Column: When Should a Startup Hire Its First HR Person?
Spencer Rascoff is an entrepreneur and company leader who co-founded Zillow, Hotwire and dot.LA, and who served as Zillow's CEO for a decade. He is currently executive chairman of dot.LA and a board member at Zillow and TripAdvisor. In fall 2019, Spencer was a Visiting Executive Professor at Harvard Business School where he co-taught the "Managing Tech Ventures" course. In 2015, Spencer co-wrote and published his first book, the New York Times' Best Seller "Zillow Talk: Rewriting the Rules of Real Estate." Spencer is the host of "Office Hours," a monthly podcast on dot.LA featuring candid conversations between prominent executives on leadership, diversity and inclusion, and startups.
The tech industry has come a long way over the last few years in terms of recognizing the importance of HR. Most CEOs now share my long-held belief that HR can and should play a strategic role at a company, and that having "good HR" can be as important as having "good tech," "good marketing" or any other function.
What is "good HR"? It means thinking of human resources (HR) as a way to recruit, retain and motivate great people. "Bad HR" means thinking of HR purely from a risk-mitigation standpoint (e.g., "how can the HR department help make sure we don't get sued for discriminatory hiring practices?"). Even worse than "bad HR" is having no HR at all.
Which begs the question that all startups face: when should you hire your first HR person?
TL/DR: typically at about 15-20 employees, I believe it's time to hire a dedicated HR person.
Most startups are capital constrained, so it's easy to postpone that first HR hire and focus scarce resources on product, engineering or sales. And if your startup is unsure if you'll get to the next round, then you should delay the HR hire and hold your breath on adding HR resources. If the CEO cares deeply about HR, he/she can fill some of this gap in the short term. But you really are just "holding your breath," and as soon as you feel that it's likely you'll be able to raise the next round (or get to break-even on your current funding), it's time to add an HR person.
Ideally, that first HR person should be a generalist — part recruiter, part HR business partner (HRBP), part employee comms, part learning & development (L&D), part diversity equity & inclusion (DEI), part HR ops and benefits. At larger companies (more than 500 employees), those various disciplines are separate and there are people who dedicate their entire careers to being the best in the world at each of them. But startups don't have the luxury of specialization.
That first HR hire is extremely important. He/she sets the tone for the role HR will play at the company. He/she needs a strategic seat at the table with the senior team to help create policies and culture which the company will live with for years. Here are just a few examples of decisions that startup companies with 10-50 employees need to make which would benefit enormously from a HR person involved:
- The first version of the product is almost ready to launch and we're starting to think about monetization. What type of sales function should we have (e.g., inside sales or field sales)? What should the compensation structure be for salespeople? How much of a role should product people (e.g., program managers) play in sales?
- We need to design employee levels and titles, an employee review system, roll out an employee experience software package and create guidelines on appropriate workplace behavior
- We need to create an employer brand (which overlaps with our consumer brand), so we need to decide what it means to work at our company. Why should candidates choose to join us, and why should our employees choose to stay?
- We have an under-performer and we need to manage him/her out of the company. It's particularly complicated because of the work-from-home situation where it's hard to evaluate employee productivity.
For these examples and many more, it's important not to wait to add your first HR person. In tech, we talk a lot about "tech debt," the concept that products build up technical debt if you don't consistently invest in their maintenance. Likewise, companies can create HR debt, which is very hard to dig out of if you wait too long.
Startup CEOs: Hire an HR generalist as employee number 20 — you'll be glad you did.
- Here is a podcast I did on the importance of company culture and how HR can be strategic:
- Here is a column I wrote about building culture in a work-from-home environment.
- When Should I Not Raise Capital Investment? - dot.LA ›
- As CEO, How Should I Spend My Time? - dot.LA ›
- Founder Questions: How Should I Structure My Annual Review Process? - dot.LA ›
- WeAreNoCode Teaches Non-Tech Founders to Build SaaS Startups - dot.LA ›
Subscribe to our newsletter to catch every headline.
