From Start-up to Grown-up: HR Needs as a Business Grows

From the first employees hired during start-up mode to the ~100 employee mark, there are four distinct phases to this growth process. This journey from Founder(s) only to full-fledged, complex organization is marked by important milestones that require skillful navigation to keep a growing organization healthy and thriving. Failing to recognize and adapt to these transitions can stall growth or stymie your organization's potential.

PHASE 1: Start-up

HR needs begin with hiring your first W-2 employees.  Entrepreneurs don’t invest in start-ups to become employers, but the fact is you can’t effectively grow your business alone. HR in the start-up phase is about the present and the future. The present is basic, involving payroll and maybe benefits set up for the Founder(s). To get health benefits, you’ll need at least one W-2 employee that is not a spouse or partner. Your immediate needs can be met with a bookkeeping service for payroll and an HR consultant who can help with hiring and navigating benefit options on an hourly basis.

The future is about building your team to grow your business. People are the driving force of a business and you can’t scale without them. 25% - 35% of your expenses (sometimes more) will be invested in your people including their hiring, training, payroll, and benefits.

Establishing a relationship with a good HR consultant or firm that understands small businesses can be helpful as you plan for hiring growth. They can help with payroll and benefits, ensure the compliance infrastructure is in place and monitored, and be a resource for hiring and onboarding employees as you execute your growth plan. 

When you have around five benefit-eligible employees, there are benefit brokers who will help. A good option at this phase for payroll and benefits is Gusto. Their platform will integrate these services, make scaling easier as you grow, and their pricing model is simple and reasonable.

PHASE 2: ~20 employees

At this transition, you are starting to become an organization and feel less like a start-up. Your HR processes for hiring, on-boarding, and managing performance should become more formalized. Having HR support is more important for these reasons but remains a part-time role. 

At this size, you have additional compliance issues to address, so an updated employee handbook should certainly be in place. You will also likely have your first couple of people managers who will need coaching and support as they manage others. HR support from an experienced HR consultant or small firm works well at this phase, with affordable options available as hourly support or a retained support engagement. Hourly engagements will range from $150 - $225 per hour. Monthly retained part-time engagements typically start at $500 per month and can be up to $5,000 when the workplan and hours requirement are more extensive.

If an HR/payroll system was not implemented already, then you should really be considering options and moving toward implementation in this phase. There are several very good options to consider in addition to Gusto (Paylocity, BambooHR, and Paycor are our favorites) that are in the $300-$600 per month price range (depending on the number of employees and modules selected). 

Having an HR/payroll system helps with process efficiency, electronic record keeping, and compliance. Such a system also helps you scale as an employer and gives current employees and new hires confidence that they work for a growing, professional employer. 

At this size, communication to connect and align people to the organization's goals and objectives comes mostly from the Founder(s) or partners, but care must be taken to do this often and effectively. As you grow, this important issue needs to be addressed differently to maintain a healthy organization.

PHASE 3: ~50 employees

At 50 employees, you are an organization now. Complexity and sheer numbers dictate that HR processes, tools and systems be in place throughout the employment life cycle. You are also subject to more employment laws of larger employers.

Finding Talent - You're recruiting and hiring more at this size, especially if you are in growth mode, so establishing and maintaining your employment brand in the marketplace is a consideration. With more hiring, you will benefit from a more structured, consistent interviewing and hiring process and some training for your hiring managers.

Onboarding new employees - Time to move beyond new hire forms, a Handbook and first day lunches. Onboarding is a process and the beginning of your training and development process. Your program should last for the first few months on the job, intentionally foster a sense of belonging, educate on purpose and vision, set clear expectations, and validate your hiring decision. 

Performance - Onboarding should launch new employees into the performance cycle. Clear expectations, on-going feedback and coaching, and a formal check-in every 6-12 months for accountability is how your performance system should be structured.

Compensation & Benefits - A compensation philosophy should guide a program that has some structure for internal equity and market competitiveness. It doesn't need to be fancy or overly complicated at this size, but the days of individual salary negotiations for all should be behind you. Your benefit program should go beyond just medical and dental, and you should have a retirement plan in place.

Manager training - Your team leaders will need some training, coaching and support beyond the typical inadequate policy and procedure topics. Elevate training for your team leaders and managers so they can successfully engage, grow, and develop the organization’s workforce. This will make your organization more agile, productive, and successful. 

HR technology - You need an HR/payroll system at this size. Process efficiency, compliant record-keeping and making a professional impression with employees and new hires are reason enough. The monthly cost will be less than $1,000 depending on number of employees and modules selected.

Compliance - At 50 employees, the list of federal employment laws you must comply with is nearly complete and now includes the Family and Medical Leave Act (FMLA) and the Affordable Care Act (ACA). Compliance is more complicated now, so you will need help.

Communication - Your leader(s) will need to connect and align people to the organization's goals and objectives. At this size, getting a clear, consistent set of messages is relatively easy. Feedback loops from employees back to leadership can still be managed without much formality.

HR Support - Some organizations hire a dedicated HR professional at this size while others engage with a firm or a dedicated part-time HR Consultant with the right experience. At this size, professional HR is only a full-time job when the organization is growing rapidly or has implemented more sophisticated HR processes.

PHASE 4: ~100+ employees

At this size, you are now a complex organization system. All the people related elements listed in Phase 3 remain important of course, but there are a few additional elements to add to the list. 

Operating system - The operating system is the way a company organizes all its human energy. This includes the way people plan, prioritize, follow processes, meet, solve problems, measure, clarify roles, manage, and lead. One operating system is important for this size organization and beyond because if individuals and groups keep doing things their own way, and different from each other, you have chaos, and the desired results won't be achieved. 

People data analytics - At this size and larger you can collect and analyze data about people to inform decision-making. More than just demographic data and descriptive statistics, you can gain insights into organizational relationships, performance predictors, and other data-driven information on hiring, performance, and development.

Manager training - The skills of your people managers are critical to the success of your organization and should not be optional at this size. Help your managers help the organization by elevating their people management skills around connecting, communicating, developing, and growing others. Providing this type of training is like a secret weapon for the organizations who do it well – structurally and sustainably adding value to your organization.

Leadership - Selecting and developing leaders becomes even more important at this size, especially for your future growth. Leadership skills now start to transcend functional areas and take on organization-wide importance.

Talent reviews - It's time to add a future-focused planning layer to your performance and development process. You should add succession planning for key roles, and also consider the growth trajectories of all employees.

HR support - By this size, most organizations have at least an HR leader and often a 2-3 person HR team combining leadership skill with an administrative and professional level specialist or generalist. Special projects and certain skill sets can be supplemented with an HR consulting firm as needed.

Where is your business in this journey? Do you have the HR processes, systems, and tools in place to navigate these transitions? Are your employees engaged and having a positive experience? Is your culture healthy? If so, congratulations on successfully navigating your growth curve! We’re passionate about supporting businesses, so whether you’re in a good place or think you may need some objective perspective and feedback, we’d love to hear from you.