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Run People Operations Like a Business

Help People Understand the Value
One thing I’ve learned over the last few years working with startups is that those of us working in People Operations have to integrate with the core business functions better than we currently do. That means understanding the entire business, not just the people side, and learning how to communicate our value better. I’ve been chewing on this for quite some time and I’m starting to create a thesis. We need to use the same metrics our businesses do to track our success. I’ve mainly  been working with SaaS companies and SaaS metrics fit nicely onto People Ops work, so I’ve started to talk about tracking the work I do in the same way.

The organization’s employees are the customers of People Ops, which, in turn, is a service provider. People Ops should be concerned with the same things the business is concerned with: acquisition, retention, and engagement.

Measure Your Impact
The products People Ops sells are culture, structure, opportunity, and the benefits of working at an organization. The customer, in this case that’s the employees, pay for the product with their labor. Google employees (the customers of their People Ops function) have a yearlyARPU of $1,000,000, with an average COGS of $800,000 for a net profit of $200,000 per customer per year. To manage the bottom line, People Ops has to function like a finance department and track CAC,LTV, COGS, and ARPU. People Ops is a high touch service and revenue comes from high prices on a low volume of transactions. However, in organizations where employees are both the biggest asset and cost, People Ops is no luxury; we are a necessity to remain competitive and drive real business value.

Create Negative Churn and Expansion Revenue
Above all, People Ops should be obsessed with churn. Specifically, finding ways of creating negative churn. Your People Ops group should closely track why customers (the employees) churn (quit), which customers are about to churn, and upsell like crazy to create negative churn (by increasing employee and organizational capability, the People Ops version of expansion revenue). The upsell is where we excel. We create culture, structure, and systems that enable innovation, communication, and engagement, and we also promote and develop employees. These activities can vastly increase our current customers’ LTV (by enhancing the value of their labor), to create expansion revenue from existing customers and, thus, negative churn. Some churn is desirable though, because certain customers will have very low or even net-negative value. People Ops has to identify these customers and help them churn to avoid misallocating resources.

This type of thinking leads you to see employee engagement as a way to build community (similar to the way you’re desperately trying to create a community for your SaaS product) and People Ops has to function like marketing. Onboarding new employees becomes just as important as onboarding new customers and partners, so People Ops functions as business development. Organizational structure is like the UI and organization design is like coding the front end, while culture has clear parallels to UX; in this way, the People Ops function is also responsible for design, engineering, and product management.

Love the Problem, Not the Solution
The last thought I’ll leave you with today is that, just like any entrepreneur, you’ve got to be obsessed with the problem you’re solving, not the solution. Understanding the organization’s values is like knowing your business’s value proposition.  It’s your elevator pitch and your guiding star. You have to understand the problem you are solving so you can build solutions. The values define the problem you are solving because they define your culture, and in the end that is in large part the service you are providing your customers. Trying to make culture haphazardly without the focus of values is like building a product out of cool stuff you’ve heard about from other services. Drag-and-drop upload here, share button there, connection-to-a-shopping-cart API here – you end up with a franken-product driven by solutions to an unknown problem your customer probably doesn’t even have. Policies (20% time, free lunch, etc.) are the services People Ops provides to our customers in order to fulfill our value proposition. These are the solutions that have been created to enact and live the values, the problem we are solving. Be obsessed with the problem, not the solutions. Experiment and learn and pivot with respect to the solutions. Measure relentlessly. Use cohort analysis to figure out how you’re doing. Pursue the problem doggedly.

Simply put, run People Ops like a business.

If you’re currently running People Ops at a startup and would like to join a Venwise pod, you’re in luck: I’m putting together a group right now. If you’d like to apply for one of the open slots, email us here and tell us a little about your company and your role.

-Joaquin

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