The Magic Bike Company

Human Resources

How do you get human resources right in a fast growing tech company. Growing from 50 to 500 to 5,000 to tens of thousands of employees is hard. Operating systems and processes that work in a 500 person company don’t work in a 5,000 company. The same is true of every growth spurt. Systems break down and stuff gets messed up. A well designed and implemented human resources organization can help. A messed up human resources organization will hurt. As Uber has found out.

Getting Human Resources Right

Hire a human resources (HR) leader EARLY in the development of your company and “level up” your HR leader as needed as your company grows. The right HR leader in a company of 50 is not likely the right HR in a company of 5,000. Of course there are exceptions to this rule, but in general you will need more experience in the HR leadership function as your company grows.
Have your HR leader report directly to the CEO. Do not tuck the HR leader underneath your COO, VP Ops, CFO, GC, or VP Admin. The CEO has a hard enough time figuring out what is going on in her company as it is. Putting someone between them and their cultural leader/thermostat is a bad idea. Plus the optics are terrible. Your management hierarchy says a lot about what you value and what you do not. Actions speak louder than words, always.
Do not make your HR function a recruiting function. Of course HR needs to help the company hire. And it certainly needs to help transition out people who have to leave the organization. But HR orgs that function mostly as an I/O pipe are bad HR orgs.
Do make your HR organization about culture and leadership first and foremost. I have heard many HR leaders called “our culture carrier.” That’s good. And HR orgs should be making sure everyone is getting feedback on their performance and development goals, including the CEO. Organizations that share feedback top to bottom with dignity and professionalism are great places to work and perform better.
Always have a company handbook that lays out the rules of behavior in the workforce. You can’t do this too early. You set the tone early and it propagates. It is great if you can start with your values, clearly laid out for everyone, and then lay out the rules and what happens if they are not followed. There’s feedback and there’s guidance; there’s praise and there’s criticism. All of it is important to do better work, but to develop a better and more productive workplace and relationships — especially given how much time we spend at work! — the way we give and receive feedback really matters. Learn more here: Giving and getting feedback
Nora Jenkins Townson Founder @ Bright+ Early, former Head of People @wealthsimple, startup HR veteran wrote an article on Medium How To Bootstrap Your Startup’s HR (And When Not To) that describes the steps a startup should take to on board a HR staff. At some time you and your partner will begin the process of growing from two to many employees at your new and unique startup. As Uber, GitHub and Reddit have demonstrated employee problems occur. When they do you need professional help. Also there are legal requirement you need to be aware of in recruiting and letting go of current employees. This article provides information to help the startup CEO in on boarding her HR department.
I believe that the companies that take the time to properly onboard new employees are better places to work and perform better. Onboarding should be more than “here’s your laptop, here’s your desk, here’s your boss.” It should be at least a few weeks of getting ingrained in the values, culture, systems, processes, and rules. It should be learning about every part of the organization, the current operating plan, strategic priorities, management team, and more. Doing it right is hard but it pays off bigtime.
One CEO that I have worked with for more than fifteen years once told me his HR leader was his most important senior executive. He said she was his “business partner.” That’s a great place to get to if you can get there. What is more important than your team, after all?
Talk about this stuff in your all hands meeting, regularly. It should not get talked about only when something bad happens somewhere. This is something that should be discussed at least a couple times a year. Companies that scale rapidly can double in size in less than a year. So you have to talk about this stuff frequently to make sure everyone understands it. And make sure to clearly cover it in the onboarding process. This discussion on Getting Human Resources Right is from the blog of Fred Wilson.