As Big Tech cracks down on moderation after the Capitol attack and Wall Street braces for more fallout from social media's newfound influence on stock trading,
legislators are eyeing changes to Section 230 of the Communications Decency Act of 1996. On Wednesday, February 10, dot.LA brought together legal perspectives and the views of a founder and venture capitalist on the ramifications of changing the way that social media and other internet companies deal with the content posted on their platforms.
A critic of Big Tech moderation, Craft Ventures General Partner and former COO of PayPal David Sacks called for an amendment of the law during dot.LA's Strategy Session Wednesday. Tyler Newby and Andrew Klungness, both partners at law firm Fenwick, laid out the potential legal implications of changing the law.
David Sacks, Co-Founder and General Partner of Craft Ventures
David Sacks, Co-Founder and General Partner of Craft Ventures<p>David Sacks is co-founder and general partner at Craft. He has been a successful tech entrepreneur and investor for two decades, building and investing in some of the most iconic companies of the last 20 years. David has invested in over 20 unicorns, including Affirm, Airbnb, Bird, Eventbrite, Facebook, Houzz, Lyft, Opendoor, Palantir, Postmates, Reddit, Slack, SpaceX, Twitter and Uber.</p><p>In December 2014, Sacks made a major investment in Zenefits and became the company's COO. A year later, in the midst of a regulatory crisis, the Board asked David to step in as interim CEO of Zenefits. During his one year tenure, David negotiated resolutions with insurance regulators across the country, and revamped Zenefits' product line. By the time he left, regulators had praised David for "righting the ship", and PC Magazine hailed the new product as the best small business HR system.</p><p>David is well known in Silicon Valley for his product acumen. AngelList's Naval Ravikant has called David "the world's best product strategist." David likes to begin any meeting with a new startup by seeing a product demo.</p>
Kelly O'Grady, Chief Correspondent & Host and Head of Video at dot.LA<p>Kelly O'Grady is dot.LA's chief host & correspondent. Kelly serves as dot.LA's on-air talent, and is responsible for designing and executing all video efforts. A former management consultant for McKinsey, and TV reporter for NESN, she also served on Disney's Corporate Strategy team, focusing on M&A and the company's direct-to-consumer streaming efforts. Kelly holds a bachelor's degree from Harvard College and an MBA from Harvard Business School. A Boston native, Kelly spent a year as Miss Massachusetts USA, and can be found supporting her beloved Patriots every Sunday come football season.</p>
Tyler Newby is a partner at Fenwick
Andrew Klungness is a partner at Fenwick
Sam Adams, Co-Founder and CEO of dot.LA
Sam Adams, Co-Founder and CEO of dot.LA<p>Sam Adams serves as chief executive of dot.LA. A former financial journalist for Bloomberg and Reuters, Adams moved to the business side of media as a strategy consultant at Activate, helping legacy companies develop new digital strategies. Adams holds a bachelor's degree from Harvard College and an MBA from the University of Southern California. A Santa Monica native, he can most often be found at Bay Cities deli with a Godmother sub or at McCabe's with a 12-string guitar. His favorite colors are Dodger blue and Lakers gold.</p>
- Lawmakers Take Aim at Algorithms 'at Odds with Democracy' - dot.LA ›
- How Trump's Order Could Impact The Fates of Snap, TikTok and ... ›
- How Social Media Moderation Might Be Legislated - dot.LA ›
On this week's episode of Office Hours, you'll hear from Gregg Renfrew, serial entrepreneur and founder of clean beauty company, Beauty Counter. She also serves on the board of directors of Supernova, my special purpose acquisition company.
- Office Hours Podcast: Bill Gurley On Startups, Venture Capital and ... ›
- Mattel CEO Ynon Kreiz on the Power of Brands and Barbie - dot.LA ›
- Mattel CEO Ynon Kreiz on the Power of Brands and Barbie - dot.LA ›