When do you hire a senior HR executive?

Answered by: Phil Fernandez, Founding CEO, Marketo

Category: Passionate Teams

If I started another company, the second thing I would do is hire a Chief People Officer. The title Chief People Officer doesn't exist anywhere, but I kept writing CPO and everybody thought it was Chief Product Officer so I wrote it out that way. This is an incredibly important role in the modern startup. I outsourced HR for a number of years. We got payroll done100% of the time and we managed to get benefits and all that stuff with Sequoia Benefits and that was all good. I hired a perfectly fine good operational head of HR, at about $30 million revenue, but it wasn't until after the IPO that I hired an amazing strategic SVP of HR. In some sense, I realized what I was missing all those years and you say, "Well you know that was then and you were big and you could get somebody like that," but I just think that the HR function is undervalued.

It's done well by a small number of people, and not well by a large number of people maybe in the Valley. If I were building a company today at series A level, I would be out wanting to hire the most senior expensive overqualified chief people officer into the business as I possibly could as early as possible.

I've been consulting and I was working with an entrepreneur who just raised his series B and he called me up the other day and said, "We have never talked about this." He said, "I'm feeling this and I don't know, I think I've got to go get a great big head of HR because I just think it's the right thing." And I said, " I'll send you my deck!." He discovered this himself and it was very gratifying to realize that there are entrepreneurs who are realizing this. The senior HR person should report only to the CEO. This becomes an incredible consigliere.

One who understands the culture. We hear all these things – how CEOs don’t know what's going on in the culture. That's B.S. if you're ever a CEO who is claiming you don't know what's going on in the culture.

There's a cultural aspect of having somebody who is trusted in the organization. If they're empowered by the CEO, they're not a creature of the CEO but they are empowered by the organization. That ability to really understand and create a workplace that's welcoming – one that's diverse, that's responsive, that's hearing people-- because it's hard when you're working hard.

I think this is really important and at the same time we are in a global war for talent. If you don't have somebody sitting at your right hand that's thinking every minute about where you're going to source talent, how you're going to find talent, how you grow talent, how you fight that war, then you're running the job with one hand tied behind your back.

For all of those reasons, this is one of the key hires. One of the great places to hire is from great HR departments -- people that are HR business partners who are the emissary for the head of HR to the sales department or the product department or whatever. A lot of times those people are ready to step up into a top job in a smaller company and from that very fertile place, you can hire somebody from that HR generalist role into the top job. There's a lot of those people available. Go get one in your company. Yes.

AUDIENCE QUESTION Given the cash constraints that startups operate under, don’t you think, practically speaking, it's sometime between series B and series C to do what you suggested?

No, I don't because you reduce turnover just a little bit. You reduce the cost of hiring just a little bit. You're a little more successful in the global war for talent. You avoid the first HR scuffle where somebody makes an accusation of an unfair workplace and you undergo a $40,000 settlement to make them go away. All those things just happen in the real world and if you know anything about me, I'm a long range thinker but I think this role pays for itself--five times over because all of those things just happen. Yes, it's a little bit hard to swallow that salary when you're also figuring out how to do it. And yes, maybe it's Series B and not series A, but I think it is then because the payback is there in culture. the payback is in the talent, and the payback is in making the CEO be a more effective.

AUDIENCE QUESTION: What were saying is finding characteristics of what you think is a strong HR partner stronger

HR is populated by lots and lots of paper pushers and those are not the strong ones. Then there are people that believe that HR can be a direct positive influence on talent of the organization, on diversity, on culture, and who can talk about those things in an actionable way. They have been down the path of helping managers through hard situations where they actually helped.

People who have come out of the COMs function are tremendously valuable. People who have come out of benefits are tremendously valuable. People that come out of the modeling part, but the people there on the front lines and that have had the right success making managers successful, I think are the right kind of people. The frontline HR business partners, the good ones are the great ones from that point of view. Like I said, keep calling out if you want to interrupt me. Yes.

AUDIENCE QUESTION: That's where I would just step in interested in one iteration on that is, a lot of the stuff that [unintelligible 00:19:11] also some former battery partner [unintelligible 00:19:16] The people, the individuals seem to matter so much more than the roles. I've been in companies where I've had a VP of Sales with that title in same responsibilities that have done way better than somebody who is a CRO got the title, got the mandate thinks that way but they're just not as good. How did you flex that along the way. You had the idea for the role but you didn’t have the right human versus having the right person but maybe not as expansive in the role and those are practical trade-offs that you are trying to do something about.

That is what's so freaking fun about building companies. Is that! and it is because it's a puzzle. and it's what you have to-[00:20:00] -do is like you write job descriptions. you design your charts and then every last hire that a C.E.O. or whatever level you get involved in --is like what's the situation on the ground, who's this person I'm talking to, what are they bringing, how do I --if I want to lean into that person and then what do I compensate for over here? and what that takes is flexibility,-- the ability to interview people not for what their resume says or what they [unintelligible 00:20:29] say they do but how do they think and what do they bring. and to see the experience of building a team as exactly that.

To me you just get how excited I get. That's like this huge reward of, "Wow, well if I can get that person then I can complement to maybe something with the skill but I'm so going to have that there, but maybe that's something that this person can grow in." I find that in fact reveling in that set of ideas --they don't have to take a lot of time-- but reveling in it as the beauty of you're working with like these unpredictable people that each with their own thing and figuring out how to craft them into a whole is like,I don't know… if that's even remotely useful as an actionable thing to say but thinking about it as like this incredibly The implication is that there's push and pull and give and take and all [unintelligible 00:21:27]

21:28 PHIL: Yes, based on who the who the human is and the notion of how to constantly be assessing what's going on on the ground, not what's your charts say but what's happening and the people that have a strength that you didn't expect or weakness and you didn't expect. and you can compensate somebody else that brings a different set of talent and I just think that you know that sense of crafting. What is that art of just-- who are the people and how do you get the most of them and always being flexible in it.

I used to be really rigid about titles earlier in my career and stuff and it's like all that stuff is like, how do you get the most out of people and assemble the puzzle.

22:15 AUDIENCE QUESTION One question on that [unintelligible 00:22:16] can say I [unintelligible 00:22:20] makes and this is something everybody talks about as important but nobody is [unintelligible 00:22:26] about it. [unintelligible 00:22:35] why is that so important. We say just 3% [unintelligible 00:22:40] why.

22:41 PHIL: Two reasons number one, hiring people is expensive. You know wildly expensive and if you're filling a leaky bucket is quite expensive. Number two, the learning curve in a modern enterprise a complexity of the software we are building or what the sales cycle looks like or what the marketing patterns are or whatever and to have somebody walk out of the door. We used to joke at Marketo like it literally became a mantra in a culture to make people successful is like, "Don't do anything for your first 90 day. Just learn because what we've realized is like people would come in, was just like huge learning curve and they'd be like halfway up it and then somebody would say, "That person is a [unintelligible 00:23:20] they're not doing the right thing," because they haven't learned anything yet, right now and so we constantly have to remind ourselves how steep the learning curve and once [unintelligible 00:23:29] was and once [unintelligible 00:23:30] up that learning curve the last thing you want that knowledge is to go out the door and then people built relationships, and people liked working with other people .

You spend a lot of time at work and if the people you start to build relationships with like aren't there tomorrow, that's painful. For getting the most out of somebody who wants to be there and be there with their friends or whatever, which doesn't mean you don't get rid of that formers and you've got to do all of that stuff because they can bring the company down. But man, every point of attrition is like golden from financial [00:24:0] from knowledge and from culture.