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HR as a core competency

In the world of start-ups, HR is at the bottom of the bottom of the heap of priorities most companies are working on. The vast majority of companies think about HR as a process and compliance function, outsource it to 3rd party providers (payroll, benefits, etc.) and doing their best to forget about it. If there’s any focus on HR as a function it is around recruiting (also typically outsourced and generally treated as very episodic). Sure – there’s plenty of talk about "culture" – of success, of working hard, of some other superlative that’s not particularly interesting or differentiating ("we want to hire great people and expect them to be hard working and successful!" duh) – but little real work done to actually execute against that and almost never someone made responsible for achieving success in people management.

I have to admit that I hadn’t spent much (any?) time thinking about this for most of my career. Companies figured out how to make sure that everyone got paid and for the most part HR was completely forgotten about. But more recently Ive been realizing that HR is an important competency for start-up businesses. The proper sourcing, onboarding, continued training, assessment and in particular the management and retention of employees can set your company apart from your competitors and put you on a course for success vs. failure.

We’ve had a number of companies in our portfolio take the HR function extremely seriously with great results. They key is the elevating HR to an executive function, hiring someone outstanding to take on the roll, and empowering that person to make real changes in your organization. This shouldn’t be a process person. They need to be the go-to person for people facing organizational challenges, having issues working with other managers or problems getting resources for the projects that the company has prioritized. They should report to the CEO (not the CFO) and be included in all senior management meetings, etc. Finding this person isn’t easy, since many HR people have been trained to be nothing more than mere paper shufflers (sorry to the competent HR professionals out there, but you all know what I’m talking about). Empowering this person won’t be easy either – most of us have been trained to marginalize HR and not view HR professionals as peers (this relates to the last problem of finding great HR pros – most of us have never worked with one and don’t know how impactfull they can be).

Most companies pay lip service to how important their people are and how their team sets them apart. It’s worth thinking about how you prioritize this part of your business and who you have managing it.

November 18th, 2010     Categories: Company Creation, Management    
  • http://twitter.com/kirkholland Kirk Holland

    couldnt agree more seth. learned this early in life while at Procter & Gamble. one of the best run companies in the world and ALOT of it has to do with how they do HR

  • Anita Taylor

    HR is also the most understaffed of all departments, we (the companies) stress over filling sales, development and support positions but leave say one lowely person to bear this entire burdon. I am SO with you on this… The deeper dive into why it is the way it is, is VERY relevant, most companies don’t want want to know, if they don’t know what is going on they can ignore it or pretend it away.

  • Isaac

    This starts with the board and the CEO. If neither of them cares about the growth of the individuals working for them then they won’t empower someone to do HR. They may hire a Yes Man but not anyone that will actually make a difference.nnFrom a board perspective how would you motivate a CEO to do this? If they don’t care can you make it important?

    • http://www.sethlevine.com sethlevine

      I agree completely. And finding the right person to run this function is critical.

  • Anonymous

    Seth I agree that the more serious the HR function is taken the better. I have observed how a good HR person can set the tone and create the corporate culture that may make the difference. Question is how soon to bring such a person in? First 5, 10, or 25 people?nnMy take on this would be that it doesn’t make sense until there is a certain critical mass or greater than 25. Before then it is possible to personally reach out, bring in the right people that have good corporate alignment. This would include the cultural fit requirement as well. It is also about this point where the leaders should be offloading some of the peripheral responsibilities they may have been shouldering for others to take to the next level.nnWhat might be interesting is a ladder list for hiring priorities at a startup. So often each group can make the case why they are a critical hire e.g. sales, marketing, product management, now HR. In an ideal situation or given what you’ve seen how should it shake out?

    • http://www.sethlevine.com sethlevine

      It depends a bit on how quickly you’re planning on growing, but I think you’re right that somewhere around 25 people is the right time to bring this type of person in. Key is finding the right person for the role…rnrnTo your last point most companies start with product (75-80% of initial employees fall in engineering or product management). Then they typically branch out to hire a sales person (someone other than just the CEO selling) and some support aroudn that (marketing).

  • http://twitter.com/spencerrascoff Spencer Rascoff

    Seth, nI couldn’t agree more. Great post.

    • http://www.sethlevine.com sethlevine

      Thanks Spencer. Do you have someone like this at Zillow? How many people are you guys up to now?rnrnAs an aside, a big “thank you” from my wife. She’s a self professed real estate junkie and loves both your site and especially your mobile app (for checking out houses on the fly while driving around). Seriously – really well done!

