Preface: Leveling the Playing Field for the "Other 99 Percent"

One in five small businesses fail within their first year. One in two go out of business within five years. In 2020, that rate was even higher (Hannon 2020).

These aren't nameless, faceless statistics. Small businesses are the manifestation of the American dream. Ninety-nine percent of all businesses in the United States are "small" as defined by the Small Business Association's definition of employing 500 people or fewer. They're also the lifeblood of the US economy. Thirty-two million small businesses employ 47 percent of the US workforce, about 60 million people. And they have contributed 66 percent of all new jobs since 2000 (SBA Office of Advocacy 2018).

The good news is that even in the dire economic realities of the COVID-19 pandemic and globalization, small businesses in America are getting stronger. Although the average lifespan of a small business is 8.5 years, the failure rate (percent of year-over-year failures) is actually shrinking (Todd 2020).

Why? Small organizations are typically more creative. They're more in tune with their customers. They can move faster, and are more nimble. They have a better finger on the pulse of their employees. And now, they have newfound access to services, tools, and technology that let them do more-much more-with less. They're using these tools to better operationalize and automate their business processes. They're using these tools to turn adversity into advantage.

Perhaps the least operationalized business function-and the one with the most potential impact-is the people function. You know, the function that oversees a company's greatest asset, expense, and source of competitive advantage: its people.

This book is all about bringing that function into focus-and up to speed-to meet the massive shifts in the new world of work.

By "people function," do we mean HR? No, actually we don't. Human resources, formerly the personnel department or "policy police," might have worked in the twentieth century. It still might have worked before the 2020 pandemic. Actually, at best, it might have worked. At worst, it was strangely separate from the business-seen as a necessary evil, an overhead, and a hassle. Business leaders and employees often don't like HR, or their idea of HR. We agree. This book is about a new approach to a timeless challenge.

People Operations (People Ops, or POPS) is a people-centric business approach that emphasizes workforce empowerment to drive growth. POPS focuses on automating administration, using data to drive decisions, and delivering tangible results. When you empower your people to do their best every day, you build a more resilient culture that becomes a sustainable competitive advantage.

People Ops is the future of work. If you own, run, or work for a small business and are responsible for people in any capacity, this book is for you and your future.

We Get It: It's Hard to Be a Small Business

The playing field for 32 million small businesses like yours is markedly stacked against you, as compared to fewer than 20 thousand enterprise companies with workforces larger than 500 people (SBA Office of Advocacy 2020).

You don't have the big companies' budgets, departments, depth of sophistication, or tools they have access to. And you likely lack the benefits, perks, and employee experience to compete as effectively for the best talent.

What you do have is an equal amount of the same compliance overhead. There are 180 federal labor laws alone for businesses of all sizes to manage. Compound that with state and city ordinances, and that's where small business owners' sleepless nights begin.

You also share the challenge of employing, engaging and retaining five generations of workers with fundamentally different expectations from their employers. Seventy percent of them will be from the Millennial and Gen Z generations in 2025 (Lettink 2019). And they're in it for purpose over paycheck, for lifestyle over the corporate ladder, for inclusion and empathy over titles. They expect their work experience to include tech that's as easy to use as the apps on their iPhones.

And what you have even more of: costs for providing insurance coverage. On average, small businesses pay 8-18 percent more for healthcare insurance coverage per employee than large firms who can negotiate better rates with more people, ostensibly in exchange for lower risk to insurance carriers (Ferguson 2020). And that's on top of a more frightening reality: the average cost of healthcare for a US family of four in 2020 was $28,653 (Girod et al. 2020). That could equate to 38-100 percent of total family income, according to Brian Melanson at M4 Innovation. Therefore, it's scary, but not surprising, that less than half of small businesses offer health insurance.

Because salaries and benefits represent the top two costs for businesses, and labor compliance is one of your greatest risks, you cannot afford to manage your people function by "gut" or good intention with occasional swag and fun events. Profit leaks, regulatory risks, and people issues are among the top reasons for small and medium-sized business (SMB) failure, and you need to be on your game.

How This Book Helps Tilt the Advantage

First of all, as authors of this book, we absolutely subscribe to the notion in The Hard Thing About Hard Things, by Ben Horowitz (2014):

There's no recipe for really complicated, dynamic situations. There's no recipe for building a high-tech company; there's no recipe for leading a group of people out of trouble; there's no recipe for making a series of hit songs; there's no recipe for playing NFL quarterback; there's no recipe for running for president; and there's no recipe for motivating teams when your business has turned to crap. That's the hard thing about hard things-there is no formula for dealing with them . [The most successful CEOs] . have the ability to focus and make the best moves when there are no good moves.

So we've established what we don't have. What is it that we do have? We have a pretty close and sober view of the realities facing small businesses.

We authors have each started and/or contributed to the growth, success, and profitable exits across a number of businesses-many of them focused on technology and automating people programs. Individually, and collectively, we've been motivated by solving hard problems. And you'd better believe we've learned a lot of hard lessons in the process.

Over the past decade, we've worked with more than 30,000 of the most successful small businesses across the country, leaning in and learning with them-and from them-about the market, social, demographic, environmental, political, mobile, health, and well-being dynamics that impact their people and therefore their businesses.

Most importantly, we've recognized the force multiplier of pairing an eyes-wide-open awareness of the dynamics of the new world of work, to better build, engage, and unleash a team of people against a hard problem or unexplored potential.

The keys: take the time to understand the changing market, business, and people dynamics, and their impact on your business. Then, continually challenge your assumptions.

Where to Start: With Your Advantage

The great thing about running a small business is your ability to adapt.

Throughout the pandemic we were awed by and grateful for how our own Zenefits team rose to the challenge and changes with grit, tenacity, and innovation. Instead of slowing our product development, we sped it up, delivering a host of products, features, and content geared directly at making it easier to manage during the crisis-from applying for Payroll Protection Program (PPP) loans, to supporting paid sick time off and managing related tax incentives and loan forgiveness criteria.

We were inspired to see the phenomenal bravery, determination, and humanity across our customer base finding new ways to exist, transform, and even grow in spite of the obstacles in front of them.

You, too, likely have access to easily tap these same tremendous small business advantages right now for better resilience:

• Speed: Your lack of size means fewer constraints to move quickly on new ideas.
• Agility: Your ability and appetite for continual iteration and improvement make your business more agile.
• Digital-readiness: Your scalable, cloud-based technologies allow you to connect, pivot, and communicate.
• People-first: You treat employees like customers, partners, and trusted counselors.

These are your strengths, and this is where you have the competitive edge over the lumbering big corporations.

The average S&P 500 company today is up to 20 years old (Sheetz 2017). Their supply chains and infrastructure that once gave them a competitive advantage have become a ball and chain that is immobilizing them. Meanwhile, smaller organizations like yours disrupt their business by providing easier and better ways for their customers to get greater value from you.

Technology is often the engine at the heart of that disruption. Technology has changed the potential for small...