Playbook for building the right HR team when you’re growing from 50 to 500

As part of Fresteam’s Leadership Series, we interviewed Professor Dave Ulrich, a university professor, author, speaker, management consultant and coach, on how a growing company goes about building the right HR team recently. Professor Ulrich, widely recognized as the ‘father of modern HR’, has published over 30 books on organization, leadership and human resources. Over the years, he has consistently been recognized as a top HR influencer and has consulted and done research with over half of the Fortune 200 companies and worked with organizations in over 80 countries.

Founders or the core teams of startups usually spend the initial years in getting their business model in place, achieving product-market fit, attracting customers and do all of this with limited resources. Building a startup may evoke images of a fancy workplace and a glamorous work culture but if you’ve been part of a team that built a company from the scratch, you know that couldn’t be further from the truth. 

Amidst all the chaos, it is a Herculean task to focus on the people you hire, the team you build and the culture you bring in the workplace, even as you focus on growing the business and making profits.

Professor Ulrich clears away the clouds on these topics and while he maintains there is no single recipe for success, he explained the broad principles and guidelines you should apply, to ensure you have a team gunning for success. 

In this interview, you would get to hear Prof Ulrich talk on: 

  • How does a growing company build its workplace culture?
  • How and when do founders take succession planning decisions?
  • How should a growing company go about its hiring process?
  • How can founders get their company to get into the rapid growth stage?
  • When should the founders of startups get their first HR leader on board?
  • What should the first HR leader of a growing company focus on?
  • What skills does an HR leader of a growing company have?

Prof Ulrich answers all of these and more, precisely and lucidly, providing examples of the companies he has worked with. This interview is going to leave you with deep insights on how to go about your next step as you build the next big startup in town.

1. The 2-point checklist to build a great team ☑️

Founders and leaders of startups and small companies are great at building products and services. More often than not, their plates are too full for them to devote a lot of time on aspects other than building a great product/service, working towards a product-market fit and bringing in a steady flow of customers. 

While scaling up, founders of growing businesses should focus on two things:

A. Think carefully about the kind of culture you want to create 🧑‍🤝‍🧑🧑‍🤝‍🧑

As many successful scaled-up startups have shown, building a great culture helps attract the best of talent, which reflects in the overall revenue and growth numbers of the organizations.

What is culture? Prof Ulrich says culture isn’t defined by “an internal set of values” but that it is an external identity by which you want your company to be known for by all your stakeholders. The external identity should be the deciding factor for the set of values that define your workplace culture.

External identity —-> Workplace culture

Quoting an example of a small company Prof Ulrich worked with, he says one of the common mistakes founders make while laying the foundation of their workplace culture is that they try to define it by a set of values they hold dear or believe in. However, a different set of values shaped the company’s promises to its customers. From his experience of having interacted with multiple leaders and writing 30 best-selling books on HR, Dave says the latter should define the company’s work culture and not the former.

B. Be very careful about the people you hire 🧐

The importance of your first few hires cannot be emphasized enough and they are probably the hardest. You have to make do with limited financial resources, you have to convince people to join you without any great reputation or brand identity and the risks are high. 

Prof Ulrich says if you are a large organization and you bring in a bad hire, you can live with it. But if you are a team of 50 and you make the mistake of someone who is not a good fit, you’re talking about 2% of the organization and that’s something you would do good to avoid. 

While hiring, organizations usually limit their screening processes to looking at the candidates’ technical skills and not their cultural or social skill-sets. Before hiring new employees, you must also ensure that you’re also factoring in their ability to learn, to grow, to expand and if their values represent the identity you want to establish in the marketplace. New hires screened only for their technical abilities may be very good at solving today’s problems but they may not be suitable to predict or solve tomorrow’s challenges.


2. Your startup is your baby but know when to let go 👨‍👧

While building your company, you get too attached to it and it’s only natural. However, as your company scales up, there comes a point when you need to acknowledge that you cannot do it all. Even superheroes need help.

Prof Ulrich says the entire company is woven around the founders and they become the embodiment of the organization. But after a certain point of time, they need to step aside and let the next generation of leaders take over and what’s the important point to remember here? 

You should pick leaders not for who they are but for what they can do. And, if you try and replace yourself with somebody just like you, you’re not helping the company. Remember to get the next set of leaders who can serve tomorrow’s customers. That’s the way to go forward.

In a way, it is similar to parenting. In case you are a parent and a founder, here’s how you can draw the parallels between the two roles:

 

3. When and how do you let go and bring in new leaders?

Timing is very personal, says Prof Ulrich. But there are three underlying points to guide you:

If you’ve hit a point where none of the three points – skills, learning and situation – are in your favor, bring in new leaders your organization needs. Now, that you’ve acknowledged the need for bringing in the next set of leaders, how should you go about it?

Don’t base your leadership hiring decisions on people. In other words, do not take the route where you say A, B or C should replace me. Instead, Prof Ulrich urges you to see at what stage of growth your company is in and assess the future pathway of the company. Based on that, you arrive at a set of skills required to take your company on that road. Following this, you shortlist people based on the kind of talent and leadership required to fulfill those conditions of success.