Hire to fit your culture! We know that culture is important. We even think we know what it is. But culture isn’t perks like dogs and snacks in the workplace — nor is it a defining personality, like, say, “googleyness”. Culture is the collective behavior of an organization… and whether or not you go about creating one, you’re going to get one anyway, argues a16z cofounder Ben Horowitz. “Unless you set it, it’ll just be what it is.”
“A lot of the good companies that I’ve seen actually proactively define their culture. And they emphasize what that is with their first 20 employees, and then it kind of takes a life of its own. Why do you want that? It’s sort of like when ducks fly south for the winter, you don’t have to tell the ducks in the back of the V, get in the V. They just know. And when a company gets into blitz scaling mode, you don’t have time to tell the hundreds of new employees that you hire, here’s how decisions get made here, here’s what we value, here’s how we make tradeoffs at the margin. They have to be programmed in the DNA of how they participate in the company. Basic management systems. This has to do with just one-on-one meetings, board meetings, team meetings, forecasting frameworks. You know, what gets covered in those meetings, what shouldn’t get covered in those meetings. Just having a sort of a philosophy of that going in can save a lot of time and avoid a lot of management debt.” Mike Maples Jr.
So what should startup leaders look out for? In general, any sign that single-minded collaboration toward a shared goal has been replaced by team- or department-specific priorities. Startups generally begin with a single tight-knit group, breaking into teams as they grow to provide focus around a particular problem domain or business goal. “But those teams are never independent of one another. There are always dependencies,” says Grosse. “If communication between those groups doesn't work, then you create a fertile ground for factions. You get factions when teams cannot seem to collaborate because of differences in vision, differences in working styles. Perhaps there’s even mistrust between the teams.” Fighting Factions: How Startups Can Scale Without Mutiny a First Round Review.

Leadership and behavior

An orchestra conductor faces the ultimate leadership challenge: creating perfect harmony without saying a word. Captured in this Teds Talk are a number of leadership skills!
The magical moment of conducting occurs when the conductor arrives onto the stage. “There is an orchestra sitting warming up and doing stuff. He goes to the podium and in front of all that noise, he does a very small gesture. Something not very pomp, not very sophisticated. And suddenly, out of the chaos, order. The noise becomes music.”
The conductor is spreading happiness. The important thing is this happiness does not come from only his own story and his joy of the music. The joy is about enabling other people's stories to be heard at the same time. In this short video we witness different styles of leadership. Delivered with a twitch, a wave of the hand, or facial expressions.
How do you create a team that functions like an orchestra ? What makes them into partners? “You have the plan in your head. You know what to do, even though Kleiber is not conducting you. But here and there and that. You know what to do. And you become a partner building the rollercoaster, yeah, with sound, as you actually take the ride. This is very exciting for those players.”
As a manager and leader you want to create music out of noise and chaos. Spreading happiness and joy embedded in stories. Stories that become your product.
“Eric Maskin presents mechanism design that recognizes the fact that there’s often a tension between what is good for the individual, that is, an individual’s objectives, and what is good for society—society’s objectives. And the point of mechanism design is to modify or create institutions that help bring those conflicting objectives into line, even when critical information about the situation is missing.
An example that I like to use is the problem of cutting a cake. A cake is to be divided between two children, Bob and Alice. Bob and Alice’s objectives are each to get as much cake as possible. But you, as the parent—as “society”—are interested in making sure that the division is fair, that Bob thinks his piece is at least as big as Alice’s, and Alice thinks her piece is at least as big as Bob’s. Is there a mechanism, a procedure, you can use that will result in a fair division, even when you have no information about how the children themselves see the cake? Well, it turns out that there’s a very simple and well-known mechanism to solve this problem, called the 'divide and choose' procedure. You let one of the children, say, Bob, do the cutting, but then allow the other, Alice, to choose which piece she takes for herself. The reason why this works is that it exploits Bob’s objective to get as much cake as possible. When he’s cutting the cake, he will make sure that, from his point of view, the two pieces are exactly equal because he knows that if they’re not, Alice will take the bigger one. The mechanism is an example of how you can reconcile two seemingly conflicting objectives even when you have no idea what the participants themselves consider to be equal pieces.
Eric Maskin presents the technique to make employees shareholders in the company. You might think that in a very large company an individual employee’s effect on the share price might be pretty small—but as Eyal said, there’s an emotional impact too. An employee’s identity is tied to this company in a way that it wouldn’t be if she were receiving a straight salary. And empirical studies by the labor economist Richard Freeman and others show that even large companies making use of employee ownership have higher productivity.”

