Build a fit-for-purpose HR structure for the reality of start-ups
Updated: Jun 24, 2021
Previously on Scaling Start-Ups...
We explored the 6 Foundations to build a future-proof HR function ready to tackle the various phases of start-up growth. In this episode, we are diving into one of the foundations: Structure, where we explore how to structure an HR function inspired by best practices beyond HR.
Building an HR team for future-focused start-ups
For the past 20 years, businesses and HR folks have been using Ulrich’s model to structure HR roles (for better or worse), but when it comes to start-ups, this model goes straight out the window. In fact, most models do!
👀 Here’s the reality of what happens in a start-ups:
When they receive funding to grow their product, they need to hire a team, fast! The first HR hire seems to be a no-brainer: a recruiter. When the HR administration becomes too much to handle for the recruiter, an HR generalist will be hired, whose role will be everything ‘people’ related.
With more new hires, employees' needs become more apparent. You’ll start to hear questions: “What is the next step of my career here? When will my salary be reviewed? When will I be promoted? How are you developing me?”
The next thing you know, your people are starting to leave because they ‘lack career progression.’
Not having the right HR structure before you grow your employee base means you’re on the back foot when it comes to meeting your employees' needs. You may experience the loss of talent, the high cost to replace them but most importantly, the very real possibility of a delay to your business growth, #bewareofhrdebt!
Only very few founders recognise that HR is a lead function, not a lag function
I have been fortunate to work for a couple of organisations that have such a mindset. I joined at a fairly early stage and gave myself 2 years to get ahead of the curve on HR debt. To do so, I made sure the structure of the HR function (as well as the other 5 factors in the 6 Foundations framework) was built to scale with as little upheaval as possible while the business grew at rocket speed.
Beg, Borrow & Steal
Ulrich’s model has inspired HR transformation for decades, but like all knowledge - once bright, attractive and fitting - it falls like dominoes to be replaced by ways better suited to our reality... which will eventually fall too. This is the way knowledge evolves and advances.
With this in mind, I decided to beg, borrow and steal to build a fit-for-purpose HR function for the reality of start-ups 😁.
BEG the business to avoid the trap
I begged the business to avoid the repeated mistakes and well-known challenges that other HR functions have faced using the Ulrich model. As Einstein said, the definition of insanity is “doing the same thing over and over again and expecting different results.” My business leaders had a progressive mindset and I was given full autonomy to build the HR structure I envisioned could serve our business and employees’ needs better.
BORROW from other areas to build 3 key HR pillars
Although Ulrich’s model is the holy grail for HR structure, it doesn’t come without limitations. So, I borrowed from other disciplines to build the 3 pillars of my HR function.
3 pillars of HR function
1. BORROW from Product Development and User Experience (UX): People Product Development pillar
In Ulrich’s model, the HR Centre of Excellence (CoE) develops and introduces strategic HR initiatives, where a group of specialists (for example, talent management, L&D, reward) are organised in their respective team and typically operate in a waterfall fashion. Imagine HR as a production line making a car: each specialism designs its own parts independently. Through the assembly line, each finishes their part and hands it over to the next specialist to attach theirs, and by the end of the production line, you have the sum of all the parts: your car.
Waterfall flow of responsibilities
The drawbacks associated with this way of working are solutions and planning are decided by senior leaders, usually lacking the involvement of consumers (your employees!), usually siloed and there’s little flexibility in responding to change.
If business and employee needs are to be at the heart of what an HR function would focus on, why reinvent the wheel (can’t help the car pun!) when product development and UX have already got this down to a tee? And that is the foundation upon which the People Product Development (PPD) team was built upon.
The PPD team is made up of multidisciplinary specialists with shared responsibilities to develop ‘people products.’ This team needs to be obsessed with our employees.
They take problem statements and test these with the business and employees to determine whether the problem is relevant and impactful. Using external research (as far and wide as possible!) and specialist knowledge, the team then design, develop, test and launch the product. But of course, the testing and learning don’t stop there! Products will continually be reviewed and iterated to make sure they’re still fit for purpose as the business evolves.
Multidisciplinary specialists organised in the same product team
The result of working like this has allowed the team to keep a finger on the pulse of what the business and employees truly need and want.
2. BORROW from Customer Service & Manufacturing: People operations & infrastructure pillar
One of the most successful parts of the Ulrich model is HR service delivery. Cost-cutting is the mantra here for the operational side of HR, from answering employee queries to payroll to HR reporting. Businesses were over the moon when they heard cost reduction. HR folks were ecstatic when HR service delivery was outsourced or off-shored - because we are able to just focus on ‘strategic’ initiatives.
