Building an HR Team From Scratch: Stage-by-Stage Guide

Your company just raised Series B. Headcount will double in 12 months. Your solo "HR person" (who's really an office manager doing HR on the side) is overwhelmed.

Your CEO is asking: "When are we going to have a real HR function?"

Your CFO is asking: "How much is this going to cost?"

Your team is asking: "Who do I talk to about [insert any HR question here]?"

You need to build an HR team. But where do you even start? Here's the stage-by-stage guide to building HR functions that actually work.

Why Most Companies Build HR Teams Wrong

The typical pattern:

1. Hire an "HR Generalist" when the company reaches 50-75 employees
2. That person drowns trying to handle recruiting, benefits, compliance, employee relations, onboarding, offboarding, HRIS, performance management, and company culture simultaneously
3. When they inevitably fail or burn out, hire an "HR Manager" to fix everything
4. Realize the HR Manager is still drowning
5. Finally bring in specialized roles (recruiter, HRBP) piecemeal as fires emerge
6. End up with a dysfunctional HR org that doesn't scale

The problem: Companies build HR teams reactively (responding to crises) instead of strategically (anticipating needs based on growth stage).

Here's a better approach.

Stage 1 (0-50 Employees): The HR Generalist Foundation

When: Company is in early stages with under 50 employees

First HR Hire: HR Generalist

At this stage, a dedicated full-time HR team isn't typically necessary. Instead:

• Founders or early team members handle basic HR tasks
• HR outsourcing or consultants manage compliance, payroll setup, and benefits administration
• Focus is on building the business, not building HR infrastructure

What gets handled:

• Basic compliance (I-9s, employment posters, state requirements)
• Payroll and benefits setup (often outsourced to PEOs like Justworks, Gusto, or TriNet)
• Offer letters and basic onboarding
• Ad hoc employee relations issues

When to consider moving to Stage 2: When HR tasks are consuming significant founder/leadership time, when you're planning rapid hiring, or when employee relations issues require dedicated attention.

Stage 2 (50-150 Employees): Your First Full-Time HR Hire

When: Company reaches 50+ employees and HR needs dedicated attention

First HR Hire: HR Manager

This is typically where companies make their first full-time HR hire.

You need someone who can:

• Set up and own HR infrastructure (HRIS, onboarding process, handbook)
• Handle benefits administration and open enrollment
• Ensure compliance across all states where you operate
• Manage employee relations issues
• Support recruiting efforts (sourcing, coordinating interviews, offer management)
• Begin building HR processes and documentation

What to look for:

• Broad generalist experience with management capability
• Tolerance for ambiguity (processes will be built from scratch)
• Systems thinking (can design processes, not just follow them)
• Startup/growth company experience (understands fast-paced environments)

What NOT to look for:

• Deep specialization in only one HR area
• Enterprise-only HR experience (they won't adapt to scrappy environments)
• "Strategic HR" without operational chops (you need doers who can also think strategically)

Cost at this stage: One HR Manager at $85K-$110K salary can typically support 50-150 employees, depending on hiring velocity and complexity.

Note on recruiting capacity: As hiring accelerates, your HR Manager will spend increasing time on recruiting. Instead of hiring a full-time recruiter immediately, many companies at this stage use on-demand recruiting services to scale TA capacity flexibly based on hiring volume.

Stage 3 (150-300 Employees): Elevate HR Leadership

When: HR complexity increases, you need dedicated recruiting capacity, and managers need more support

Key Hire: Director of HR

At this stage, you need a more senior leader who can:

• Own the full HR function and begin building a team
• Develop HR strategy aligned with business objectives
• Partner with leadership on organizational effectiveness
• Oversee talent acquisition (likely adding dedicated recruiters at this stage)
• Drive talent review, performance management, and succession planning
• Lead culture and engagement initiatives

What to look for:

• Director-level HR experience at similar-stage companies
• Business acumen (understands P&Ls, strategic planning, organizational objectives)
• Team building capability (will need to hire and manage HR staff)
• Change management experience (growth creates constant change)

Organizational structure at this stage:

• Director of HR (leads function, strategic partnership with leadership)
• HR Manager or Generalist (benefits, compliance, HRIS, employee relations)
• Recruiter(s) or on-demand TA capacity (sourcing, recruiting, offer negotiations)

With 85% of talent acquisition leaders now prioritizing diversity recruitment, your Director of HR needs to embed inclusive practices throughout the employee lifecycle.

Stage 4 (300-500 Employees): VP HR/CHRO and Specialized Functions

When: HR requires executive-level leadership and specialized expertise

Key Hire: VP HR or CHRO

At 300+ employees, you need a senior HR executive who can:

• Own people strategy and represent HR on the leadership team
• Build and manage a growing HR organization
• Advise the CEO and executive team on organizational matters
• Drive culture, values, and leadership development
• Manage board-level people discussions (compensation committees, etc.)

