Building AI-Native People Systems That Scale ft. Abby Gates

Written By Ryan Morrison
 
 

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About Abby Gates

  • Founder and CEO of SproutWise, a people and culture consultancy for early-stage startups

  • 20 years of experience in tech across talent acquisition, people operations, and HR executive leadership

  • Survived four company exits (Secure24, Hook Logic, Dynatrace IPO, and Salty/Zoom acquisition)

  • Mentor on Upnotch, supporting leaders on HR and people topics

  • Conducted 80-100 one-on-one conversations with Michigan founders, funders, and ecosystem partners

 

AI and Lean Teams: Building Possibility Mindsets

The narrative is everywhere: AI lets five people do what used to take twenty. Major tech companies from IBM to Amazon are announcing thousands of white-collar layoffs while doubling down on artificial intelligence. But for Abby Gates, founder of SproutWise, the real question isn't about replacement—it's about acceleration.

"When we think about AI in early-stage organizations, it's often through the mindset of what kinds of people tend to choose those organizations to begin with," Gates explains. The key differentiator? What she calls "good start-upers"—people with natural intellectual curiosity and a possibility mindset rather than a probability mindset.

Drawing from a recent book recommendation, Gates contrasts these two approaches: probability thinking leads to standard, tried-and-true solutions with the highest average success rate. Possibility thinking, on the other hand, considers problems from every angle, potentially uncovering solutions that are "head and shoulders above" conventional approaches.

"The moment is here. We don't have a choice whether AI is going to affect work or whether it isn't. It already is," Gates notes. "I see this in the same way as the Industrial Revolution. If you resisted it, it was going to happen and evolve with or without you."

For startups building AI-native organizations, Gates recommends integrating this thinking into the entire employment journey. The question isn't just about skills—it's about whether candidates have "naturally tinkered around or integrated these tools within the way that they think." This curiosity signals adaptability in an "adapt or die" moment for how we work.

Gates points to VeroTouch, a current client bringing new technology to the historically resistant construction industry, as an example. Many of their trade professionals previously ran their own businesses, bringing entrepreneurial mindsets into intrapreneurial roles. "These are people that have understood how to build their own organization and what that takes," she says.

The real value of AI in lean teams isn't just efficiency, it's freeing up mental bandwidth for the kind of innovative problem-solving that startups need to survive.

The Entry-Level Crisis: Preparing the Next Generation

A question weighing on many seasoned executives' minds: Should we be worried about our kids getting jobs? With AI showing early signs of replacing repeatable entry-level work in fields like software engineering and accounting, Gates acknowledges the concern is legitimate.

"I'm not quite there yet of doom and gloom for entry-level professionals," she says, "but I do think that we're at a time of massive change." The challenge is that many educational institutions haven't yet adapted their curricula to prepare students for this new reality.

Gates sees both opportunity and risk. On one hand, professionals who learn to leverage AI early can accelerate their value dramatically. On the other, those who resist or don't develop the necessary adaptability will struggle.

Her advice for early-career professionals centers on three key areas:

First, develop adaptability and resilience. "The ability to be nimble, to be flexible, to see change as an opportunity rather than a threat" is becoming the most valuable skill set.

Second, embrace continuous learning. The half-life of skills is shrinking rapidly. "What you knew five years ago may not be relevant today, and what you know today may not be relevant in five years," Gates warns.

Third, learn to work alongside AI rather than compete with it. "Those who learn to use these tools to amplify their work will thrive. Those who see them as competition will struggle."

Gates also emphasizes the importance of human skills that AI can't replicate: emotional intelligence, relationship building, creative problem-solving, and strategic thinking. "The ability to connect with people, to understand nuance, to navigate complex organizational dynamics—these are skills that will become more valuable, not less."

 

Origin Story: From Four Exits to Building SproutWise

Gates didn't set out to build SproutWise with a rosy view of HR. In fact, quite the opposite.

"I've been in rooms where people quite literally roll their eyes when HR walks in," she admits. "No one loves HR. And I say that as someone who's been in it for 20 years."

This awareness fundamentally shaped how she designed SproutWise. The firm exists because Gates kept seeing the same pattern: early-stage companies with brilliant ideas and viable products systematically underinvesting in people systems until those gaps created existential crises.

Her career included four company exits—Secure24, Hook Logic, the Dynatrace IPO, and the Salty acquisition by Zoom. Each taught her something crucial about what works and what doesn't when building teams.

"Every exit was grief," Gates reflects, pushing back against the champagne-and-celebration narrative that dominates exit stories. "Even when outcomes are positive financially, there's loss. Loss of identity, loss of relationships, loss of the mission you believed in."

