Building a People Function at a Startup

Why is it important to invest in your people function early?

Your best employees will start asking questions – as your company grows, your most engaged employees will begin to think about their future at the company. They’ll start asking questions like: What does my career trajectory here look like? How can I be developed as a manager? Can we expand our benefits package?

If you don’t invest early, you’re forced to play catch-up – you want to make sure you have an early people function and infrastructure in place so that you’re ready for those kinds of questions. Otherwise, you’re always playing catch-up on the needs and demands of your team members. Your policies can evolve as the company grows, but you need an early structure to build off of.

When you run HR audits, what are some of the common red flags that come up?

Incomplete or missing employee handbook – at a bare minimum, your company should have an employee handbook that covers basic policies, processes, and other need-to-know information about working at your company.

Misclassification of employees – for example, people who are working as independent contractors but should actually be employees based on the work they are doing. Misclassification can lead to legal or tax issues down the road.

Compliance issues – common compliance issues that come up usually involve problems related to the state where an employee is hired (i.e. not complying with the necessary hiring documentation required by a specific state) and federal documentation mistakes (such as not completing federal paperwork in the proper time frame after an employee is hired). Compliance mistakes can yield hefty fines if they are caught in a formal audit.

What does people ops include at an early-stage startup?

Managing payroll, benefits, and compliance – people ops covers HR admin tasks around tracking, reporting, and compensating employees.

Managing and communicating company policies – create and update an employee handbook (see below for more on what should be included in an employee handbook).

Managing the employee lifecycle – set hiring and onboarding processes and policies, coordinate performance reviews, manage employee departures (e.g. exit interviews), etc.

Manage training and development – slightly more mature companies start to offer professional training and/or coaching resources to aid in employee development.

Field and route employee questions – such as: Who should I go to for various issues (technology, people management, onboarding questions, etc.)? How can I be reimbursed for a company event I attended? Who should I ask about getting access to a new tool or service I need?

What are some of the key policies that go in a startup’s employee handbook?

Key Policies:

• General information about the company and culture – what is your company’s vision? How are you adding value or enriching the lives of your customers or the community at large? Be inspiring! This is an area where start-ups can really shine.
• What does the recruiting process look like – where do you advertise open positions? How do you handle referrals? What is your interview process like?
• Information about payroll, benefits, and time off – how often will employees be paid? What does your full benefits package include? How does your company handle time off and what are the procedures for requesting and planning for time off? What federal holidays does your company observe and when will the office be closed?
• Statutory requirements that you have to comply with – employees should be able to access all information about state and federal statutory requirements in this section (for example, FMLA).
• Company perks – does your company offer additional perks like wellness days, a training and employment development stipend, or a 401k?

Handbook formats:

• There are different ways to house it – the employee handbook can come in a variety of different formats, from an internal PDF, to a living document housed within your PEO (professional employer organization) portal, to a OneDrive folder that also includes access to employee forms.
• Handbooks can range from 20-80+ pages – the length of your handbook can vary depending on the resources you need to include. A company with a very geographically dispersed workforce will need a longer handbook that includes additional state-by-state requirements.

What are some of the benefits you should consider offering early on, and what are reasonable ranges for each?

Note: Once you offer employees a benefit, it’s very hard to take it away. Be forward-looking when choosing which benefits make sense to offer from the beginning and which benefits may make sense to layer on as your company grows.

What should recruiting ops look like at an early-stage startup?

Create a job description template – in addition to role specifics, what kind of information about the company and benefits goes into every job description? Where do you post for different kinds of positions?

Standardize your interview process – how many interviews are required to make a hiring decision? Who is involved in the interview process and what are candidates being evaluated on?

• Decide who is evaluating for what – don’t waste time and resources by having too many people evaluate for the same criteria. One person should evaluate for technical skills, one should evaluate for culture fit, one should evaluate for leadership, etc.
• Does your interview process include testing? – decide whether your process involves any testing, case studies, or technical evaluations—and who from your team is conducting those parts of the interview.

Be clear on your decision-making process – who makes the final hiring decision? The hiring manager? The most senior member of the team? Is it a group decision? Be clear on what the decision-making process looks like and who the final decision rests with.

Make sure you are great at communicating with candidates – whether you are making an offer or not moving forward with a candidate, how you communicate with them is important. Poor or unclear communication with candidates can hurt your employer brand in the marketplace.

Identify which platform and tools you’ll use – that doesn’t necessarily mean you need to invest in an applicant tracking system from the beginning (although these can be very helpful). But you should have a process in place that includes where you are advertising for the position and how you are managing candidate flow.

Know when recruiting ops ends and people ops begins – everything that happens up until the offer letter is signed is part of the recruiting ops process. Once someone signs the offer letter and begins the new hire process, that is part of people ops.

How should startups onboard new employees?

Have a consistent onboarding process – every new team member should be onboarded in the same way. Implement some standardization around what someone does in their first 1-2 hours (completing all their necessary paperwork, meeting with someone to go over their benefits package, showing them where they are sitting and getting them set up with the equipment, etc.).

The people ops team should cover general onboarding – aspects of onboarding that are relevant for the whole company, such as the employee handbook, training materials, general company policies, etc.

The hiring manager should cover things that are specific to the role – e.g. meeting the rest of the team, reviewing team structure and responsibilities, introducing specific tools the team uses, reviewing meeting cadence, and going over what is generally expected of the new hire. The onboarding process should also include a clear 30-60-90 day plan that sets expectations and milestones for the new hire.

