Securing funding – angel investment or otherwise — is an important first step in getting your startup up and running.
But what foundations need to be set up to ensure that you can transform your side hustle into a viable, full-time business?
We sat down with our internal people operations expert, Marlee Sezer, who helped build and scale functions at The Farmer’s Dog, Compass, and from scratch here at Polywork, to help you determine the most critical functions you need to begin scaling your new company.
What’s the purpose of a people operations function?
There’s a lot going on behind the scenes at growing startups. You know that employee handbook you were asked to review on day one? Or that laptop and monitor that suddenly arrived at your home before you started? Those are just a couple of examples of people operations at work.
By definition, Sezer says people operations, especially at a smaller/start up company, is more of a generalist position covering the entire HR spectrum. They tend to wear multiple hats and contribute to every aspect of the employee lifecycle, starting with recruitment, onboarding, compensation/benefits, performance reviews, goal setting, and tend to manage all employee and business operating systems. And even that barely scratches the surface.
It’s ultimately a role centered around alignment, as these individuals oversee both big- and small-picture HR strategies that contribute to a company’s overall objectives while supporting employee productivity and growth.
While many companies don’t consider bringing on people operations until they reach the 50 employee mark (the typical rule of thumb is usually one people ops person per 50 employees), Sezer says it’s ultimately dependent on the company’s mission and focus.
Speaking of which, we put Sezer in the hot seat to help us decode — regardless of a company’s mission or focus — the most critical functions that startups need to be successful, which we outline below.
What are the most important startup people and operations functions to set up first?
Below, Sezer shares the top five people and operations functions that should be in place to start running your new business effectively.
1. Evaluate or establish a PEO
For a new business, a PEO (professional employer organization) is crucial, Sezer says. They essentially act as de facto employers for your organization: they manage payroll, healthcare benefits, and employment taxes, among many other key processes.
“A PEO often has more capabilities than doing it ourselves [at the early stage of companies],” Sezer says, adding that with a growing team and low resources, having that function outsourced is essential for smooth operations.
2. Determine the best places for your money
A startup’s blessing and curse is the sudden influx of capital it’s receiving to grow and scale. But where should it go first? What is the balance that needs to be struck between investing in operations and people at the jump?
Most often, companies choose to invest in people with their newfound capital. However, they may not have the experience to scope critical roles, write job descriptions, determine the most attractive benefits and perks, and gauge the market for competitive compensation.
“If you want to invest in employees and people early, you need to bring in someone who focuses on humans and is a resource outside of the CEO,” Sezer says.
Not to mention the above excludes the actual finances, such as places to invest cash at higher interest rates than a typical savings account with low risk, which Sezer says can have a sizable impact over time.
“Something that’s often overlooked is all of the finance-related stuff,” Sezer says. “You have to be thinking about how your company can make money outside of sales.”
3. Lay the groundwork for organizational tools
Regardless of your company’s stance on in-office, hybrid, or remote workforces, solid communication and alignment is key to an effective operation, which is why the tools you invest in are just as important as the people using them, according to Sezer.
Therefore, companies need to set up their base of organizational tools to scale and integrate new hires into the best communication structures possible. At minimum, they should set up:
- An internal communications tool, such as Google Drive, Slack, or Microsoft Teams
- An intranet that all employees can go to for internal FAQs and information, such as Notion or Confluence
“Building up your base of organizational tools is super important and lays the groundwork for scaling and hiring,” she says.
4. Build foundations of diversity and inclusion
In absence of people operations, companies would just hire as fast as possible without regard of understanding the best candidates not only on the basis of qualifications, but also the diversity of experiences and thought that is invaluable to organizations.
“While the hiring manager just wants to do it fast and get the job done, you really need someone to ensure that a diverse team is in place,” Sezer says.
The enduring benefits of diversity and inclusion isn’t just lip service — among those whose workplace offers each policy or resource, a majority of workers say each measure has had a somewhat or very positive impact where they work, according to Pew Research.
5. Other critical startup functions and documentation
The benefits of tapping into a global talent pool are countless, but tend to come with the compliance complexities, Sezer notes.
Therefore, new companies should partner (even if on retainer) with outside accounting and legal firms early on to make sure that they’re complying with the different rules and regulations across the U.S. and in other countries. Once employee headcount has grown into the hundreds, it’s typically more cost effective to consider bringing some or parts of those functions in house.
As a team of one, Sezer is often fielding a lot of questions, some of which are common and re-asked (sometimes by the same people writing this very article!).
Erin Greenawald
That’s why another foundational piece of the people operations puzzle is an employee handbook.
“Employees need to understand how to work together, the expectations of them, and what they can expect from the company in terms of leave, software, and how we equip them to be successful,” she says.
Ultimately, it’s the company’s source of truth.
“I’ve been at companies where the handbook is 200 pages long and others where it’s three pages long. The main requirement is that it needs to be something employees can reference as to what to expect and be expected of them,” Sezer says.