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Creating an HR Strategy for a Startup

A helpful guide for tips and considerations on creating a strong HR strategy

Elle Mason

by Elle Mason - May 30th, 2023


If you’ve worked at a start-up, then you know that wearing many (figurative) hats can often come with the territory. It’s not uncommon for HR strategy to be neglected – particularly when growing from a team of two or several people. The limited resources that the business has tends to be spent on product development, marketing and growth – with HR taking the sidelines.

Because of that gap, startups may not have the resources or education on how to create a cohesive HR strategy. But it’s never too early to start working on one. Even if you have an HR department of one – or none – this article will serve as a helpful guide for tips and considerations on creating an HR strategy for a startup.

What are the benefits of having a strong HR strategy at a start-up?

A proper HR strategy can be critical to growing your business. After all, you need people to build or deliver the product. If the business can’t attract or retain the right people, the outcomes will be stunted. And beyond that – a good HR strategy can help create team cohesion and productivity, it can reduce the administrative burden of constantly hiring, onboarding and releasing, and it can save your business money and time by making you aware of key compliance and legal information.

And while many people think of HR as simply focused on areas like payroll and compliance, consider all of the broader areas that a proper strategy can create or influence:

  • Building recruitment pools and funnels

  • Designing systems for hiring and onboarding

  • Defining organizational goals and responsibilities

  • Creating policies and procedures for various business functions

  • Building compensation and benefits structures

  • Managing compliance information

  • Creating a plan for nurturing a positive work culture

  • Managing employee development and performance

  • Building rewards, recognition and other engagement programs

Given the breadth and spread of these areas, even if your team is small, it’s never too early to start thinking about a strategy.

Question and considerations for creating a step-by-step HR strategy for a startup

How is your organization designed? What’s the size?

Are you a company of 5? 50? 500? What departments or teams do you have and what do they manage? What is the organizational reporting structure? Planning and mapping the vision for this out can help contain or avoid some of the confusion that comes with rapid growth.

What are the non-negotiable policies that should be in place?

Does your company have rules or regulations about time off? Dress codes? Technology use? Conduct? Documenting these things can help onboarding go smoothly, prevent performance issues, and give managers a resource to follow if a conflict arises.

HR technology can allow you to easily create policies & edit them as you need — If you’re a startup, you may need to create brand new policies and agreements for employees to acknowledge. GoCo’s Magic Docs makes it easy to create e-Documents with custom fields, drop-downs, eSignature, and more for employees to digitally acknowledge. The policies are all housed in the HRIS so they can reference them at any time.

What do you need to know from a regulatory and compliance perspective?

What are the mandatory documents and due dates for business functioning and compliance? What regulatory forms need to be completed and how often? Who are they submitted to or where are they stored? An HR strategy will help you plan for this in advance.

What is the plan for hiring and recruitment, and what training will be needed?

Onboarding is a critical time for employees – they’re building their impression of the organization and you want them to have a positive one. Some of the questions you might ask are: Where will you source talent? What type of messaging will you convey? What are your interview processes and who is involved in hiring? How long will new hire training take and what should it entail?

What is the compensation and benefits plan?

How will you ensure pay parity? What are the pay differentials for levels of experience, time in the organization, etc.? What benefits can you offer? This can be one of the biggest factors that causes people to accept a job or leave for another job.

GoCo’s HRIS was specifically built for SMBs/startups that don’t have the time to manage the paper-based, admin work. With GoCo, HR admin or even leadership can streamline all of the onboarding, benefits, and payroll tasks and focus on scaling or growing their startups.

What is the employee engagement and development plan?

Beyond their initial training, how will employees continue to grow their skills and develop as professionals? Will there be trainings or workshops? Are resources allocated to using outside materials, attending conferences, or taking courses? What is the roadmap for measuring, understanding and growing employee engagement? Will you introduce a rewards or recognition program? These are also key questions that can drive how satisfied people feel in their roles.

If you previously thought of HR as a function solely limited to hiring and payroll, then these considerations can feel daunting. But you don’t have to do it all alone! HR technology is designed to help. Using an HRIS to help take some of those manual tasks off of your plate so that you can effectively delegate some of the administration so you can focus on growing the organization, keeping employees happy, and all the other hats you might be wearing.

9 Tips From Experts to Create a Startup HR Strategy

To gain insights into the unique challenges faced by HR and leadership at early-stage startups, we asked professionals from various positions, including Associate Directors, CEOs, and Founders, to share their experiences. From hiring and retaining experienced professionals to overcoming the lack of name reputation, here are the top nine challenges these experts have faced in creating an HR and recruiting strategy.

Hiring and Retaining Experienced Professionals

The challenge I faced while creating an HR and recruitment strategy at my company was hiring and retaining professional people full-time—especially the ones who have previously worked with MNCs.

Running an early-stage startup requires every member of the team to go above and beyond their comfort levels, which is scarce in people who have been with MNCs before. For a startup to grow, we need skilled and experienced people, but those who are already habituated to a smooth life don't do well at adjusting to the working culture of an early-stage startup.

In most early-stage startups, the pressure is always high, there is a constant need for upskilling (as one may need to perform more than one role they signed up for), and employees need to deal with an insufficient work-life balance. 

So it is challenging to come up with HR policies that strike a balance between their and the company's needs.

Shilpa Kabre, Senior Talent Acquisition Manager,

Addressing Fair Recruitment Challenges

You should think about how fair recruitment can be challenging in creating HR and recruiting strategies. When devising a plan, it's essential to be mindful of potential unconscious biases. The employer himself doesn't know that he is following unconscious bias. Since it is mandatory to provide equal opportunities to all candidates, documenting what is unconscious bias can be challenging.

