Startups don’t engage HR – but they should

Sophie Henderson
Founder and Managing Director
Derigo Solutions
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To survive, startups need customers. To grow they need customer loyalty. To succeed long term they need talented customer-focused employees. It’s a vicious circle. But there’s a global talent crunch and it’s never been more difficult to attract and retain great employees.

To become a truly customer-centric business, and grow and secure investment, great HR support is vital. But most startups don’t have professional HR advice.

I asked the experts why it’s important for startups to get HR support early.

What’s the long-term play?

For many startups the goal is to attract serious investment. If you’re going to do that you need to have all your processes and procedures nailed down from the start. Jordan Dargue, Head of Operations and Investor Relations at Growth Capital Ventures, says: "If you’re a startup, you need to be recruiting a team. And you need to be doing it properly. You need to make sure you have the right policies and contracts in place, and a complete on-boarding process.

“To get the best people, you want to be able to show how they can develop in their career with you as a startup. You need to be able to show performance and development processes, and professional objective setting. Such components – which are led by HR – can give a brilliant insight into your startup and what the future plans are.”

Money is important but HR is vital

The vast majority of startups struggle for money. They live day to day, customer by customer. That means it can be incredibly difficult to justify the outlay on HR in the early days. But according to business strategist Rose Cartolari, it’s not just about the money: “Many entrepreneurs see HR as bureaucracy that gets in the way of rapid change, innovation and flexibility.”

Richard Knight, co-founder of Grafter, agrees: “In the first wave of business growth, most startups have the agility to move fast, making rapid improvements to evolve their offer often resulting in a fast changing and adaptive team.”

But HR support can save startups money by helping them avoid risks. Martine Robins, Director at The HR Dept, says: “Some [startups] feel they may not be at risk possibly because they employ friends or family – this is not the case!  Until they encounter a ‘people problem’ they will never have engaged with HR support. Following a robust process from the outset is a good discipline and keeps the potential risks at bay.”

Founders can only wear the HR hat for so long

Most startups live by the seat of their pants and there’s a broad and loose approach to job roles. Richard Knight says: “The need for lean, cost effective staffing will more often than not leave the founders carrying out much of the HR role as budgets will not extend to full time HR support.”

Multiple job roles are common in startups. Borne of necessity, it can often extend beyond the founder. Jordan Dargue says: “The founder / CEO often wears multiple hats - and there's no reason why this can't be the same for every other member of staff, particularly at the early stages.”

But this jack-of-all-trades approach is not optimal and at some point, startups need to turn their attention to cultural issues: “Most benchmarks indicate that organisations take on a full-time HR person as they reach 70-100 people,” says Saberr CEO, Tom Marsden. “But organisations that are smaller still need to care about their people and culture. If you don’t have an in-house specialist, then it is key that founders take an active role in defining and re-enforcing the company culture.”

Without HR support, you can’t build a customer-focussed business

I believe that startups need HR support straightaway if they’re going to attract customers at scale and grow a successful, strong brand. You can’t build a business with the wrong employees and when you’re small, every customer engagement counts.

Business consultants like Rose Cartolari who work with startups every day agree: “Startups need hungry, motivated and empowered employees who can work in cross-functional teams often across multiple locations. This means they have to find a way to develop and grow over time in a way that’s fair, equitable and, most of all, inspiring. And this is where HR is key. Too often, when HR is weak I see smart business leaders lose their top talent, compromising the organisation’s ability to innovate and pivot with ease."

HR is not a ‘nice to have’; it’s not an optional extra. It’s vital to the future of every small business. “Outsourcing HR, particularly for SMEs, start-up and scale-up businesses is as vital as them ensuring they have accountancy services in place. [After all], most smaller businesses won’t have the technical expertise to know when they need to implement certain HR policies and practices, and why should they as they’re so busy concentrating on their businesses!”, says Lindsay Barnett, Managing Director of hr.byhoxby.

Finally, if a startup thinks they can get away without an HR professional for long, think again. Jordan Dargue agrees. No matter what kind of HR support a startup decides to use – whether it be in-house or oursourced, “the baseline requirements remain the same – every startup has the need for an HR function.”

About Sophie Henderson

Sophie Henderson

I am founder of Derigo Solutions (www.derigosolutions.com), a consultancy that provides HR and workforce advice to private and family-owned businesses.

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