You probably know that about a third of small businesses with employees fail after two years.
What you might not know, however, is that lack of a proper HR strategy is one of the main reasons behind business failures, and we think we know why.
To win in the marketplace, you must first win in the workplace. Since the HR department is responsible for managing people, it shapes the future of a company in many ways, including recruiting top talent, setting up corporate culture, motivating employees, etc.
But implementing a working HR policy for startups is not an easy task and is often met with many challenges. In this article, we’ll discuss the challenges and goals of the HR department of a startup.
HR Goals of a Startup
Startups and SMBs rely on a flexible culture. They need to sail fast, keep the business on track, as well as prevent toxic work environment that could negatively impact employee morale and retention--a role that falls under the HR docket.
To ensure smooth operations and positive working relationships, the HR department seeks to meet the following 3 major goals.
1. Develop a Competency Model
The main objective of an HR department is to hire the right personnel for the right jobs, taking their education, skills, and expertise into account.
This goal is achieved by outlining clear job specifications, benchmarking the roles against similar jobs in the industry, then developing a concise competency model for each department.
Essentially, an HR professional will gather market intelligence related to staffing, drawing insights from case studies and relevant business books to determine market standards. This intelligence is crucial as it also helps to ensure the right people are compensated well.
2. Increase Employee Satisfaction
The HR department is the fuel that drives the growth of any business.
That’s because it’s responsible for everything surrounding employees—from hiring to training, to firing, and more. It’s responsible for ensuring employees are satisfied with their roles, pay, and the company culture.
In a nutshell, the HR department is responsible for employee satisfaction.
And according to a 2015 Social Market Foundation (SMF) survey, happy employees are 20% more productive than unhappy employees.
It’s the goal of the HR department to boost employees’ morale by ensuring employees are getting attractive monetary and non-monetary rewards that align with the company’s financial situation, mission, and vision.
3. Create a Sustainable Company Culture
Corporate culture is an integral part of a business, irrespective of size.
It’s the backbone of a happy workforce and affects nearly every aspect of a company. From recruiting top talents to enhancing employee satisfaction, corporate culture defines the tone and the future of a company.
According to research by Deloitte, 94% of executives and 88% of employees believe a strong corporate culture is important to business success. It’s the goal of the HR department to perpetuate a company culture that thrives.
HR professionals achieve this by recruiting people who will share the organization’s beliefs and thrive in that culture. HR also develops training, orientation, and performance-based programs that reinforce the company’s core values and offer appropriate rewards to employees who embody those values.
HR Challenges of a Startup
To meet these goals, HR professionals are often faced with some challenges. Here are just a few of them.
1. Training Employees
Unlike many established businesses, most startups operate on small budgets. As such, many startups lack the resources to train their employees.
While it may seem cost-effective at the time of talent acquisition, this can prove to be very costly in the future. A recent IBM study found that employees are 12 times more likely to quit a job if they aren’t getting the training and development they need.
Solution: Purpose to offer training to all your employees. If on a low budget, you can organize in-house classes led by employees who are experts in certain areas. Moreover, make sure you have great properly structured training materials to send it over to all your remote team members who are sometimes considered to be the big challenge for every organization's HR because of lack of communication or difficulties in developing trust.
2. Getting Employee Feedback
Feedback is a great way to understand what your employees feel about your company.
Unfortunately, most startups lack a proper system for obtaining employee feedback on crucial aspects of a business. Every company should have a way for employees to express their opinions, dissatisfaction, or complaints about the business.
Solution: Use a variety of methods to obtain employee feedback about what they feel about the company or certain areas of business. Could range from surveys to one on one talks etc.
3. Documentation of Policies
Many companies start small; hence operate under a flawed assumption that personnel issues can be handled when they crop up.
They fail to document policies, and when employees need a place to look to understand your standards for how you conduct business and measure performance, they lack a reference point. This often leads to quality problems and HR issues
Solution: Before hiring employees, make sure you have a booklet of expected behavior and company policies are given out alongside the employment offer, to be signed and returned.
4. Employee Retention
According to a study conducted by the Society for Human Resource Management (SHRM), almost 60% of SMEs and startups feel that retaining top talent is a major issue.
After acquiring new skills, most employees use those skills to get jobs with established companies that offer higher pay and more attractive perks.
Solution: Reward employees according to their education, skills, and capabilities. Build a strong company culture that will nurture employees, foster growth, and make them appreciate and feel proud of working with you. Also, support thoughtful leadership in your organization as it is one more crucial piece of the puzzle.
For many startups and SMEs, the value of HR isn’t always apparent. Unknowingly to many, the role of HR in a company is important to its survival and success.
For instance, having a talented HR manager can help you devise training & development programs, maintain compliance with the labor laws, and hire the right talent for your startup. Moreover, the presence of an HR manager keeps the management focused on their job.
About the Author: Stewart is a full-time content marketer at Foundr and part-time reader, gamer & footballer. You can follow or tweet him @stewydunlop.