3 Reasons Why Your Startup Needs HR

August 21, 2013

Whether you’re talking to VCs or founders of startups, one can’t help but get into discussions about talent — particularly around the strategies being employed to attract and retain the best talent in the market (see our new eBook, Get More Talent! How to Build the Talent Factory Your Company Needs to Scale). Talent is the lifeblood of a startup. It determines the company’s ability to innovate, generate creative ideas, and execute successfully by getting its products or services in the hands of as many people as possible.

HR’s Place in a Growing Startup Company’s Priorities

In the first year of operating a startup, founders are challenged with meeting the rising expectations of stakeholders and quickly creating value for potential customers by translating an idea into a concrete product or service. To achieve this objective, founders need to make difficult decisions on where to allocate their time and how to best utilize the limited resources they have at this early stage.

Once a viable product or service has been produced and validated in a market, most founders reflect on how to strategically grow different aspects of their business. This often involves the need to bring on new talent to support key dimensions of the growth strategy, and may include hiring software developers, sales and marketing professionals, and/or business strategists and developers.

Of course, bringing on all that talent and incorporating them into the organization effectively is no simple task.  Founders need to continuously reflect on and have discussions around the following:

  • the type of talent that is needed
  • the timing of when they are needed
  • where they can be found
  • how much they would want or need to be compensated (including equity)
  • which ones are essential during the next phase of development and growth
  • how they can be inspired to join the startup
  • how they can be motivated to operate at their full potential while remaining happy and engaged
  • and, of course, how to do all of this in a cost-effective manner!

Often, founders choose to take these responsibilities on themselves, as it is difficult for them to justify hiring a non-product/service centric or revenue-generating employee at this early stage. But the reality is that an HR lead — even at this initial phase of the company’s development — can play an essential role in driving forward a startup’s growth strategy in the most efficient and effective way possible.

Many times, leaving key talent management responsibilities to an HR professional can actually be a more cost-effective approach for the company, enabling the founders to remain laser focused on the strategy and operations tied to growing the new enterprise.

HR for Startups: 3 Key Benefits

Here are some examples of where an HR lead can help drive value for startups:

1) Keeps recruitment costs down

An HR lead can support recruitment efforts (as well as other talent management areas), thereby curbing the need to utilize expensive recruitment agencies early on. Additionally, having an internal HR resource perform the initial screenings of potential hires can help ensure that candidates are not only technically competent, but also a strong cultural fit. This can have a significant impact in improving interview-to-hire ratios, thereby reducing the amount of time founders and other employees allocate towards assessing candidates, which can lead to higher levels of productivity.

2) Facilitates collaboration and innovation

When a company is made up of only a handful employees, it is often easy to collaborate and collectively generate new ideas while operating in close quarters. However, as growth sets in and clear divisions begin to take shape across the startup, there is a new need to increase communication and facilitate a culture of collaboration across the growing body of employees in order to sustain innovation and organizational performance.

HR leads can help establish new talent initiatives in the company such as brown bag seminars and mentorship programs, or they can design creative workspaces that help facilitate the conversations needed to spark higher levels of creativity and collaboration across the different divisions of the startup.

3) Enhances employee retention and engagement

As with any organization, no matter its size, human resource challenges are inevitable and arise for myriad reasons. As a startup transitions into its growth phase, it is essential that employees remain engaged, happy and productive, as well as foster a strong sense affinity or loyalty to the organization. A dedicated HR lead can play a pivotal role in establishing a set of tools and a corresponding environment that helps discern key HR issues as they arise and put in place a set of programs to counter related risks and foster a more inclusive culture.

For example, regularly surveying employees, both on a formal and informal basis, can help the HR lead determine the key factors that contribute to employee engagement and satisfaction in the workplace as well as potential challenges that may be on the horizon. If these issues are identified early and addressed effectively, the startup can lower its turnover rates and increase engagement levels, thereby improving the overall productivity of the company.

The examples illustrated above provide a glimpse as to how HR can play a vital role in creating value for a startup and help successfully execute on its growth strategy. Has your startup created new value through implementing a robust HR strategy?


Head of People Operations

Salima Ladha is the Head of People Operations at <a href="http://www.signpost.com">Signpost</a>, a cloud-based marketing software that gives local businesses the power to effortlessly build and manage customer relationships. She previously recruited top talent to to OpenView and our Portfolio Companies.