PEOPLE LEVERAGE IS A FORM OF CAPITAL ALLOCATION. IT’S NOT AN AFTERTHOUGHT.
Thursday, August 21, 2025
By Faheem Siddiqi, CEO at FinanceWithin | Finance, Accounting, HR partner for founder-led companies
Every Thursday, THE BOARD BRIEFING brings you curated industry insights directly from our Members to your inbox.
PEOPLE LEVERAGE: BUILDING A HIGH-PERFORMANCE CULTURE AS A FINANCIAL STRATEGY
The most durable and valuable companies are built by strategically maximizing three forms of leverage:
Capital leverage
Product & systems leverage
People leverage
Each is critical, but too often, “people leverage” is treated as an afterthought
Capital and systems determine how far and how fast brands can grow, but people determine whether that growth is sustainable. The right individuals in the right roles, operating within a high-performance culture, can dramatically shift both revenue trajectories and margin profiles. Done well, people leverage is not “soft” HR. It is a financial strategy: a direct driver of profitability, working capital efficiency, and enterprise value.
This essay explores the importance of people leverage as a construct: how HR and people operations can function as a strategic growth engine that multiplies financial outcomes.
THE FINANCE WITHIN PHILOSOPHY OF LEVERAGE & GROWTH
Capital Leverage
Strong liquidity and a disciplined working capital strategy are non-negotiable. Every dollar should work harder than the last. Shortening the cash conversion cycle, protecting margins, and fueling profitable growth. Smart capital structures enable growth without sacrificing resilience.
Product & Systems Leverage
Scale is sustainable only when supported by the right products and systems. Automation, tech enablement, vertical integration, and process design reduce operational drag and expand margins. Hero SKUs, category architecture, and innovation pipelines drive velocity and enhance margin.
Systems turn complexity into a competitive advantage.
People Leverage
A high-performance culture is a growth engine. The right people, in the right roles, with clear accountability, can have a significant impact on the desired future state of a company. You can build enterprise value from talent density: A-players in every seat, operating lean, aligned to strategy, and accountable for outcomes.
The problem is that many companies treat HR as a compliance function and people operations as admin support. I see it differently.
People leverage is a form of capital allocation.
Just as balance sheets measure efficiency of financial assets, an organization’s talent structure reflects the efficiency of its human capital.
WHY PEOPLE LEVERAGE MATTERS
Headcount Sets Your Cost Base
For startups and even mid-market companies, payroll is a meaningful part of opex. Every key hire shifts the cost structure and the break-even point. A few mis-hires or carrying underperformers can weaken culture, create cognitive load, impact margins and compound problems over time.
Talent Is a Force Multiplier
Top performers aren’t marginally better, they’re exponentially better. An A-player can deliver 5–10x the output of an average hire, with higher accuracy and strategic contribution. In a lean operating model, one extraordinary hire can replace several mediocre ones while improving speed and quality.
A dear friend of mine, Ayman, once said: “You’re 1 hire away from cutting your problems in half. And 2 hires away from having a completely different company.” That’s the power of strong talent.
Culture Protects and Accelerates Value
A high-performance culture reduces turnover, shortens ramp time, and keeps execution aligned with strategy. Lower churn cuts recruiting costs; institutional knowledge compounds. The result is velocity. Moving quickly without breaking fundamentals, which translates directly into financial performance.
People Decisions Are Capital Decisions
Every hire, promotion, and incentive is capital allocation. Compensation design is an investment strategy; incentives dictate behavior; org design sets the limits of scalability. When leadership frames people as a capital decision (not just an HR function), talent becomes a direct driver of the P&L and enterprise value.
BUILDING PEOPLE LEVERAGE: CORE PILLARS
Hiring for A-Players
Top 10% talent in every seat: Companies should raise the bar on talent density. Each hire must meaningfully improve performance relative to cost.
Cultural and strategic fit: Skills matter, but alignment to business objectives matters more.
Rigorous process: Structured interviews, case studies, and reference checks reduce hiring mistakes, which can cost 2–3x salary.
Compensation as Capital Allocation
Pay for outcomes, not activity: Incentive plans tied to revenue, gross margin, or cash flow sharpen accountability.
Equity and/or phantom equity: Well-designed long-term incentives align employees with enterprise value creation, especially for non-fungible talent.
Benchmarking: Comp bands should reflect both market rates and company financial constraints.
Org Design and Headcount Discipline
Stay lean as long as possible: Every new role should have a clear ROI case.
Span of control: Avoid bloated middle management layers.
Scalable org charts: Design today’s org with tomorrow’s scale in mind.
Performance Management
Clear KPIs tied to financial metrics: Marketing tied to LTV/CAC, ops tied to fulfillment cost, finance tied to cash flow, etc.
