I recommend doing so as soon as you notice significant people or team issues pop up on a regular basis, likely around the 25-30 headcount mark. An exceptional Head of People will future-proof your startup against organisational issues that start out as distractions but tend to balloon into complex cultural problems that could derail your company long term.
The changing face of HR
The idea of spending precious VC money on an HR hire in the early days of a startup may leave some founders feeling skeptical. After all, what value can HR really add when what you really need to grow your business is 1) engineers writing robust code fast and 2) sales people and/or marketers smashing targets every day? This skepticism is not unfair: you may have memories of dealing with HR in the context of previous corporate jobs where all HR seemed to do was create boring admin work and make policies that felt stifling or unnecessary.
But those days are all but gone. In the recent past, HR has had a makeover only comparable to the transformation Marketing went through as budgets began shifting away from traditional media to Google and Facebook. Rather than acting as a reactionary support function, People & Culture, as it’s now commonly called, has earned a seat at the table.
This is due to a realisation by a growing number of senior leaders that it’s not enough to invest in building a great product: you need to also build a great organisation that’s capable of nurturing your evolving business.
Think of your business as a house plant and your company as the pot it’s in. As the plant grows, you may need to replant it into a larger pot. If you don’t, the plant will outgrow it and die. As you scale, you must constantly rethink your ways of working or face chaos - it is this challenge a Head of People will help you tackle.
You should expect your first People hire to commit to a two-fold mission:
- Help build and develop the best team you can possibly get and,
- Build and embed programs, structures and frameworks that cause that team to seamlessly deliver the best work they are capable of.
The right Head of People will obsess over these objectives and solve small team bugs that could turn into systemic failures down the line. My friends Matt Bradburn and Al Fraser at the People Collective aptly describe these bugs as “people debt”: much like technical debt, people debt accumulates quickly and fixing it becomes exponentially harder as you scale.
People debt can take a myriad of forms but common early woes include co-founder conflict, bad people management practices, new hires who turn out to be culturally misaligned and silo-ed teams. These are all issues your Head of People will help you nip in the bud before they escalate.
When to start recruiting for a Head of People?
When you’re 5-10 people sitting in the same room, things just work. There is no need for meetings: you just turn to the person on your right and ask them a question. Everyone is a witness to all decisions being made and knows what to do to action them. Engineers work in tandem with Sales and Support and sometimes even directly with your customers which allows them to build features with real empathy for their pain points.
You can get away without a formal management structure: your early hires are likely self-starters who just propel themselves forward. It’s easy to drive accountability: if your feature isn’t releasing, you simply walk up to your 2 engineers to figure out what’s going on.
This effortless, well-oiled machine starts crackling when you reach a headcount of 25-30 people. Some early signs of dysfunction could include the following:
- You agree with your head of marketing on a big CRM push but you both forget to update Ops who then struggle with fulfillment due to a higher than usual volume of orders.
- You have 3-4 team members who are just not delivering to the standard you’d expect. You know you should do something about it but what exactly? This can be especially difficult when the low performer had been an early hire and you are personally friends with them.
- You have decided to hire a brilliant engineer and reluctantly agreed to pay her a fair bit more than the rest of the team. But now the team has found out and they are arguing that they deserve the same salary.
The best time to begin the search for your first People hire is when team issues start to become noticeable but before they take up too much of your time. Are you losing track of who’s on holiday, off sick or working from home?
Do you have 2-3 people whose performance needs closer management? Have you recently promoted some high performers into team lead roles and it’s not going as well as you hoped? Are you thinking about opening a second office?
These are all signs you should begin your search for a Head of People. The traditional adage was to make your first People hire when you reach 50 heads. I’d argue that you risk building up too much people debt unless you act at 25-30.
The value a Head of People will bring to your company
With the right support, a strong Head of People will be able to deliver the following within 1-1.5 years of joining:
Introduce, and train your team, on a semi-structured hiring process which reduces hiring mistakes and maximises your chances of identifying candidates who will actually perform well.
Build an internal Recruitment function so you no longer have to rely on expensive agencies.
Manage the Recruitment team and the Office Manager.
Take care of all HR admin including employment contracts, payroll, leave tracking and the creation of basic policies such as travel, parental leave and disciplinary (which becomes more important as your employees approach the 2-year service mark).
Partner with you to manage a bottom-up, cross-functional process to articulate your mission, vision, purpose and core values which will serve as the foundation of all other people programmes: this process will lead to more successful hiring decisions, better employer branding and a more motivated team. It will also provide a helpful framework to talk about performance issues that come down to cultural misalignment.
Introduce or improve your All Hands and other internal comms channels.
Deal with employee relations issues: they will work with your managers to resolve (and even prevent) team conflicts and performance issues on their teams including supporting them when it comes to letting people go.
Build a performance management framework including embedding goal setting and performance reviews. This will allow you to identify top performers who you need to proactively work on keeping as well as those who are struggling and need help to get back on track. A good review program will also streamline promotions and pay raises.
