Value Creation for HR in an Entrepreneurial Firm

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May 28, 2013 by michaelchanrubio

Value Creation is an important contribution stream, and only becoming more so in the future. While few will claim that it is an easy thing to provide, especially in a mature organization, it is very easy to provide in a growing, entrepreneurial organization.

By easy I don’t mean that there are no risks, that you can’t do a bad job at it. What I mean is that in an entrepreneurial organization (a company growing past 7 employees, and in a very fast way), the contributions of HR are highly valuable.

I’ve read quite a few posts on how HR has a problem earning a seat at the C-Suite table. This is a legitimate concern, but one that is more evident in large, mature companies. In a small company entering its growth phase, HR has that seat, albeit on a very small table. Nonetheless, it is very exciting.

I’ve mentioned in a previous post how in many entrepreneurial companies, the first growth phase can be a kill point for some of the incumbent employees. This is because the company that the entrepreneurial organization is becoming (and needs to become) will outgrow the competencies of the incumbents. Yes, even the founders must ask themselves whether they are the ones who should lead the organization.

Thus, hiring and the development of employee systems becomes very valuable, and is perhaps the most valuable task in the organization whose business model is sound and is poised to grow. The organization must hire as fast as possible while remaining as careful as it can. Every delay costs the company, as critical tasks are being performed by incumbents no longer qualified to do so.

So what specific contributions?

  • Hiring policy development (and execution of the hiring process; protecting the hiring managers from themselves)
  • Compensation and Benefits strategy; the organization will not be able to compete with bigger companies to woo away experienced hires, but the best possible offer must be created. The HR leader must work with the founders if equity is available for compensation. Also, the HR leader must work with the founders to design the rewards and performance measures to align with the culture as idealized by the founders.
  • Redeployment, placement, or perhaps even termination of incumbents; this is tough. There is that dilemma between loyalty vs. success; granting that the dichotomy does exist in your particular case (it often does). The HR leader must find roles where the now-B or C players can be A players again.

This process can last for several years, and is renewed at every new growth phase; and by then it’s very clear how Human Resources earned its seat in the C-Suite. Unless, that is, the skills of the HR lead got outpaced by the business growth.

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