-35 | ||
| HR Leadership profile/Team | HR Director – focused on the core activities of the HR function. This person may have the title “Head of People”, but their profile is a Director-level employee at a 500-person company. It could be a career Human Resources Business Partner (HRBP) who can act as a generalist. | ||
| Core operating tools | PEO (professional employer organization) – acts as the employer of record for your employees, managing tax compliance, benefits, etc. ATS (applicant tracking system) – these are cheap and you can get one as early as 10 employees. You might start with a tool like Breezy or Jazz HR. | ||
| Key Responsibilities | Doing the basics: • Paying people on time • Ensuring Onboarding administration occurs • PEO or HRIS management • Functional leadership | ||
| First People Leader | |||
| Approximate FTE count | 35-50 | ||
| HR Leadership profile | First Head of People – you’ve either hired them or you’re getting ready to hire them. They’ll put structure around all of the processes that you’re implementing at this stage. They could be an outside hire or a promotion—if you’re going to promote your Director of HR, you need to be 70% confident they can handle the position. | ||
| What your team looks like | • Head of HR • One Recruiter • One HR Generalist | ||
| Core operating tools | • PEO • ATS | ||
| Key Responsibilities | • Instituting a thoughtful onboarding process • Creating policy around promotion, vacation, etc. – people are getting into their second tour of duty and being promoted. • Employee churn – you’re probably dealing with churn in volume for the first time and doing exit interviews. • Establishing the employee lifecycle | ||
| Building Out Sub-Functions | |||
| Approximate FTE count | 50-100 | ||
| HR Leadership profile | True Head of People (VP or CPO) – to help oversee all of your different activities, They’re expected to think and lead strategically to meet business objectives. They may join board meetings and take an active role on the leadership team. | ||
| What your team looks like | HR adds mid-level managers – you’re now adding managers with direct reports to lead specialized sub-functions like: • HR generalist – they’ll manage questions around benefits, pay, etc. • Dedicated recruiter • People Operations – it might only be one or two people. There’s enough churn and hiring that People Ops is required to manage that growth. | ||
| Core operating tools | • PEO • ATS – upgrade to a system like Lever or Greenhouse that has more robust reporting capabilities. | ||
| Key Responsibilities | • Establish organizational philosophy – your Head of People needs to begin to establish an organizational philosophy to meet business goals. • Align org strategy with mission and vision – if your next stepfor growth is launching a business unit in a new market, HR needs to strategically consider whether you’re designed for that if you have the talent in place, and what restructuring or hiring needs to happen. • Preparing to add scale and new strategies – the implications of what you install now are massive for the next stage of growth. You’re building a larger employee base that requires HR maturity and will spotlight shortcomings. • Building out L&D – add a true learning and development framework and training modules directed by your Director of HR. | ||
Tips as you reach 100 employees:
Building a people function involves evolution, not change in activities – the sub-functions you have at 35 employees don’t change when you grow to 100 employees; they evolve and add formality and maturity. For example, at 35 employees, you might have an onboarding process and a few exit interviews that make up an employee experience. At 100 employees, you might have an entire employee experience team. As you grow, sub-functions are more organized while People leaders provide the adhesive between the different sub-functions so they communicate with each other effectively.
Mistakes at this stage scale – make sure that the executive team’s organizational strategy is aligned with HR strategy. You should be thinking about and monitoring business metrics like revenue per employee and revenue loss from employee churn.
| Strategic People Function | |||
| Approximate FTE count | 100-250 | ||
| HR Leadership profile | You typically hire a Global Chief People Officer – there’s enough business-as-usual work that your leader can spend 70% of their time on maintenance. Depending on where your organization is headed, they may need additional slack to think strategically about the organization. Your People Leader is making decisions that move the entire ship. | ||
| What your team looks like | Director of HR – you probably have a number 2 who will be handling functional tasks. HRBP – in place of an HR generalist, you have HRBPs that partner with specific departments. Specialties to build out: • Comp and Rewards • Employee experience • Learning & Development Match your headcount to your strategic goals – if you’re solely in the US, your org is going to look very different from a company across four countries. | ||
| Core operating tools | • In-house HRIS • ATS | ||
| Key Responsibilities | Tackle new corporate strategy challenges – like going global, adding business units, or entering new markets. This comes with implications for your infrastructure. Understand the laws of your geography or market, set up employee relations, and prepare the necessary processes and policies to tackle new domains. Handle divergent business performance – some organizations begin to struggle, others thrive and grow at this stage. People Leaders should think strategically about moving the ship for the business. The organization starts to look and feel very different. Tailor your People function to your organization’s needs. | ||
What are the different responsibilities/sub-functions within a strategic people function?
