Why Startups Need HR: Unlocking Growth and Stability

Masha -

HR in startups is crucial for growth and efficiency. It helps with hiring, developing and retaining employees. HR practices can prevent the creation of a toxic work environment, promote a strong company culture, and ensure fair compensation. Human Resources also provides training, creates policies, and maintains career paths.

The human resources department does not have to be a hindrance for growing start-ups and small and medium-sized companies. There are ways to organize HR work and hiring employees while remaining flexible.

Here you can find out why startups and SMEs should introduce structured HR and recruiting processes:

Why startups need some HR functions

Startups and SMEs rely on a flexible corporate culture. You need to be able to fail and pivot quickly. Structured HR and recruiting processes are not their top priority because they are viewed by senior management as terrible "corporate" culture killers that threaten innovation and flexibility. The development of good HR and recruiting processes is therefore usually pushed into the background.

But unstructured HR and recruiting processes can do more harm than good if left unchecked. They can foster a toxic work environment, cause confusion, and negatively impact employee morale and retention.

Companies that consciously develop a strong human resources function show that they value their employees and their company. These companies are better in the following areas:

  • to hire employees;
  • to develop employees;
  • and retain employees.

HR processes help start-ups and SMEs hire employees

Investing in HR puts you in a better position to hire because you're more likely to:

  • You can create job titles and descriptions that are non-discriminatory. Human resources staff will help you create accurate job titles and descriptions to attract qualified applicants to apply. This is important for startups looking to grow their teams and hire diverse employees.
  • Conduct structured interviews. Hiring the right people is critical for small businesses, and unstructured interviews invite bias in the hiring process. Human resources and recruiting staff can help startups conduct structured interviews to evaluate applicants based on fair, predetermined criteria.
  • Protecting companies from lawsuits. The human resources department employees are the contact persons for legal questions - including labor laws at the state and federal level. HR staff will help you understand complex laws and what they mean for your company (e.g. how to interpret the Family Medical Leave Act in the US).

HR processes help startups and SMEs to develop and retain employees

Startups and SMBs with solid HR processes are better able to develop and retain employees, both of which are important for business growth. You are more likely to:

  • Fair remuneration for employees. Compensation and benefits are an important part of human resources work. Without human resources professionals, conversations about raises are difficult and could boil down to how managers "think" about an employee or position rather than what the fair market value is for a role. Fair compensation practices also prevent you from developing a gender pay gap.
  • Invest in training managers. In startups, there are many “generalists” - employees who wear many hats. These generalists often find themselves in leadership positions without any formal leadership experience. Leadership training is important because the quality of your leadership has a direct impact on whether employees stay with you or jump ship.
  • Take care of the workplace culture. Good HR and recruiting departments take the pulse of employees in a way that doesn't feel like police work. They take applicants' experiences into account, carry out monitoring visits to new employees and meet with them regularly. This creates a strong culture that contributes to a strong employer brand, which in turn leads to better hires.
  • Recognize the need for policies. As companies grow, new employees may face new problems in the workplace: e.g. How to deal with noise, manage expenses, and manage paid time off. Human resources departments work with managers to create policies that consistently answer these questions. In this way, small conflicts can be resolved before they become big ones.
  • Nurture career paths. When a company employs at least 30 people, how to develop these employees in order to retain them is crucial. Human resources is your company's best partner when it comes to developing career programs to prevent turnover, which is expensive and affects employee morale.

How to engage HR without losing your flexible culture

The human resources department is a reflection of company management. As long as you value flexibility, you can build a creative and flexible HR department.

Here's what you don't need to build and run a successful HR department:

  1. Jargon. Jargon alienates employees, creates mistrust and reduces productivity. Human resources departments should strive to communicate clearly and concisely, in person whenever possible.
  2. In any case, proceed “according to the instructions”. Startups don't need hard-and-fast rules governing every aspect of office life (e.g., formal dress codes are out of style.)
  3. A defined set of “corporate values.” At the corporate level you may need this because in larger companies there are usually many departments, employees and cultures. But as a start-up, company values can be limiting and change as your company develops.
  4. An employee handbook. You'll need some policies (e.g. sick time, paid time off), but as a startup you probably don't need such a comprehensive employee handbook. But if you absolutely need one, here's how to write an effective employee handbook.

Here's what you need to do to build an innovative HR department:

  1. Hire the right HR people. These employees will be the ambassadors of your company culture, so look for people who embody that culture. Consider hiring employees who can be both:
  • HR Coordinators: This person meets informally with employees on a regular basis and encourages managers and employees to resolve problems among themselves.
  • Recruiter: This person should meet with managers regularly to get a feel for what qualities they value in applicants. She should also be able to identify each department's hiring needs, build talent pipelines, and provide good candidate experiences.

2. Encourage proactive HR involvement. Proactive HR professionals make the effort to meet people face-to-face and learn what drives employee engagement. This promotes trust in HR rather than fear. Proactive HR employees:

  • Regular visits to employees
  • Meet with passive candidates
  • Welcome new employees with flair

3. Empower your HR employees. An empowered HR department is a group that doesn't have to go back and forth between managers and employees to get buy-in for everything they say. You are free to represent employees and share information with them. Your goals for employees could include:

  • Proper employee onboarding
  • Measuring employee engagement
  • Communicate with employees about what is going on in the company
  • Competitive compensation and benefits
  • Actively cultivate culture in the office

4. Invest in good HR software. There is a wide range of HR software to choose from, and many of them can streamline some aspects of HR work (e.g. applicant tracking systems, HRIS and procurement tools). However, remember that even the best HR software is not enough to replace human employees.

Frequently asked Questions

What does the HR department do in startups?

  • HR processes are crucial to the success of any company. They can help you develop and retain your employees, meaning startups with strong HR practices are better able to grow their business in an efficient manner.

When should I hire HR for a startup?

  • Most startups hire HR when they have around 20-30 employees or after a Series A round. At this time, companies are recommended to develop and hire a human resources department. More employees in your company require the full-time supervision of a professional who can oversee all aspects of human resources management, including hiring practices.

What does HR do all day?

  • Human Resources ensures that interviews run smoothly, coordinates efforts between departments and companies to hire new employees, and guides them through their first day on board.

Investing in HR is pivotal for startup success. With tools like IceHrm and strategic practices, startups can navigate growth effectively and cultivate thriving workplaces.