These experiences revealed a fundamental truth: the companies that handled transitions well—whether exits, rapid scaling, or pivots—were those with strong foundational people systems in place. The ones that struggled had deferred the hard work of building structure, culture, and clarity.

SproutWise was born from a simple belief: every company deserves access to fundamental structure, regardless of size. "Fundamental structure" for Gates means the scaffolding that enables a 10 to 20-person startup to function without heroics—clear roles, basic processes, healthy communication norms, and fair decision-making frameworks.

"It's not enough to have a good idea. It's just the beginning," Gates says. "The gap between a compelling idea and a team that can actually deliver on it is filled with people systems. And most founders don't realize how wide that gap is until they're already falling into it."

 

The Viability Paradox: When Success Masks People Problems

Here's the paradox that Gates sees repeatedly: the more viable a startup looks from the outside—raising capital, hiring, shipping product—the more likely it is that basic people systems are being deferred.

"Success creates permission to ignore problems," she explains. "When you're hitting milestones and investors are happy, it's easy to say 'we'll fix that later' about everything from unclear roles to toxic team members to missing feedback loops."

This creates what Gates calls "invisible people risk"—organizational debt that compounds silently until it triggers a crisis. The leading indicators appear six to twelve months before teams feel the pain:

  • Increased time-to-hire as candidates reject offers or drop from pipelines

  • Rising employee turnover, especially among high performers

  • Founders becoming bottlenecks for every decision

  • Teams working longer hours but producing less

  • Conflicts that used to resolve themselves now requiring intervention

  • New hires struggling to onboard or integrate effectively

"When founders finally call me, it's usually because something has broken," Gates says. "A key person quit. A hire turned out to be disastrous. An exit negotiation revealed how misaligned the team actually was. By then, we're doing triage instead of prevention."

She recalls one company that "got away with it" for nearly three years—raising multiple rounds, hitting growth targets, building impressive products. The breaking point came when they tried to hire a VP of Engineering.

"Every candidate they brought to final rounds rejected the offer," Gates recounts. "Not because of compensation—because of what they learned about how the company actually operated. No clear decision-making processes. No feedback culture. A brilliant but corrosive technical co-founder that everyone worked around. The candidates could see it would be impossible to succeed in that environment."

The challenge? By the time these symptoms become obvious, fixing them requires unwinding patterns that have calcified over years. And it often requires difficult conversations that founders have been avoiding.

 

Stage-Appropriate Systems: What Every Startup Needs

Founders often say, "We're too early for HR." But Gates argues there are fundamental systems every startup needs, even at the earliest stages.

For a five to twenty-person company, Gates identifies three non-negotiable systems:

1. Payroll and compliance basics

"There's the obvious—a payroll system," Gates begins. She hasn't encountered a founder trying to manage payroll through spreadsheets. "It's such a complexity that no one would want to take on themselves." But payroll systems serve as more than just payment processing—they're the gateway to compliance, ensuring organizations operate legally and appropriately. These systems often include employee record management, handbook building, and policy integration. For Michigan companies specifically, this includes compliance with the ESTA law passed in 2024, which mandated sick time policies for employers of virtually all sizes.

2. Human Resource Information Systems (HRIS)

Between the 15 to 20-person range, complexity increases significantly. Adjacent teams need to work together, strategic plans at the firm level start trickling down into expectations and deliverables, and OKRs become necessary. "Can you articulate the North Star for your organization?" Gates asks. "And does your team understand what their role is in delivering against that?" This is when culture cracks start appearing—employees questioning if their jobs are safe, uncertain if what they're doing is valuable or even what they're supposed to be doing.

HRIS systems help organizations track progress against metrics, which becomes especially critical when venture capital or other funding enters the picture. "It's not just the soft squishy culture stuff that's important," Gates emphasizes. "It's also being able to report on and show progress being made by the organization against any sort of metrics a company might be held to delivering."

3. Applicant Tracking Systems (ATS)

Around the 20-person mark, companies need systems for managing talent—not just candidates they're actively hiring, but also strong candidates they couldn't justify hiring yet. "It's basically a candidate CRM," Gates explains. Just as sales teams need systems to quickly reengage with opportunities, HR needs tools to accelerate finding, managing, and reengaging with talent. At this stage, headcount planning and role clarity become essential as complexity enters the game.

Gates notes that the HR function at this stage resembles "a mix between a fractional COO, fractional CRO, and a fractional CFO, kind of all built into one"—ensuring cashflow, managing finances properly, and integrating people and processes for growth into one cohesive environment.

The "glue" function

Beyond specific tools, Gates describes HR as "the glue in an organization." The work cannot happen in a vacuum. HR must establish partnerships across every department: working with finance on headcount planning and compensation structures, collaborating with legal on contracts and separation agreements, and partnering with every department lead on hiring.

