People are the heart of any organization; be it a thriving and growing enterprise, or a start-up building everything from scratch. The reason is the employees, the most valuable assets for any company.
The first 10 hires in the organization determine the pace of the organization and the level of growth. How these new hires are onboarded and engaged in the organization is often falls to HR, or the person responsible for HR tasks, if the business is small.
A Checklist for HR in Start-ups
Many entrepreneurs are unsure whether they are doing the HR practices right or not. According to the Bureau of Labor Statistics, around 20% of start-ups fail within their first year. 20% close down after the first two years of operation. Another 50% last around 5 years, while 30% of start-ups make it to the 15-year mark.
These statistics show that businesses might be doing something wrong or might not be able to build the strength to sustain the pressures of the external environment.
One of the top four reasons why businesses shut down is retaining an inadequate team on the management side. This also means that leadership issues cause businesses to shut down, even if they have adequate funding available.
Many organizations don’t have a specialized HR department or proper HR processes in place which is where outsourcing your HR function can be beneficial. Frequently, HR is still considered essential only when the organization grows. However, there is no truth to this statement because an effective hiring process is what strengthens the foundation of a startup.
The fact that ineffective leadership causes most businesses to shut down is a testimonial that HR has been, is, and will always be one of the most essential functions for the smooth running of an organization, regardless of its size. Therefore, it is important to have an HR checklist to help in laying a foundation for a budding business.
Here is a checklist that is a must-follow for all start-ups, especially those that believe in the power of people and want to make sure that the people processes are in place and do not cause the startup to topple down:
Start with Setting up an HR Team
The first thing to do essentially when a business is set up is to hire for the major roles. This means that there should be a specialist for HR, marketing, operations, finance, and sales, so the major components of the organization are well-managed.
Amongst these roles, the first thing to do is set up an HR team or rather “department” if the company only has the budget to hire a single employee for each department. If you don’t have the financial resources or budget to hire an employee in HR, consider outsourced HR solutions with GritHR. Why should you consider this? Because typically a new business is not ready for the investment in an HR team for the processes. A cost-effective option is to hire HR consultancy and outsourcing services.
Why? Because several HR problems are bound to arise. The right guidance makes sure that the company saves on money that might be spent on a trial and error of different HR strategies and saves money on hiring a specialized person for each role in the HR department.
Develop an Organizational Structure
Once your HR strategy is decided upon, it is time to plan for an organizational structure and based on the demands of the business make a list of roles to hire for, which includes the role’s responsibilites and major functions.
Here are some questions to ask when developing the first organizational chart:
- How many employees can the startup hire?
- Which roles are the priority roles? These are typically the roles you wish you had filled yesterday.
- Who is the right person for the role? What skills and what kind of personality is well-suited for the role? Who will best fit into the culture you are trying to create?
- What are the expectations from the person who will be hired for the role? Will they contribute to short-term goals or go for attaining the long-term vision?
Startups usually fill top management roles first. Here are some of the roles that should be a part of the organizational structure apart from HR:
- The CEO – this role can be assumed by the founder
Develop a Sound Recruitment Plan
While showcasing business ideas and the potential of the business to clients is important for a startup, it is also important for attracting talent to the company. Every new employee makes a difference to the startup, therefore hiring wisely is recommended.
Even if the organizational chart has been planned out, the recruitment plan should also cover how the employee will be onboarded. A good employee onboarding process improves the retention rate by a whopping 82%! Also, an employee leaving the company costs the company at least 6 months of the salary. For an employee making $50k per year, that equals $25k in costs to backfill, hire, and train a new employee.
Since every penny counts when a business is developing, making sure that employees are satisfied is the key to moving forth swiftly. Once HR is set up, developing a recruitment plan that helps attract the best talent is the second item on the HR checklist for startups.
Offer Attractive Compensation
Even though startups face a financial burden, in the beginning, the employees must be offered an attractive compensation package because this is the factor that will help attract talent that can take the company onwards and upwards.
The inclusion of benefits other than the pay like medical coverage, insurance coverage, and paid leaves are great ways to attract the best talent around since employees are looking for a complete compensation package rather than just a paycheck.
Develop Company Policies to Stay Compliant
Many times, businesses neglect the basic needs of a business like forming an employee handbook or making sure that the company policies are designed in a way that the business stays compliant with the industry laws.
For practical reasons, HR must form policies that help make the company processes and HR practices compliant with legal matters. It helps startups to steer clear of legal costs too early in the business which may cause an unexpected rise in costs and a blow to the employer brand which may cause useful talent to repel.
Lay the Foundation of a Strong Organizational Culture
The organizational culture exists whether the HR department works towards developing it or not. But making sure that the organizational culture serves as a factor in attracting and retaining talent is up to the HR department.
To strengthen the organizational culture, developing a culture of rewards, eliminating behavior like bullying and harassment, and creating an open communication culture are necessary.
Often, the founders of the startup are so passionate about the cause and the vision that they often forget that the motivation for other employees to work in the firm might not be the same as theirs. As a result, they expect employees to overburden themselves in building the company. This causes burnout and a toxic culture that often leads to a high turnover. Therefore, training the leaders and even the founders is necessary to make sure that the employees are satisfied.
Summing it Up
While a company can be run by the sole owner, to scale, the startup needs a proper organizational structure. To begin with the growth process, HR is the prerequisite for any activities when a startup is looking to hire.
This article gives a checklist, and every element on it is a must if the startup is looking to succeed. Attracting and retaining talent means that the organization is building its assets, and HR is the manager of these vital organizational assets.
The HR conducts activities like developing an organizational structure with proper planning of the roles and responsibilities and the compensation package offered, attracting talent with a formal recruitment and onboarding process, and developing company policies to stay compliant with the state and federal laws and improve the employer brand.
All of these activities are pivotal to the success of any startup; therefore, this checklist is a guide to making sure that HR is doing all it is supposed to do to strengthen the foundations from which the company will go up and beyond.