Top 4 HR Mistakes Made by Startups (and How to Avoid Them)
Before working for TriNet, I was involved with a startup company. So I can speak with experience and empathy about the pressures and stress that go into getting a business up and running.
Amidst all the business licensing requirements, capital expenditures and strategic planning, startups can easily overlook one very important function on the path to success: human resources. This is not surprising. Business owners get into business to do what they are good at in the first place, not to do HR. However, the ability to hire good people, manage them effectively, and have policies and processes in place to scale with growth are crucial for even the earliest stage startups.
I have outlined the top four HR mistakes that I see startups make and give my best advice for how these mistakes can be avoided.
1) Rushing your recruiting
Startups learn very quickly that they can’t move forward without having someone to get the work done. Putting the right people in place so that critical business functions can be performed is one of the first tasks of any small business.
Unfortunately, many startups make the mistake of thinking that just getting bodies in the door is all that is needed. This rush to hire someone – anyone – to lend a hand can lead to poor employee placement, which can lead to rapid employee turnover. This means the startup has wasted both time and money, the two scarcest resources a startup has.
Since payroll cost is one of your largest budget line items, recruiting should be conducted with the same type of strategic thought and urgency as any other capital expenditure.
2) Not benefitting from employee benefits
If a startup has not thought through what their compensation and benefits package is going to look like, they are going to struggle to find the qualified talent they need to make their business successful. Finding employees with the knowledge, skills and abilities who will dedicate themselves to making your business successful will be more difficult if the employee benefits package you are offering is not in alignment with what the market for those talents demands. A good example of how not thinking about HR from the get-go can play out negatively for a startup is described in this Bloomberg article on a company called Thinx.
To avoid these problems, founders need to include human capital planning in their business plan, as well as any strategic discussion they have throughout the planning process and beyond. By identifying, early-on, what type of qualities are required of your ideal employees, you can then research compensation trends in your area. From here, you can make sure your salary and benefits package offering attracts dedicated employees who can take you to the next level and beyond.
3) Discounting Culture
One of the biggest management and HR buzz words out there today is culture. While culture is important in an organization, it requires more active participation than startups typically realize. An organization’s culture goes beyond what the leadership says they want the culture to be. Culture is created, perceived and passed on by the employees of the organization through their interactions with their mangers and other employees, as well as their experiences with the processes and workflows the organization has put in place.
One of the most successful startups in recent years, Uber, is an example of a company that grew quickly but did not implement any type of HR infrastructure. This led to disastrous results as the company has recently been fighting off claims of harassment and mismanagement. These types of issues are not only PR nightmares for a startup but also corrosive to the organization’s culture.
Strong recruiting practices can have a positive impact on culture. Startups need to recognize the role that employees play in cultivating and reinforcing your company culture. The right people will help to reinforce your culture in the right way.
Additionally, policies and processes should be developed that align with what the organization wants its culture to be. For instance, if you want your culture to be one of flexibility, then you need to have flexible workplace policies, such telecommuting and paid time off, that reflect that type of culture.
4) Not being concerned enough with compliance
With the myriad of state and federal regulations affecting small businesses, it is no wonder compliance is so complex and difficult for startups. Compliance issues can range from notices that need to be provided to employees at the time of hire, to which employees may be protected under federal anti-discrimination laws, to the types and amount of insurance coverage you should have.
For startups, it can be hard to comprehend – much less manage – all that needs to be done to stay in compliance. And the consequences for not being compliant, even if non-compliance is due to simple ignorance, can be disastrous to a small business. Significant fines and penalties can occur for FSLA, ADA and OSHA violations, just to name a few. This could be the undoing of your startup if you’re not careful.
As we have seen with the examples of Uber and Thinx, the topics of recruiting, benefits, culture and compliance are all areas of HR that startups should strategically plan for. Overall, the ideal way to avoid these issues is to hire a qualified HR person internally or partner with an HR services provider to help manage these issues before they turn into serious problems.
This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.
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