Quarterly reviews with accountability: Evaluations should be forward-looking (how to improve) and have clean lessons learned from the past on what went wrong.
PIPs and RIFs: Address underperformance quickly. Protect culture by refusing mediocrity.
Leadership Development
Coaching and training: Developing managers compounds people leverage.
Succession planning: Anticipating leadership gaps prevents disruption.
Execution coaching: Teaching leaders how to connect strategic goals with operating decisions keeps organizations sharp.
HOW PEOPLE STRATEGY DRIVES FINANCIAL METRICS
Revenue Growth
Better talent in sales and marketing increases top-line growth.
High-performing product and merchandising teams build assortments that drive velocity.
Aligned organizations execute faster, capturing market share before competitors.
Gross Margin
Strong ops and supply chain teams negotiate better vendor terms, optimize COGS, and improve fulfillment efficiency.
Cross-functional alignment prevents margin leakage from mispricing, discounting, or poor promotions.
Operating Expenses
Lean, high-performance cultures require fewer people to achieve the same output.
Retention lowers recruiting and onboarding costs.
Accountability reduces waste and non-value-adding activity.
Cash Flow
Incentives tied to working capital metrics (DSO, DPO, inventory turns) directly improve liquidity.
Compensation tied to free cash flow ensures leaders treat cash as the scarce resource it is.
Enterprise Value
High-performance teams reduce execution risk.
Talent density drives operating leverage: fewer people, greater output, stronger margins.
Clarity and accountability accelerate decision-making and preserve organizational velocity.
Durable cultures compound over time, protecting downside in downturns and capturing upside in growth cycles.
EXAMPLES OF WHAT I’VE SEEN
Case 1: Staying Lean through Scale
A DTC brand scaling from $20M to $75M in revenue resisted the urge to triple headcount. Instead, they hired selectively for A-player roles in supply chain, finance, and growth marketing. Their headcount grew only 40% while revenue grew nearly 4x. The result: operating leverage expanded EBITDA margins from 7% to 11%.
Case 2: Compensation Design and Cash Flow
A CPG company tied bonuses for its sales team to gross margin dollars, not top-line sales. This shifted behavior away from discount-heavy deals that eroded profitability. Within a year, margin contribution improved by 300bps, generating an incremental $2M in gross profit.
Case 3: Performance Management and Turnover Reduction
A retailer suffering from 40% annual turnover implemented structured onboarding, career paths, and quarterly reviews. Turnover dropped to 20%, saving ~$800K annually in recruiting costs while improving store-level revenue per employee by 12%.
THE CFO-CHRO PARTNERSHIP
The CFO and CHRO should be natural allies. Finance brings rigor, metrics, and capital allocation discipline. HR brings insight into talent, culture, and organizational behavior. Together, they drive “people leverage” as a financial strategy.
CFO Role: Ensure compensation, headcount, and org design decisions align with financial goals.
CHRO Role: Build the systems, processes, and culture that maximize the productivity of human capital.
Joint Role: Translate people strategies into measurable business outcomes. Tying every hire, promotion, and incentive back to P&L impact.
COMMON MISTAKES THAT ERODE PEOPLE LEVERAGE
Over-hiring: Scaling headcount ahead of revenue creates fixed costs that can be hard to unwind.
Tolerating underperformance: One mediocre employee lowers standards for the entire team.
Misaligned incentives: Paying bonuses on revenue when margins are thin destroys enterprise value.
Ignoring culture debt: Just as companies accumulate technical debt, they accumulate cultural debt when they compromise on talent density.
Separating HR from strategy: Treating HR as an administrative silo ensures it won’t drive financial outcomes.
PEOPLE AS THE ULTIMATE LEVERAGE
Capital leverage and product & systems leverage are powerful, but people leverage is what makes them work. A company can raise meaningful growth capital, but without the right people and culture, it will burn cash and stall. A company can build automated systems, but without accountability and alignment, those systems will be underutilized.
High-performance culture is not a “nice to have.” It is a financial imperative. By treating HR and people operations as capital allocation levers (on par with debt, equity, and working capital), companies can build more durable, more profitable, and more valuable brands.
The essence of people leverage is simple:
Fewer, better people
Aligned to strategic outcomes
Measured by financial results
When leaders embrace this philosophy, they unlock the highest return on investment available: turning human capital into drivers of business performance.
THE BOARD is a vetted community of C-Suite talent from worlds of Fashion, Beauty, Tech and more. Whether your brand needs a 'Dream Team' to create a data-driven roadmap for what's next or an on-call advisor to provide objective feedback on your strategy, THE BOARD has you covered.
For more BTS conversations + in depth insights subscribe to ABOVE BOARD on SUBSTACK.