"We have to ensure that there is some cohesiveness across the needs of each of those departments," Gates explains. "Are we aligned with the North Star? Do we understand our role in making those things happen, in advocating for the team that ultimately has to do that work?"

Gates admits she's done this poorly earlier in her career, but now understands "the power of creating solid connection and collaboration across those teams and why it is so very important in order to scale well."

 

The Real Cost of "We'll Fix It Later"

For founders who've been deferring people systems for months or years, Gates offers a practical starting point: pick one thing and fix it this quarter.

"The biggest mistake is trying to fix everything at once," she explains. "You'll freeze execution and create more chaos than you solve."

Her first diagnostic question: What's the one area where your team's confusion or frustration is actively blocking progress? Maybe it's unclear decision rights. Maybe it's the lack of a real onboarding process. Maybe it's one toxic team member everyone is working around.

"Start there. Not with the full solution, but with the first 10% that takes the pressure off," Gates advises.

One of the hardest conversations Gates facilitates involves what she calls "brilliant but corrosive" team members—highly skilled people who create cultural damage that's hard to quantify. Founders tolerate them because they're seen as critical to shipping.

"The question isn't whether they're talented," Gates says. "It's what their presence is costing you in terms of other people's engagement, productivity, and retention." She helps founders calculate the true cost: How many hours does the team spend working around this person? How many candidates have rejected offers after meeting them? How many high performers have left or are considering leaving?

"Usually, when you do the math honestly, keeping them is the more expensive option. But it takes courage to face that."

Gates also recommends a simple quarterly "people health check" that any startup can run in under an hour:

  • Ask each person: What's working well in how we work together?

  • Ask each person: What's one thing that would make your work more effective?

  • Look at your hiring pipeline: Are strong candidates accepting offers or declining?

  • Review turnover: Are you losing people you wanted to keep?

  • Check decision velocity: Are key decisions taking longer than they should?

"You don't need fancy surveys," Gates notes. "You need honest conversations and the willingness to act on what you learn."

 

Exits, Grief, and the Stories We Don't Tell

Gates has lived through four company exits, spanning private equity acquisitions, strategic acquisitions, and an IPO. Each one involved grief—a word that doesn't appear in the typical exit narrative.

"Exits are supposed to be champagne moments," she acknowledges. "And for some people, maybe they are. But for most employees, there's a real sense of loss. Loss of identity, loss of relationships, loss of the mission you believed in."

The grief is especially acute for employees who don't benefit financially. "Most employees don't get rich from acquisitions," Gates points out. "Maybe the founders and early team do, but employee number 47 probably doesn't see life-changing money."

This creates a communication challenge for founders: How do you announce an exit without it feeling like a betrayal?

Gates emphasizes honesty and acknowledgment. "Don't pretend this is unalloyed good news for everyone. Acknowledge what people are losing. Give them space to process. And be clear about what happens next—not just the corporate messaging, but the real operational changes they should expect."

In her experience, private equity acquisitions are often hardest on culture. "PE buyers typically have specific return timelines and playbooks. That often means cost-cutting, efficiency drives, and pressure that can feel at odds with the culture that made the company successful in the first place."

Strategic acquisitions can be smoother, but only if there's genuine cultural alignment. "When there's alignment, the acquisition can feel like acceleration. When there isn't, it feels like colonization."

IPOs bring their own challenges—increased scrutiny, pressure for consistent performance, and the loss of the scrappy startup identity. "Going public changes everything about how you operate. Some people thrive in that environment. Others don't."

The through-line in all of Gates's exit experiences: companies with strong people systems navigated transitions far better than those without. "When you have clarity, trust, and good communication norms already in place, you have a foundation to build on through massive change. When you don't, the change itself reveals every crack in the foundation."

 

Memorable Quotes from the Episode

"The moment is here. We don't have a choice whether AI is going to affect work or whether it isn't. It already is. I see this in the same way as the Industrial Revolution—if you resisted it, it was going to happen and evolve with or without you."

"No one loves HR. And I say that as someone who's been in it for 20 years."

"It's not enough to have a good idea. It's just the beginning. The gap between a compelling idea and a team that can actually deliver on it is filled with people systems."

"Success creates permission to ignore problems. When you're hitting milestones and investors are happy, it's easy to say 'we'll fix that later.'"

"If you're still trying to be in every conversation at 50 people, you're the problem."

"Every exit was grief. Even when outcomes are positive financially, there's loss."

"Looking at 16% Michigan revenue versus 80% Colorado, it becomes a survival question: Is it literally worth it to my family?"

 
 

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