HR is a hot topic: the sector has over 16,000 startups, and HR Tech is also one of the active sectors for investors, with an overall funding of nearly $48B in 3K+ companies.
What’s more, 500 Startups, Techstars, Plug and Play Tech Centre, Y-Combinator and Right Side Management are taking the lead in investments.
What could warrant so many tech tools in one industry?
With the usual 1,000 hats to wear in a startup, HR is responsible for a lot more than talent recruitment and retention - though these two areas take up the majority of HR bandwidth. And in the busy life of a startup, the latter is often massively overlooked for the former.
Here’s a look at what else happens on the human resources side of things and the major challenges that startups should prepare to overcome.
As an internal department, the HR team in a startup works to maximize employee performance in order to help the company reach its goals. But at the outset, it’s most likely going to be you and maybe your co-founder overseeing all of these responsibilities.
This includes overseeing functions like:
Talent Acquisition: Most startups and scaleups have an in-house HR department that helps them hire the right employees and ensures a well-structured onboarding process for new hires
Work Policies: Whether you’re wondering about official working hours and dress code, or holiday and sick leave, your local HR team has probably got the answer — and are the ones that wrote it.
Employee Onboarding: Once hired, training new employees well is a vital step in retaining them for the long term. And they don’t stop with the first onboarding. Investing significantly in employee training and career development statistically has one of the highest impacts in retention.
Company Culture Development: HR plays a big role in maintaining the lived actualization of a company’s values, both by hiring people that are able to push the company’s vision forward, and by implementing policies that are in line with them.
Only 62% of startups make it to the fourth year. The rest fall victims to various difficulties new businesses are exposed to.
While HR is often overlooked in a budding startup - team is everything, meaning the people who hire people play a vital role in a startup’s survival in the long run. In a bootstrapping startup, team chemistry and employee motivation are integral factors in the long road to bringing a product to market. Team disharmony is often cited as one of the biggest reasons that startups fail — so overlooking a strong HR strategy is not an option.
While in the beginning, a strong vision and charismatic founder can attract the first hires, lacking operational structure will increase the chances of a team bleeding out. And since as a founder, you’ll be taking the lead on HR before you hire professionals to do the job, the following pieces of advice are especially pertinent to pay attention to!
“Learning is limited by an organization’s ability to keep its people.” ― Tom DeMarco, Peopleware: Productive Projects and Teams
From recruitment, to onboarding to retention - a typical day in the life of an HR professional is versatile to say the least. What’s more, the rabid competition in startup world for strong talent brings a level of uncertainty to everyday work that’s hard to compensate for.
We spoke with Barbara Vero of Futureproof Consulting, to pinpoint the top pitfalls of early-stage startups dealing with HR. Here are some of the main challenges HR faces starting out and how to plan for them.
While it may seem like a great idea to team up with your buddy to realize your million dollar business idea, remember you’re in for the long haul. Futureproof’s team likes to say that you should think about this the same way you would think about a marriage partner - because you’ll be facing some grueling challenges ahead.
In order to find the right partner in crime, look beyond the initial chemistry and consider the long term. Identify and discuss your business values, and find the right partner who aligns with you. Begin by understanding each other’s long-term mission and business goals, as well as what financial challenges and opportunities you foresee and are ready to tackle together.
Similar mindset applies to your team as it does to finding your co-founder. Just because someone is genial or a good talker does not mean they’re the right fit for the job. Before you pick your first (incredibly crucial) hires, determine what roles and jobs to be done you are looking for. Set up a simple process to size up the fit and mindset of your potential hires, and only then determine who is the most suitable.
When you first start out, keep the HR process light but existent. You don’t have to dig into heavy processes, but some structural order is needed.
The key thing to look out for as CEO, is to avoid micromanaging your people and structuring your organization so that everyone is dependent on your go ahead. Instead look to empower newcomers, by clearly communicating your vision and giving them space to solve problems on their own. If you’ve hired the right people (see our tips above), you can trust that they’ll be just as invested in solving the right problem as you.
In order to ease the hiring process, consider the following:
Difficult hiring processes: With few benefits and job security to brandish - and a non-existent or just forming employer brand to boot, enticing talent to a tech company is no small task. Especially as the onboarding processes are getting formulated and roles remain vague, it becomes extra hard to find and attract talent.
Don’t bypass the legalities. That means, beginning from day one, create employee contracts with clear, formal working agreements for all hires. While it may seem like a formality for a group of developers in a garage, once you make it big, it will matter a lot. Having contracts in place is also a signal to new hires that you’re serious and by the books - earning extra credibility points.
Create a strong onboarding process. Investing upfront into an onboarding process saves ‘seniors’ a lot of time in training new hires and showing them the ropes. It also signals to new teammates that the team cares, and is invested in helping them do their best in furthering the company mission.
Don’t oversell the role. As mentioned earlier, often a grand CEO vision can sway new employees - but once the mirage is up, the disappointment may not only lose you a hire, but earn you a reputation for being a bunch of hot air as well. Show your talent why they should choose you by walking the walk — pitching them on the real vision and current facts, without exaggerating the state of your company culture.
When you’re scaling your startup, you’ll need to ramp up your operations together with your organization. At this point, you’ve probably received some funding and are looking to hire a lot more teammates to speed up growth - double-down on the definition of your job descriptions and make sure you are hiring for jobs to be done. You’ll probably be in the market for your first HR person, usually a junior recruiter focused on attracting talent.
As a founder or CEO, keep your sights on the bigger picture - building up a company culture and employer brand that adds value to your team by attracting the best talent and maintaining consistent motivation. Avoid disempowering your team by micromanaging or pushing them towards burnout. Building a good culture is a delicate process that involves your vision, and also everyone else’s input and commitment.
Lack of retention strategy. A proper HR strategy takes finances and personnel that budding startups realistically don’t have. What’s left is a handful of people just learning how to motivate teammates, without an HR background or resources.
First and foremost, commit to creating a strategy. Though it may seem trivial, a commitment to a mission, vision and values gives your team something to align to as well as the monetary and non-monetary rewards that go along with it. It also sets the scene for future HR professionals to work towards clear, actionable goals further down the line.
When your company is getting ready to exit, everything is on the table - from your product, to your team, to soft valuables, like your company culture and employee brand. You’re far out of the sandbox of your original organization, where you and your small team set the culture and values.
At this point, your values should be a selling point to top talent and your community of users - defined by leadership’s behavior and lived in everything from product to team. To achieve this, your vision will be clearly communicated across internal and external channels, and an integral part of the onboarding process for both your teammates and your users.
HR at this point is a full-fledged organization, with an exec leader and 2-3 recruiters and talent managers to attract and develop new teammates. One of the biggest jobs for this team is to ensure that your current employees are a good culture fit, and don’t represent a threat to overall team satisfaction and productivity with a toxic attitude.
So there you have it, the main challenges facing startups in each phase of the startup growth cycle. What challenges do you face? Have you employed any of these tactics?
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