But what we can gain in cost reduction when outsourcing, we lose in knowledge and insights of our employees. On top of that, the experience we give our employees will be a poor imitation of our culture. No one will live and breathe our own culture as we do.
My vision is to avoid outsourcing HR service delivery when the business reaches critical mass. Not because I do not want to reduce cost (as a Malaysian Chinese, getting a good bargain is in my DNA), but the loss of employee knowledge, insight and authenticity is a greater cost.
From the get-go, the vision for the in-house HR service delivery team (called People Operations & Infrastructure aka POI) is to continuously reduce the HR operational work as the business grows exponentially. It is easy to default to expanding the headcount, but we cannot forget the C-word in any HR function - Cap in headcount. So the answer is clear: leverage technology and apply LEAN methodology to reduce waste inspired by customer service and manufacturing.
Technological advancement allows us to automate processes, provide self-service options, speed up communication, create forums in which employees can help each other and we can’t forget the glory of chatbots! We see customer service taking advantage of a whole plethora of new technology to engage with their customers better. Why shouldn’t we do the same?
We also mapped all HR processes and workflows, and these get the LEAN treatment to eliminate wasteful practices. Why should we take 10 steps when we can deliver the same great employee experience in 3 steps? Any steps that are redundant are continuously and actively removed - bye-bye bureaucracy! 👋
3. BORROW from Customer Success: People Partnering pillar
In Ulrich’s model, the role of an HR Business Partner (HRBP) is one that leads and implements HR strategies closely with their business. However, in start-ups, the role can be succinctly described by a saying in my mother tongue (Hokkien): ‘Bao Sua Bao Hai’ which literally translates to ‘cover the mountain and cover the sea.’ The role covers everything and anything purely because of the nature of the structure (or lack thereof!) in start-ups.
I dipped my toes into HR business partnering in a scale-up and boy, I have never worn so many hats in my life! Besides the usual influencing and steering strategy in my business units, I was doing everything and anything between building career maps, listening to employees’ woes and dreams, overhauling performance reviews and engagement programs, preparing reward letters and setting up new processes in our HR systems. Did I feel like I did anything exceedingly well? The honest answer is, no!
Because of the lack of investment in the HR function in start-ups, the role of HRBP will not be truly valuable. Why? Because they are losing 80% of their productivity each day in context switching and are stretched too thinly to be able to effectively focus.
I want a world where, when HR checks in with employees, it is because we genuinely want to know how they are doing or what they think about the initiatives that we are currently building for them. The more we know our employees, the better we are able to meet their needs.
Typically, HRBPs only partner with business leaders - hence you will hear HRBPs who are responsible for 700 to 1000 employees 😱 This means non-leaders associate HR with problems or hard conversations because it’s the only time they interact with them!
So, the People Partnering team I built is a ratio of 1 partner to ~60 employees. This way, it provides scope for our People Partners to have their ears on the ground, finger on the pulse of our employees and able to influence business strategy more effectively.
STEAL from Agile to glue all the 3 pillars together
To bring alignment and collaboration across all the 3 pillars of the HR function, I stole from Agile principles and methodology.
I had my first taste of Agile when I was working with the Product and Tech team at one of the world’s largest online classifieds companies. The business leaders couldn’t decide on which of 2 sets of questions we should use for our end-of-year performance review when our VP of Engineering said, “Why don’t we run both sets of questions and ask people for feedback to see which is better?”
😲 Years in HR taught me that a successful team has all the answers and puts out 100% completed initiatives that they will back with their life as the best thing since sliced bread. Anything less is inconceivable!
But I ran an AB test of the performance review questions - this was no test environment, it was tested in a very real performance review cycle. No one died, no one complained that HR does not know their shit💩. All our employees were super excited to provide feedback. The world is ready to embrace experimental ways of working in HR! Hallelujah!
Since then, I was determined to build HR functions that embrace iterative ways of working through collaboration with our employees. There is no hesitation to roll out initiatives faster by creating MVPs (minimal viable products). The ultimate benefit is we will deliver value faster, with greater quality, predictability and greater ability to respond to change.
Ulrich’s model is a great starting point, but don’t hesitate to adapt it to your needs
Getting that buy-in from your business leaders is important: if they’re resistant to change or a new way of approaching HR, your strategy is doomed from the outset! Don’t be afraid to step outside the safety of Ulrich’s model and look at what structure is going to best serve your business and your employees, now and in the future - and remember to keep an agile mindset while you do it: trial, test and iterate!
In the next episode...
We discovered different perspectives to structure an HR function inspired by best practices beyond HR. Next, how do we hire for the B.E.S.T. capabilities-fit for your HR structure? Stay tuned to deep dive into the next foundation from the 6 Foundations framework: Capabilities.