4. How do you hire to fit your organization culture? 🤝🏽

A lot of founders double as recruiters in the initial stages and we’ve heard or read of stories where founders spend a significant amount of their time in interviewing, screening and hiring candidates. Brian Chesky, CEO and co-founder of AirBnB, in an interview said he himself had interviewed the first 300 employees in his company.

While it is relatively easier to hire based on technical skills, it is quite another story to have a screening process that also assesses one’s cultural fit in the organization. Prof Ulrich shares a four-point guideline that tells you how exactly you can go about doing so.

Giving an example, Prof Ulrich explains that if an organization wants to be known for innovation, sustainability, customer centricity and agility, the leadership team should go about mapping the behaviors of the people who demonstrate those cultural attributes. For instance, innovation would mean people who are creative and take risks. 

So, when you are interviewing candidates and assessing their technical abilities, also screen to see if they have the traits that represent the values you want your organization to be known for by your stakeholders. And, be sure to assess each candidate’s cultural attributes by multiple people.

5. When to bring in your first HR leader? ⏲️

Though the point at which founders should actively consider bringing in their first HR leader (technically, the second because the first HR leader, without any doubts, is the founder herself) varies depending on various factors, a rule of thumb for him is anywhere between 75-100 employees, says Prof Ulrich

Marc Andreessen, American entrepreneur and investor, said in an interview that one of the biggest mistakes startups make is hiring an HR leader a bit too late. He went on to say that a high percentage of companies in the Silicon Valley put off hiring an HR leader and that they were dealing with “some level of catastrophe – either a public catastrophe or one that’s in the making”. 

As a founder, you have a lot to worry about funding, customers, your products/services and becoming successful and as your organization becomes bigger by the day, you might find yourself overwhelmed with all the complexities and the increasing number of things to deal with. 

Prof Ulrich says when you find yourself distracted by talent, organization and leadership, that’s the time you actively scout for an HR leader for your company.

6. You have your first HR leader. What should they focus on? 🤔

The first HR leader, according to Prof Ulrich, should divide his responsibilities into two: 

As the first HR leader in a growing organization, they should get all the administrative tasks such as hiring, onboarding/offboarding, storing data of employees and managing their time-offs through technology. One cannot spend all day doing such tasks manually. It makes a lot of sense to automate as much as possible and “as much as humanly as possible”.

A company’s founder shouldn’t look at hiring an HR leader mainly for the administrative tasks but rather for helping their business and company grow. The HR leader should work as a coach one-on-one as well as with the entire team on three things: talent, leadership and organization.

  1. Talent: The HR leader should help the company in having the right talent for the future, which would involve listing the sourcing criteria, screening and sourcing people and creating a work environment where people will deliver the best.
  2. Leadership: The HR leader should help create a great leadership team. The founder is sort of a role model for the other employees to emulate. Being a leader is not just about you but also, about “distributing leadership to the next generation”.
  3. Organization: The HR leader should be able to create the right culture for your organization. The culture is again not just restricted to the founders but the identity that the organization wants to be known for in the marketplace. The HR leader should be able to bring that identity to reflect in all of the company’s policies and practices.

7. What should an HR leader’s skills be and how do they gain entry to strategy meetings? 🤹🏻

Prof Ulrich firmly believes that the debate about an HR leader being invited to be part of business/strategy meetings should end. He says we are well past that stage and instead of asking if HR leaders need to get a seat at the table (because business and HR leaders know that), the latter should be asking what should they be saying or doing when they get to the meetings? And, that should be the focus.

If you had to answer the question – What’s the most important thing an HR can give your company – what would your answer be? Close your eyes and think for a couple of moments before you scroll down to see the answer.

Prof Ulrich’s answer to this is: “The most important thing that HR can give your company is an organization that wins in the marketplace.” And everything an HR leader does (building talent, leadership and organization) should be filtered through that question.

How does an HR leader go about building talent, leadership and organization that help in delivering customer and investor success? There are four key functions of an HR leader:

  1. Coaching: Work one-on-one with business leaders and help them with functions such as helping with producing the right outcomes through right behaviors, to deliver talent and be an example to the other employees in the organization.
  2. Facilitating: Helping facilitate processes and ensuring to involve the right people. To make sure if there are right processes in place for strategy and business.
  3. Designing: Taking charge of designing good HR systems around talent, compensation, training and communication.
  4. Delivery or Execution: Finally, make all the above three happen and getting things done.

Here is the matrix shared by Prof Ulrich and all you need to do in the beginning is tick off the boxes in which you have taken action and aim for achieving your goals in all of the 12 cells.

If you’d like to catch some important snippets from Prof Ulrich’s interview, I’d suggest you head here: https://bit.ly/2woQpgj

If you’d like to follow Professor Dave Ulrich’s work, Linkedin is the best way to do so: https://www.linkedin.com/in/daveulrichpro/

What are your first thoughts after listening to/reading Prof Ulrich’s interview? Tell us in the comments section below!