The Importance of HR for Startups

“Human resources is dead.”

The above phrase is often repeated in startup circles. Why? Many startups pride themselves on innovation and creativity, and because HR is the non-flashy part of business, it has gained somewhat of a stigma in the startup world. Founders, who tend to be younger, frequently express a desire to move away from the perceived bureaucracy of larger organizations, and human resources can fall under that umbrella.

Despite this aversion to human resources that is somewhat common in the startup world, HR is certainly not dead. In fact, it is just as important to the success of startups and small businesses as it is to larger organizations, and a startup’s aversion to having a proper HR function can create unnecessary consequences for the organization.

There are several challenges that startups face that could be minimized with proper HR processes and systems in place. For example, some believe that the startup boom may be slowing down, causing startups to address internal culture problems in order to continue to thrive. Because startups are...well, start-ups, they sometimes suffer from a lack of defined business processes and systems in place for managing employees and responding to complaints. In addition, in the startup world, people find themselves switching companies and roles more often. Sometimes key employees will leave a company for another opportunity, and the small startup is forced to absorb the losses involved in hiring and training a replacement.

Hiring is one of the areas where startups can and should focus on, in terms of human resources. Startups are often seeking to hire the best talent in their given industry, but they must compete with larger, more established organizations. Because of this, they must be more innovative in their hiring practices. Having an employee dedicated to working in human resources, or at least formal recruitment and hiring systems in place, can greatly benefit startups and help them to attract and retain top talent. 

In addition to an emphasis on recruitment, human resources can provide a load of other benefits to startups. In developing an HR strategy, startups should prioritize the following:

• Creating precisely written working agreements that detail job responsibilities, compensation information, etc.

• Developing hiring and onboarding practices and techniques

• Creating an employee handbook

• Establishing and communicating company goals and values

• Identifying an internal knowledge-sharing platform

Taking all of these steps can be a large undertaking for startups, as it does require a fair amount of time and resources, which may be scarce for the organization. In fact, the cost is a major reason why many startups shy away from properly establishing a human resources function. Still, the costs that can result from the consequences of not having proper HR processes in place can also be very high, if not higher. For this reason, startups need to consider how they can incorporate HR into their organization.

For organizations that simply do not have the resources to create their own HR function or hire somebody to manage the HR processes, there is always the option of outsourcing. Outside help can come in the form of a professional employer organization (PEO), which eases the burden placed on the startup and takes ownership of the HR processes without removing the human element. PEOs like Navigate can help startups manage important factors from payroll to benefits procurement and management.