Which to look for:

• VP-level HR experience at similar or larger companies
• Business partnership skills (strategic thinker, not just "HR things")
• Team building experience (has scaled HR functions before)
• Executive presence (can hold their own with C-suite peers)

Additional specialized hires at this stage:

HR Business Partners (HRBPs) As the organization grows, add HRBPs to:

• Partner with specific business units or functions
• Coach managers through performance issues and difficult conversations
• Drive talent planning and organizational effectiveness within their client groups

Total Rewards / Compensation & Benefits Manager If benefits costs are material and compensation complexity is increasing:

• Design and manage benefits programs
• Build compensation structures (bands, leveling, equity guidelines)
• Ensure benefits compliance (ACA, COBRA, ERISA)

People Analytics / HRIS Manager If you need better data for decision-making:

• Own HRIS platform (Workday, ADP, BambooHR, Rippling)
• Build people analytics dashboards
• Automate HR processes and reporting

Stage 5 (500+ Employees): Mature HR Organization

When: Organization requires full HR infrastructure with specialized functions

Next HR Hire: VP HR / Head of People

At 500+ employees, you should definitely have a CHRO if you don't already. The HR organization becomes a full department with specialized teams.

Your HR org at this stage might include:

• CHRO/VP HR (executive leadership, board interaction, people strategy)
• Talent Acquisition Team: TA Director/Manager + 3-5 Recruiters
• HR Business Partners: 2-4 HRBPs supporting different business units
• HR Operations: Total Rewards Manager, HRIS Manager, HR Coordinator(s)
• People Development: Learning & Development Manager, OD specialists

Important context: The timing of CHRO hiring is heavily influenced by:

• Industry: Some industries require senior HR leadership earlier
• Geographic complexity: Companies operating in multiple states or countries need more sophisticated HR sooner
• Growth trajectory: Companies heading toward acquisition may delay CHRO hiring until post-acquisition
• Future plans: IPO-track companies often bring in senior HR leadership earlier

Common HR Team-Building Mistakes

Mistake 1: Hiring Too Senior Too Early

A VP HR at a 75-person company will likely be bored and frustrated. They'll spend 80% of their time on tactical work (benefits administration, compliance) that doesn't use their strategic capabilities.

Hire for your current stage: HR Manager at 50-150 employees, Director at 150-300, VP/CHRO at 300+.

Mistake 2: Neglecting Recruiting Until It's a Crisis

Companies often delay hiring recruiting capacity until they have 20 open reqs and desperate hiring managers. By then, it takes 3-6 months to hire a recruiter, get them ramped, and actually fill roles.

Anticipate recruiting needs based on growth plans, not current pain.

Mistake 3: Building HR Silos Instead of Integrated Teams

HR functions should work together. Recruiters should partner with HRBPs on new hire integration. Total Rewards should align with TA on competitive offers. People Analytics should support everyone with data.

If your HR team operates as independent silos, you'll have dysfunction and turf wars.

Mistake 4: Using Traditional Recruiting Firms for Multiple HR Hires

If you're building an HR function and need to hire 3-5 HR roles, traditional 20-25% commission fees will cost you $50,000-$100,000+. On-demand recruiting models provide project-based HR hiring capacity while controlling fixed costs.

Mistake 5: Hiring "HR Administrators" When You Need "Strategic Partners"

As you scale, the type of HR professional you need shifts from tactical executors to strategic advisors. Make sure you're hiring for the level of impact required, not just filling an "HR role."

How to Accelerate Your HR Team Build

If you need to build an HR function quickly (post-fundraise, post-acquisition, rapid growth), consider:

1. Hire your generalist first, but use on-demand recruiting for TA capacity

Instead of hiring a recruiter as your second HR person, bring on additional recruiting capacity through on-demand partners that scale with hiring volume. When hiring slows, you're not stuck with excess headcount.

2. Bring in external recruiters who specialize in HR

Building an HR function means hiring HR generalists, recruiters, HRBPs, total rewards managers, and eventually HR leadership. Working with recruiters who understand HR assessment (not just matching "HR experience" keywords) dramatically improves quality.

Explore IQTalent's approach to HR recruiting, which includes understanding talent acquisition, HRBP capabilities, and systems expertise.

3. Sequence hires based on actual pain, not generic advice

Every company is different. If your biggest pain is employee relations issues, prioritize an HRBP before a recruiter. If recruiting is drowning your generalist, prioritize TA first. Don't follow a generic template if it doesn't match your needs.

4. Retain candidate data from every HR search

Even after you've hired your HR generalist, you'll eventually need a recruiter, HRBP, and specialists. The best recruiting approach builds an HR talent pipeline you own—not a black box that disappears after each placement.

The Bottom Line on Building HR Teams

Most growth-stage companies will follow this general sequence:

Stage 1 (0-50): Founders + HR outsourcing/consultants
Stage 2 (50-150): HR Manager (first FT HR hire)
Stage 3 (150-300): Director of HR + recruiting capacity
Stage 4 (300-500): VP HR/CHRO + specialists (HRBPs, Total Rewards, People Analytics)
Stage 5 (500+): CHRO (definitely) + full HR department

Timeline and sequence vary based on your industry, geographic footprint, growth rate, and whether you're heading toward acquisition or IPO. But the principle remains: build HR capacity before crises emerge, not after.

Talk to an HR recruiting specialist: Schedule a consultation to discuss which HR roles to prioritize for your stage.

Calculate your HR team build costs: Use our free Recruiting Resources Calculator and see how many team members you'll need to hit your hiring goals.