You often have to reject a candidate based on a fact; on the other hand, you must keep one because of the same truth. It depends on the role, time, and situation. Fair recruitment is not as easy as it seems. You can't put all the candidates on the same measurement scale.

Their skills, qualifications, and experiences differ. You have to consider all of these factors while creating a recruiting strategy. And now, developing a fair recruitment strategy has become more challenging because of the inclusion of diversity.

Saikat Ghosh, Associate Director of HR and Business, Technource

Technology vs. New Candidates Dilemma

At an early stage in the business, there's always the dilemma of whether to opt for technological solutions, which add a hefty cost to a small business in an early stage that doesn't have the means and hiring new candidates, which will not perform the job as efficiently or effectively as they require more time and resources, costing the business more in the long run and will eventually be replaced with technological solutions in the future. 

This dilemma is always a struggle as a business would like to focus its spending where necessary. However, getting funding and starting with an efficient strategy you would like to maintain in the future is advised.

Max Wesman, Chief Operating Officer, GoodHire

Hiring Impact, Embracing Generalists, Freelancers

I am a founder, investor, and advisor for hundreds of early-stage startups. Relative to mature organizations, early-stage startups have zero visibility into what will happen in the next 12-24 months. This poses distinct challenges:

  • Hiring for immediate impact: Time is of the essence, and waiting for someone to figure things out is a major mistake. Early-stage startups require talent that can drive results from day one, eliminating the need for extensive training.

  • Embracing generalists: The dynamic nature of startups calls for versatility. Specialists may not align with the ever-changing landscape. Hiring adaptable generalists enables seamless transitions as your startup pivots and explores new avenues.

  • Freelancers for flexibility: When resources are limited and runway is a concern, working with freelancers can provide flexibility. Freelancers can be quickly onboarded and, if necessary, let go without the complexities associated with employee terminations.

Rafael Sarim Özdemir, Founder and CEO, Zendog Labs

Offering Attractive Benefits on Budget

As a super early-stage startup, we are still in the lean stages of operations. This means we don't have the budget to offer all the attractive benefits some candidates may wish for. We tend to work with people based in Europe. European countries are known for much paid time off, extended maternity and paternity leave, and excellent healthcare options. 

We struggled to structure these benefits when creating our HR and recruiting strategy but ultimately landed on a happy medium we can offer for now. This helped us attract more quality candidates, and with their help, we will reach the goal of providing a more attractive benefits package (such as extended maternity and paternity leave).

Gordana Sretenovic, Co-founder, Workello

Overcoming Limited Resources Challenge

I believe that limited resources and tight budgets make it difficult for early-stage businesses to implement practical human resources and recruiting strategies. 

To tackle this challenge, I prioritized resource allocation and concentrated on low-cost recruitment strategies, such as leveraging social media platforms, attending industry events, and leveraging employee referrals. In addition, to recruit and retain elite staff, I investigated inventive ways to compensate for limited cash resources, such as offering shares or unique advantages.

Edward Mellett, Co-founder, TestHQ

Navigating Founder Control Issues

Startups tend to be insular; this often helps them in the early days when decisions need to be made on the fly with little debate.

But it also means that clashes can occur over small things when they're ready to move on to a big-name hire. Founders find it difficult to give up control and often veto candidates with a different vision for the company, even when they know a fresh opinion is precisely what they need.

As a recruiter, it's up to me to play the middleman, which means employing strategies like incremental change. Starting with applicants who move the needle slightly can open the Overton window enough that when the perfect fit appears, they go for it.

Travis Hann, Partner, Pender & Howe

Balancing Speed and Quality in Recruitment

Time is of the essence when hiring new candidates. Vacant posts can cause costly delays, stifling growth and reducing productivity. However, rushing the process could result in selecting the wrong candidates or overwhelming the onboarding experience. 

This could lead to increased employee churn and higher costs overall. Finding the right balance between speed and quality when recruiting is essential. We want the process to be as efficient as possible and a positive experience for potential employees. 

To facilitate this, we have focused on streamlining the application process and eliminating unnecessary stages. Setting reasonable, realistic goals for our hiring team is also imperative. Transparency is vital. We concentrate on clear, consistent communication, across departments, between colleagues, and with candidates. We've learned to be timely but not hurried in our approach. This has helped us to attract high-quality candidates and keep them engaged.

Kathy Bennett, CEO and Founder, Bennett Packaging

Overcoming Lack of Name Reputation

When I launched my firm, the biggest challenge in developing a recruiting strategy stemmed from a lack of name reputation. Even though I had an excellent track record and stacked my company with experienced recruiters, some clients wanted the extra reassurance that comes with an established brand.

Startups often face a similar disadvantage, but they shouldn't let that dissuade them in the early stages.

It's counterintuitive, but leaning into your newness can solve the problem. Focus on your firm's potential by highlighting the risks of stagnant processes. Startups understand the value of novelty, so don't copy your competitors. Instead, develop a game plan that's as fresh as your brand.

Tim Walsh, Founder, Vetted

Final Thoughts

Despite the daunting challenges, establishing a strong HR strategy in startups is not only critical but also achievable. Given the necessity of HR in various aspects of business, such as recruitment, onboarding, policy creation, compliance management, employee development, and much more, it is essential for even small startups to plan and implement an HR strategy from the onset.

Experts suggest focusing on fair recruitment, flexible hiring methods, balancing quality and speed, overcoming the lack of reputation, and addressing challenges that come with limited resources and control issues. Fortunately, the advent of HR technology can be a game-changer, enabling startups to streamline their HR processes more efficiently and focus on the core tasks of growing the organization.

Leveraging tools like GoCo's HRIS, startups can efficiently manage their HR administrative work and focus on scaling the business. Hence, irrespective of the size or stage of the startup, investing in a comprehensive and robust HR strategy is a step toward sustainable growth and success.

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