Sub-functions within a Strategic People Function include:
- People Ops: the strategic approach to managing an organization’s human resources, focusing on employee-centric policies, general needs, and well-being.
- Talent/Recruiting: dedicated to identifying and acquiring top talent for an organization, often involving recruitment strategies, candidate sourcing, and selection.
- Learning & Development: the HR sub-function responsible for enhancing employees’ skills, knowledge, and capabilities through training programs, workshops, and continuous learning initiatives.
- Employee Engagement: fostering a positive workplace environment that encourages employees to be motivated, committed, and enthusiastic about their work and the organization.
- Comp/Total Rewards: designing and managing the compensation and benefits package for employees, including salaries, bonuses, and non-monetary rewards to attract and retain talent.
- Performance Management: setting clear expectations, evaluating employee performance, providing feedback, and facilitating ongoing development to achieve organizational goals and employee growth.
What should each sub-function look like as you scale?
| Talent & Recruiting | |||
| What it is | Dedicated to identifying and acquiring top talent for an organization, often involving recruitment strategies, candidate sourcing, and selection. | ||
| Tools/services to help | • ATS • Third-party Recruiters | ||
| Metrics/KPIs to evaluate performance | Don’t make the mistake of looking at lagging indicators – like time to hire—this can be misleading if a hiring manager goes on vacation or the search is difficult, then it might not accurately gauge success. A metric like cost per hire can be cut many different ways and varies wildly between positions, but may be a more relevant way to gauge performance. Evaluate recruitment teams on their ability to hit strategic goals – they should be thinking proactively about recruiting and be intimately attached to business transformation. They may start with a goal of reducing churn—to do that the CX department needs a certain profile—to get there your CX team needs x hires. You should have a consultative relationship with hiring managers. | ||
How your Talent & Recruiting Team scales:
At first, you have one Recruiter working 60 hours/week – they’re doing every task required to make a hire: sourcing, screening facilitating, coordination, etc. They’re typically pretty junior.
When you need more recruiting support, hire a Director of Recruiting – you might call them Head of Talent, but it’s really a Director-level role overseeing a recruitment and talent program. They should take you from reactive recruiting to proactive recruiting where you’re identifying needs and planning for them ahead of time.
As you hire additional recruiters, your team starts to specialize by task – you don’t have 360° recruiters anymore, doing all the sourcing, screening, and coordination. One recruiter does each task:
- One sourcer
- One managing relationships with hiring managers,
- One holding kickoff conversations, providing feedback, and managing the pipeline.
- If you have the budget for it, a recruiting coordinator to help manage the pipeline
Finally, you build out sub-teams of specialists recruiting for specific functions – you might have teams who specialize in recruiting positions in different business domains like GTM, Operations, Field recruiting, Corporate, and Engineering. By 250 employees, you’ll have a recruiting team composed of:
- A Head of Talent
- 2+ Recruiting managers
- Recruiting teams of sourcers, IC recruiters, and coordinators specializing in different functional recruiting needs
External recruiters have a role to play throughout your internal team’s growth:
- Early on, you use external recruiters to increase capacity – if you don’t have the recruiting resources but you need to make a hire, then you use an external recruiter.
- As you add internal capacity, external recruiters add specialized recruiting – If you’re making a confidential executive search, you want a firm to come in and do that specialized search. By the time your team ramps on that market, builds relationships and understands what the hiring manager needs, that might be recruiters spending several months costing $80,000 in productivity. If you outsource at 20% of base salary and it costs you $50,000, that may represent savings from using a third party.
| People Ops | |||
| What it is | The strategic approach to managing an organization’s human resources, focusing on employee-centric policies, culture, and well-being. | ||
| Tools/services to help | • Communications/project management tool – e.g. Asana, can be used for a long time before you have to get a formal dedicated onboarding platform. It allows you to customize your onboarding with all the bells and whistles and integrates well with other systems. • Dedicated onboarding tool – e.g. Gusto. You have to ensure that it integrates with your other tools to allow them to speak to each other. | ||
| Metrics/KPIs to evaluate performance | • Qualitative and project-based evaluations – evaluate People Ops on whether they got their projects done on time and if internal stakeholders are satisfied. | ||
They’re responsible for administrative aspects of employee experience – e.g. onboarding, coordination. As you grow, they’re responsible for employee experience and become the party planning committee—they’ll help plan offsites and organization-sponsored events, and pass out employee experience surveys.