Article retrieved from McKinsey & Company — McKinsey Quarterly 2016
To motivate a team, you need goals that are clear, and metrics that support them. That means that your strategy — how you break down the problems and how you plan to remove the obstacles — should be widely understood, and your goals should match a shared mission. And both need to match the systems you’re using to navigate, so that your people align themselves with the strategy.
That isn’t something that happens on its own, but it also isn’t something that can be imposed from above. Instead, it needs a cooperative alignment, matching the the goals with incentives based on useful metrics. Failure to use metrics well means that motivations and behaviors can drift. On the other hand, using metrics won’t work exactly, because complexity isn’t going away. A strong-enough sense of mission means it may even be possible to align people without metrics.
When Yvon Chouinard, Patagonia’s iconic founder, and his wife Malinda started the company, their employees were friends and family and they wanted to support them as they worked, and started their families. Patagonia, which has housed an on-site school daycare for nearly 34 years, knows the power of employee happiness. Its employee daycare has enabled the company to attract and retain top talent, which has been a boon for the company. When Patagonia’s owners created the daycare during the early years of the company, they were responding to the human needs of a workforce which consisted of their friends and family. It unexpectedly led to a nearly 100% retention rate of mothers employed by the company, and Patagonia’s overall company turnover has been described as “freakishly low”. By listening to their employees, the owners were able to make them feel happier about going to work. retrieved from: Quartz
“It makes sense, however, to use both sets of tools; adding goals that are understood by the workers and aligned with the mission, which clearly allow everyone to benefit, will assist in moderating the perverse effects of metrics, and the combination can align the organization to achieve them. Which means ambitious things can be done despite the soft bias of underspecified goals and the hard bias of overpowered metrics.” retrieved from: Overpowered Metrics Eat Underspecified Goals - David Manheim writing at ribbonfarm
“Spend money very very carefully until you have product market fit. You want as lean a team as possible before you get there. There is no point of hiring more than the bare minimum team (usually just the co-founders) before you figure out what users want. Then you scale. Companies that hire before that waste runway, and that’s a shame. Once you have product market fit, you still need to be careful with hiring. retrieved from: Sarah Tavel, quoted by Tren Griffin
Good company culture is more nuanced than simple homogeneity or heterogeneity. On the homogeneity side, everyone being alike isn’t enough. A robust company culture is one in which people have something in common that distinguishes them quite sharply from rest of the world. If everybody likes ice cream, that probably doesn’t matter. If the core people share a relevant and unique philosophy about something important, you’re onto something. Similarly, differences qua differences don’t matter much. In strong company cultures, people are different in a way that goes to the core mission. Suppose one key person is on an ice cream only diet. That’s quirky. But it’s also irrelevant. You want your people to be different in a way that gives the company a strong sense of identity and yet still dovetails with the overall mission. Having different kinds of problem-solvers on a team, for example, can make for a stronger culture. retrieved from: Blake Masters' class notes chapter 5.
Two good example companies provide guidance for generating employee involvement: Netflix — Reference Guide on our Freedom & Responsibility Culture and Valve — HANDBOOK FOR NEW EMPLOYEES
The goal is to create a culture where peers inspire peers, in which each employee acts like a leader, pushing the culture forward. People like us do things like this. People like us, care.

When it comes to making decisions, holding people accountable, and dealing with conflict, leaders can find themselves unable to act clearly and forcefully. Some leaders tendencies lean towards a high tolerance for dysfunction, due, in part, to the value of not upsetting people. Leadership will often let disruptive behavior go on for some time without speaking up about it, as being non-judgmental becomes more important than accountability.
“The highest form a civilization can reach is a seamless web of deserved trust. The right culture, the highest and best culture, is a seamless web of deserved trust. Not much procedure, just totally reliable people correctly trusting one another. That’s the way an operating room works at the Mayo Clinic. One solution fits all is not the way to go. All these cultures are different. The right culture for the Mayo Clinic is different from the right culture at a Hollywood movie studio. You can’t run all these places with a cookie-cutter solution.” Charlie Munger quoted by Tren Griffen.
In his book Drive, Dan Pink says more than money, employees are motivated by the holy trinity of mastery, autonomy, and purpose. He presents this idea in this Teds Talk.

 

If this is true, then it’s easy to imagine the perfect employee: satisfied with her abilities, content in her relationship with the larger organization, and happy with the meaning she derives from it all. This is wonderful, but it’s only enough when you’re accountable -- when you can guarantee your actions by your word alone, and not by third parties.