How should startups think about org design and role definition (without making things too complicated)?

At a basic level, decide who does what (and understand where overlaps exist) – whether your team has 10 people or 50 people, role definition and responsibilities should be clearly defined. That doesn’t mean that overlaps in responsibilities won’t exist, but you should be clear on why the overlaps exist. Be particularly conscious of:

• Hand-off overlaps – when work transitions from one team to another (such as when the hiring process moves from recruiting ops to people ops) there may be responsibility overlaps.
• Natural overlaps in employee functions – depending on the role and the project, some functional overlaps may be necessary. Always try to be as clear as possible about who handles what.

Set clear boundaries around decision-making – this is especially important with very small teams where most people are involved in every project. Having too many people involved in every decision can become confusing and lead to inefficiencies. Setting up a clear decision-making methodology (such as the RACI model, for example) is key so that everyone knows who will make the final decision.

Be careful with title inflation – when start-up founders can’t compete on salary, they sometimes turn to title inflation in order to attract candidates. This can lead to a very top-heavy company structure and can affect future hiring. Be thoughtful about the long-term effects of the titles you offer.

What people tech tools does an early-stage startup need?

Your first tool is an HR information system (HRIS) – e.g. Gusto, Rippling, Namely, and BambooHR. An HRIS is used to capture and store employee data, track hiring dates and salary changes, maintain an org chart, and report on overall employee data.

The second tool is an applicant tracking system (ATS) – e.g. Greenhouse, Gem, and Jobvite. An ATS will help you manage your candidate flow as you scale and begin to hire more people. At that point, it’s useful to introduce more structure and technology into your recruiting operations. 

Note: Many of these tools function similarly, but have different reporting capabilities. When you are evaluating people tech tools, consider how your team will specifically use the tools and what kinds of reporting options will be most valuable for your purposes.

When should startups use a PEO (professional employer organization)? How can you select a good one?

If you have less than 50 employees, a PEO is a good choice – rather than splitting people ops responsibilities among internal team members, invest in a PEO resource that can help you handle all of your early people needs.

As your company grows, an internal team starts to make more sense – PEOs usually charge per employee and get more expensive as you grow, But this decision depends on your growth plan and what level of people ops you want to eventually offer. If you want your people team to cover high-touch offerings like coaching, training opportunities, and employee events, it may still make sense to use a PEO for things like payroll and benefits.

What should you look for in your first hire?

A manager-level generalist with 3-5 years of experience – you might even be able to get away with less experience, depending upon the role. Look for someone who is good at multitasking and taking on a customer service/success role. They should be great at managing requests and troubleshooting.

Your first hire should be excellent at executing – seek out someone who knows how to get things done, can anticipate what to do next, and is regimented about getting things done on time and within a set schedule.

When hiring at a Director/VP level, look for someone who is thoughtful and consultative – it’s valuable to have someone with experience coaching managers who has also demonstrated a consultative approach to working with senior team members. This person should be great at listening and asking thoughtful questions to understand the core issue rather than immediately jumping to a solution. 

Look for someone who doesn’t lose their cool – people problems can be tricky and sometimes volatile, especially in a start-up environment. Look for someone who remains calm under pressure and does not let their own emotions cloud the conversation.

How should startups train less experienced managers to be great people managers?

Invest in coaching – The value you get from offering your employees formal coaching can be exponential. The best option is one-on-one coaching, but group coaching workshops and online training (virtual courses, books, podcasts) can also be valuable.

Managers should develop skills around:

• How to give feedback – teach them to use a feedback methodology and practice role-playing.
• How to engage high-performing employees – how do you keep high-performing employees engaged? How do you give them opportunities for growth without being selfish about keeping them on your team?

How to manage underperforming employees – how do you give feedback that motivates and course corrects? What sort of performance plan documentation should you maintain, and when should you alert your own manager to an issue?

What additional considerations apply for startups with remote or hybrid teams?

Think about how you maintain a sense of company culture and closeness – it’s a challenge to make a geographically dispersed team feel like they are part of a larger company culture, but there are a few things that can help:

• Maintain consistent communication – tools like Slack are great for having one shared communication space for all employees.
• Celebrate accomplishments and milestones in a public way – birthdays, personal milestones, work accomplishments—let all of your team members know when someone has done something great!
• Create virtual “water cooler” time – schedule time for your employees to “hang out” and talk outside of formal meetings.

What are the most important pieces to get right?

Set up the right infrastructure – your people policies and practices should be clear and consistent (and thoroughly laid out in your employee handbook).

Make sure people understand how they fit in and how they add value – everyone on your team should understand how their role contributes to the overall company goal and vision. They should know how they specifically add value.

Be clear on your company’s vision (and make sure all your employees are clear on it too) – people often choose to work at start-ups because they are inspired by the company’s mission. Having a clearly articulated company vision from the very beginning can help with recruiting, retention, and overall employee engagement. Every employee has a traditional role, but if you get them excited about your mission then they also become brand ambassadors.

What are the common pitfalls?

Don’t wait for something bad to happen to invest in people ops – companies think they don’t need HR systems in place until something egregious happens. You will save yourself a lot of trouble by putting clear people ops structures in place from the start.

Be clear on how responsibilities for your team members are evolving – in the beginning, people ops are sometimes divided among early team members into fractional responsibilities. But as other responsibilities start to grow, time becomes scarce and things fall through the cracks. Be cognizant of when it no longer makes sense to spread people ops responsibilities around. That’s when you need a clear, dedicated people resource.