See this guide on onboarding from Carly Guthrie.
| Employee Engagement | |||
| What it is | It’s a more mature version of employee experience – when you get around 250 – 500 employees, you’ll have a dedicated employee engagement function responsible for things like: • How productive are employees? • Are employees using L&D modules? • How’s the employee experience? • Are people happy? | ||
| Tools/services to help | • Culture Amp is a good tool – Employee Engagement is responsible for measuring the pulse of the workforce; understanding the employee lifecycle and experience, including DEI&B. | ||
| Metrics/KPIs to evaluate performance | • Many tools come equipped with built-in evaluation metrics – (ie. modules completed, engagement scores, etc). But the real goal is finding a way to create continuity across them and ensuring that these metrics aren’t being used in siloes. | ||
| Learning & Development | |||
| What it is | Responsible for enhancing employees’ skills, knowledge, and capabilities through training programs, workshops, and continuous learning initiatives. | ||
| Tools/services to help | • Early on, L&D might have a budget that employees can spend – it can be used to send people to conferences or to check webinars. • Begin to formalize the L&D program at 100 – 150 employees – it’s headed by your Director of People. You may or may not have a platform, but you build a framework around training modules for employees. (At the next stage of growth, you hire a L&D person). | ||
| Metrics/KPIs to evaluate performance | • Early on, a lot of your L&D metrics will be heavily tied to completion and usage because you haven’t had it in place long enough to see pre and post L&D performance. • Tip: if people aren’t using it, that’s a form of feedback on whether or not it’s valuable or not | ||
| Performance Management | |||
| What it is | Setting clear expectations, evaluating employee performance, providing feedback, and facilitating ongoing development to achieve organizational goals and employee growth. It’s a seed that starts at the first stage of growth and slowly progresses as the business transforms and matures. | ||
| Tools/services to help | Performance Management tool – e.g. Lattice, 15Five, and Culture Amp. • Performance management and evaluation is tied to a company’s values – whether they say it or not. You are signaling to employees what is a priority. It is the clearest illustration of risk and reward. • You must decide what actions and results are a priority to evaluate – ‘Performance’ must have an operational definition in your organization. • The actions, results, and outcomes associated with an employee’s performance must be clearly defined – As your performance management muscle matures, you should be able to measure employees’ performance in a consistent and standardized way. | ||
| Metrics/KPIs to evaluate performance | • Performance metrics in and of themselves should be dictated by what the organization deems are priority goals, outcomes, and behaviors. • This could be task-based, project-based, outcome-based, results-based, or even behavior-based – performance can be evaluated both qualitatively and quantitatively. | ||
How Performance Management scales:
At first, there is no performance management function in HR – you might conduct very informal check-ins with the CEO weekly about performance. Oftentimes it’s the CEO riffing with HR and the two sharing informal advice.
As you approach 25 hires, managers are responsible for their direct reports – with a manager layer, performance management takes the form of function-specific performance conversations. Employees may start having weekly check-ins with direct functional managers. You can add quarterly or biannual performance reviews between managers and reports—but there likely isn’t a company-wide performance management philosophy.
Between 50-100 employees, implement consistency between departments – instill a consistent performance management program that is cross-departmental. At this stage, you likely have real compensation ladders, benchmarks, comp bands, and long-term/short-term incentives. So the stakes of performance management are raised. You can track performance through a tool like Lattice. Your reviews become structured and supported with heavy documentation, and performance reviews will include support from HR.
What should the partnership between a people leader and the CEO/founder look like?
The People Leader should be the CEO’s confidant – the CEO should be able to turn to the People Leader with issues they haven’t yet communicated to the broader team. The People Leader deals with so much sensitive and privileged information that before anything is communicated by the CEO. They can serve as the CEO’s sounding board for information that will be shared with employees.
Overall, what are the most important things to get right when scaling your strategic HR function?
Hire the right people leader – especially when a first-time founder is hiring their first people executive. It can be tough because HR covers such a broad surface area. A lot of first-time founders underestimate the gravity and depth of that first-people leader role and they miss on the hire.
HR should be proactive problem-solvers – HR activities should be aligned with the business strategy of the organization and designed to help reach goals and milestones. HR isn’t just limited to the “party planning committee” or the paperwork and compliance department.
What are common pitfalls when scaling your strategic HR function?
Trying to scale without laying a strong HR foundation – the activities and processes you institute early on in your HR organization will echo long into the future. Make sure you have solid practices in place to support the growth of your organization.
Responses