Figure our a fair and scalable approach to compensation which will likely include the introduction of progression levels, helping your team understand why they get paid what they get paid and how to get to the next level.
Advise you how to continuously restructure the organisation so it remains fit for your evolving business.
An exceptional Head of People can, of course, bring a lot more, including, but certainly not limited to, setting up and running your EMI / CSOP / restricted share scheme, acting as your talent ambassador helping you pipeline for future exec hires, and becoming your most trusted internal coach, calling you out when you go off track or are about to make a decision where you haven’t considered every angle.
Every business is different and a strong People leader will not blindly apply what they learned in a previous context: they will carefully analyse your business and culture and work with you to introduce programmes that make sense in your specific context.
The profile of an exceptional Head of People
The Head of People role is extremely broad so you’re looking for a person with a real diversity of skills. I’d encourage you to look for the following key attributes:
High emotional intelligence and strong communication skills: I believe a Head of People must be able to accurately predict and proactively highlight how actions and decisions will impact people’s feelings and motivations. They should be able to make people feel comfortable and foster psychological safety. They need to also have the confidence to speak their mind and disagree with senior stakeholders when necessary: they need to become the culture anchor of your organisation. You should also expect your People leader to set the standard for clear, jargon-free communication in meetings
Commercial acumen: it is a thorough understanding of the business they are serving that sets an exceptional Head of People apart from a great one. A grasp of the nuances of each discipline allows the Head of People to effectively coach business leaders across the entire company. All business decisions have people implications and the best outcomes are a product of a careful balancing exercise of commercial needs and empathy toward individuals.
Bias for action: The notion of best practice in HR is far less clear than in other disciplines like Product Management. A terrible decision in one context might just be the right course of action in another. A Head of People will resist the temptation to create a perfect world - getting started followed by gradual iteration is key
Demonstrable leadership and people management skills: an exceptional Head of People should be a shining example of leadership other senior stakeholders can turn to for advice. They must have the ability to attract and hire incredible candidates for the People team as well as the wider company.
Analytical skills: the HR function of the past often struggled with a lack of resource, to a large extent because HR leaders did not explain the ROI of their work in terms that resonated with a numbers-focused CEO. A 21st century Head of People should be inclined to measure and demonstrate the value-add of her programmes. Whether it’s drawing insights from a free-text pulse survey or slicing performance review data, they should feel at ease.
People from many backgrounds may embody these qualities. In the past, most HR professionals built their careers through a succession of roles exclusively in HR. When interviewing candidates who have grown up in HR, look for a critical view of what has and hasn’t worked in their previous companies and a real determination to do the latter differently.
Increasingly, leaders from other business disciplines choose to pursue People leadership roles.Notable examples include Google's Eileen Naughton who ran Sales & Ops in UK&I before transitioning to her current role as VP People Operations, and Loren I. Shuster who moved from operating roles to running People Ops at Lego globally.
Pay particular attention to this type of candidate: they could bring a broad perspective to the role which they likely gravitated toward due to a genuine passion for the craft.
If you already have a Recruiter or Office Manager in place, you may be wondering whether you should promote them to the Head of People position. My advice is you certainly should when the time is right as long as they possess, or have the potential to quickly develop the above attributes.
They have the important advantage of knowing your company and employees well. However, progression to a People leadership role should be earned rather than the default path as they require vastly different skills.
What level of seniority to look for and what compensation you should expect to pay
Different organisational challenges tend to show up as you hit new headcount milestones.
At 50, it’s realizing you need to more formally manage team performance.
At 100, it could be about improving internal communication to reverse team silo-ing.
At 200, it may be about restructuring your teams into a matrixed organisation so everyone is closer to the problem they are solving or the customer they are serving.
As such, you should ideally look for a People professional who has dealt with a headcount similar to where you expect to be in the near future (the next 6-18 months depending on your growth rate and their potential). That said, the art of scaling an organisation is in the process of it which remains the same regardless of headcount so don’t immediately discount more junior, high potential candidates.
How much you should budget to pay a Head of People will depend on your startup’s maturity, location, current headcount, and risk appetite to hire for experience versus potential. As a result of the growing importance of the People function, compensation for the Head of People role is on the up.
An experienced Head of People candidate will expect anywhere between £75-110+K in addition to leadership level equity (along the lines of what you’d offer to, say, a Head of Marketing) to join your post-Series A startup of 50-100 people in London. At seed stage, you will likely find a less experienced but high potential candidate for somewhere in the £45-60K range plus equity.
About the Author: Daniel Illes is the former Chief People Officer of Drover (a Forward Partners portfolio company), a London-based scale-up challenging traditional forms of car ownership. Before his current role, Daniel had a previous career in operating and commercial roles in startups such as Lyft and WeWork and as a finance lawyer at an international law firm in the City.