AI Is Rewriting the Economics of the People Function
The Future of Organizational Scale | Part II
Your First CPO Should Build a System, Not a Department
In Part I, I wrote about the four modes of organizational scale and the role an experienced Chief People Officer plays in helping a company move through them. For many CEOs and investors, the first critical decision comes when the company reaches about 50 (and growing) employees.
This is when the people issues are becoming real. Managers need support. Hiring is accelerating. Compensation is inconsistent. The culture that once spread naturally now needs intention. It is time to hire the first CPO.
The usual question is: What HR team will this person build to support growth?
I think there is a better question: What systems will this person build to support growth?
Redesign the Work Before Building the Team
The first CPO has an opportunity to design the people function around the company’s next stage, rather than recreate the HR model they inherited somewhere else.
That starts by questioning entire processes. Does the company need an annual performance review, or does it need a better way to set expectations, give feedback, and make performance decisions throughout the year? Should HR continue preparing managers for every employee conversation, or should managers have the tools and skills to lead those conversations themselves? Does onboarding need more HR coordination, or does the process need to be redesigned so new employees get the access, context, and relationships they need to become productive quickly?
The same thinking applies to hiring and compensation. Interview intelligence should do more than summarize interviews. It should help managers make better hiring decisions, identify coaching opportunities, and allow the company to measure the quality of its hires. A compensation platform should do more than move an annual process faster. It should support a clear compensation strategy based on the company’s stage, talent market, business model, and definition of performance.
This is the work of an experienced CPO. They decide what should be eliminated, what should be redesigned, what managers should own, and where human judgment still matters. Then they select technology that supports those decisions.
The goal is not to automate every existing HR process. Some processes should not survive.
AI creates the opportunity to build a smaller, more experienced people team, but only if the CPO redesigns the work before adding people or technology. Otherwise, the company will automate old habits, add new platforms, and still build the same HR department.
Hire Experience Earlier
An early stage company does not only need someone who can handle today’s HR work. It needs someone experienced enough to see the organization it is becoming and design for that company now.
That person must know what to automate, what managers should own, what requires expert judgment, and which systems will still work when the company has 200 or 500 employees.
AI creates an interesting shift. It makes senior HR leadership valuable earlier while allowing the HR team to remain smaller for longer.
The first CPO should not spend the next several years recreating a traditional people function one hire at a time. The CPO should build the infrastructure that allows the company to scale without one.
Change How You Evaluate the CPO
For CEOs, this means evaluating the first CPO on more than the problems they can solve personally.
Can they build manager capability?
Can they create clear decision rights?
Can they select technology based on the company’s operating model rather than a list of features?
Can they distinguish the work that requires human judgment from the work that does not?
For investors, the people strategy should be part of the scaling thesis.
Scale Without Adding Complexity
Here is my take away: A strong people function is not defined by how many people report to the CPO. It is defined by whether the company can grow without complexity growing at the same rate.
That is the real mandate for the first CPO:
Build the system the next 500+ employees can run on.
But selecting and installing the technology is not enough. A company can buy modern tools and continue operating in exactly the same way. The old approvals, handoffs, roles, and habits remain. Only the interface changes.
Implementation is not transformation…
Coming Soon in the series:
Part III: Implementation Isn't Transformation