  • Tim

    We hired an internal recruiter from the start who I’d worked with previously and she helped hired a terrific first hundred. Almost no one has been hired by an outside recruiter. I think it’s the CEO’s role to set the culture and protect it. We’ve been able to build a great culture and now at about 250 we’re looking for our first really senior HR person. I don’t think you can delegate creating the formative culture but you can get a ton of leverage from HR professionals once you reach a certain scale.

    • http://www.sethlevine.com sethlevine

      I think you guys are somewhat the exception, Tim. You’ve created an extremely strong (and positive) culture and you and Ryan have managed the business extremely well. I think for most companies a bit more focus earlier on on HR is required…

  • http://twitter.com/AGB2BPro Alisa Goldschmidt

    Great post Seth – totally in agreement. I think the error many startup companies make is avoiding HR altogether. They often view it as something that “big, stuffy” companies do to make life difficult and constrict them. It’s only when something goes wrong with an employee or hiring that they find out how valuable HR can be! By hiring/contracting a skilled HR professional to join your team (not just a recruiter) you can help set the culture of the company, avoid legal snafus, and make it a great place to work. (no I’m not an HR person – but have experienced the good, bad and ugly enough to know!) A good HR person does much more than recruit and plan company parties!

    • http://www.sethlevine.com sethlevine

      I think that’s exactly right. Too many companies think HR = a bunch of process BS that big companies do (and as a result treat it that way).

  • Wendi Welton

    After reading so many negative articles like the infamous “Why I Hate HR”, it’s such a breath of fresh air to read your post! And, yes, I am an HR professional who has spent my career promoting the value we bring to organizations. Unfortunately I think many have had negative experiences with HR and that baggage stays with them. I can understand this to some extent. There are many HR folks who moved into the field because they “like people” and they aren’t developed to contribute fully. But there also those of us who have the desire and aptitude to fully understand the business and contribute beyond the stereotypical “HR policy police” or “party planner” roles. It’s important to remember that you get what you pay for though. I’ve seen far too many start-ups looking for a HR director with 5 years experience and a budget of 65k and they end up disappointed in the long-term.

    • http://www.sethlevine.com sethlevine

      I think peoples’ perception of HR is driven largely by direct experience with HR “professionals” who viewed their job as one of compliance and administration. Yes – there are great HR people out there (as I know from first hand experience) however unfortunately the vast majority just aren’t that remarkable. It’s unfortunate because it’s taken what should be a valued business discipline and often marginalized. it…

    • http://www.sethlevine.com sethlevine

      I think peoples’ perception of HR is driven largely by direct experience with HR “professionals” who viewed their job as one of compliance and administration. Yes – there are great HR people out there (as I know from first hand experience) however unfortunately the vast majority just aren’t that remarkable. It’s unfortunate because it’s taken what should be a valued business discipline and often marginalized. it…

  • http://www.thehrladyconsulting.com Denise, the HR lady!

    HR’s bad rap comes from bad HR people. I have been in the business for 15 years and am sad by what I witness. However, there are great HR people out there, but small and new businesses often don’t think they can afford the support. Look around, there are smaller consultants out there who can help! nnThanks for the article, Seth!

  • http://hrnasty.com HRNasty

    Great Post! Absolutely agree. I am fortunate enough to work and report to a CEO in a small start up that understands that culture and the team can make HUGE difference, especially when times are really tough. The right culture and team will keep people tighter – longer when the chips are down. CFO’s are wired to keep track of finances, not people. We pay folks 5k to quit in the firs 3 months. Not too many CFO’s will go for that, but in this economy, it ensure that folks are there for the right reason. I think that HR has itself to blame. We need to learn how to “sit at the table” and interact with the rest of the Execs at this level, bring the same sort of value that the rest of the exec team does. This won’t come from a CEO that wants to give HR a chance. CEO’s don’t have the time. It will come when HR learns to play ball in the Major Leagues, not at the Triple A level. HR needs to grow leaders, and not perpetuate the paper pushers myth. Thanks for the great post!!!!

    • http://www.sethlevine.com sethlevine

      I really do like the “we’ll pay you to leave” idea (Zappos pioneered this,rnright?). Builds the culture very strongly around everyone being therernbecause they want to….