Select Page
SaaS startup owner contemplates pricing

It’s tempting to try and do it all yourself, but entrepreneurs shouldn’t overlook the importance of HR. 

It’s a question that makes HR experts shudder, but you may ask it all the same: “Does my startup/new business even need HR?” We get it. Without an in-depth understanding what human resources does for your business (and your bottom line), maybe you don’t see any real value in putting money there.

Let’s look at what HR is, if you can do it all yourself, and why you need it (because trust us, you do).

Human Resources (definition): The department in your startup that is responsible for personnel, including recruiting/hiring, administering benefits, and onboarding/training.

What Does HR Do?

HR departments handle many tasks related to the employees at your startup. These jobs include:

  • Recruiting and hiring qualified candidates
  • Handling onboarding, including employee paperwork
  • Providing employee support
  • Ensuring your startup is compliant with employment laws and other regulations
  • Organizing business processes surrounding personnel to ensure growth
  • Creating, implementing, and managing company culture, employee handbooks, and other employee-related guidelines and standards
  • Managing and administering benefits

The tasks listed above are general, and at a startup your HR department may prioritize job tasks in different ways. For example, company culture plays a large factor in talent recruitment and retention, so for some startups an HR department may focus primarily on tasks associated with culture initiatives.

Despite the clear function and necessity of HR, PayScale collected data showing that tech startups with less than 100 employees staff half as many HR professionals as other comparably-sized companies in other industries.

Can You Do HR Yourself?

Lots of entrepreneurs handle many tasks for their small businesses all on their own, including HR. There are some things that a startup founder can do to launch HR by themselves including: writing a values statement, outlining an employee handbook, self-educating, and setting up a structure for employees to communicate issues.

“In many companies, even without HR departments, the first step for any problem is the direct supervisor and then the boss’s boss,” writes The Balance Careers, who advise following this reporting structure in lieu of a real HR person at your company.

Even with the technology that is available, as a startup grows the smart choice is to hire employees or outsource the core functions of the business. Bootstrapping your startup’s HR will get you started, but at some point the functions of HR will become more than you can handle by yourself. That’s a good problem to have, one that frees up a founder to pursue their business.

Join other successful startups and learn about outsourcing your tech company’s HR with Growthwright.

When’s the right time to make your first HR hire? “Startups usually launch without personnel teams, but SHRM advises that companies bring on a human-resources staffer once they reach 15 employees, the point at which personnel issues become complex enough to require specialized skills,” writes the Wall Street Journal.

Nora Jenkins Townson, founder of Bright + Early, agrees. She notes that startups need to overcommunicate when their employees total 15 or more. “You absolutely must communicate, over and over,” she writes, cautioning startups to never assume that employees know what a company is working towards. The responsibility of informing employees on critical issues falls on HR.

Why You Need HR

There are risks associated with not having HR. Even without an HR department, startups (and any business) are still responsible for covering human resources. The benefits of having HR are especially relevant to startups, as good HR practices often translate into growth. First, let’s discuss one reason you absolutely need to have HR covered at your startup: compliance.

Just because you don’t hire an HR person doesn’t mean your business is exempt from providing human resources to employees. If you go without HR, you’ll still have to handle compliance, recruiting, employee conflicts, benefits administration and myriad other human resources-related tasks.

HR handles compliance and legal issues for your business, including making sure that paperwork and protocol mandates are met. The obvious implication here is that ignoring HR or failing to properly address it is a major business risk for startups. But there’s more: without HR, your employees will have no confidential source of expertise on employee matters and you risk sacrificing a “culture of safety” at your organization.

Now that we’ve scared you a little, let’s look at the positive impacts of HR. These include scalable endeavors like standardizing human resources processes and the ability to replicate growth. Importantly, a designated HR function as a part of your business signals to employees that you value them. Employees who have positive interactions coming on board with your company are more likely to be satisfied and therefore, productive.

Best Practices for Startups Launching HR

Startups in particular need to take a lean approach with all their early-hires. While it’s tempting to hire cheaply, the smarter option is to hire in a way that helps you grow. That means that startups often make a strategic HR hire by finding someone with impressive experience who can not only build a human resources department but also take on culture initiatives, too. “Investing in HR early on was invaluable for us, and it’s a decision I would make again,” says Kyle Taylor, CEO of The Penny Hoarder.

Job Roles in HR

Here are the HR roles commonly filled at early-stage Startups

Bookkeeper

Bookkeepers handle accounting for your startup and in many cases, human resources is on their to-do list as well. Don’t just assume a bookkeeper has an HR background. Instead, include “Bookkeeper with Human Resources Knowledge” in your job description.

People Operations

Coined by tech startups seeking to move past perceived negative connotations with the term “HR,” “People Operations” is a title utilized by startups who want to show they’re focusing on people more than bureaucracy. Titles vary and can include “Culture Scout” or “People Success Manager.”

HR Generalist or Manager

The most common one-person HR department consists of an HR Generalist or Manager. They will handle all the general HR functions your startup requires, but juggling so many priorities will mean that specializing on individual items will be difficult. If something like corporate culture is especially important to you, include a Culture Officer in your HR hiring plan.

It may be tempting to break off the functions of HR and place them with other employees, like financial directors, office managers, or department directors. Not only are managers in these roles untrained on compliance and HR issues, but burdening them with extra duties keeps them from the core work you hired them to do.

There’s a better way than bootstrapping or doing HR all on your own: outsourcing. Startups need to be lean, and as with many other business functions, HR is a way for early-stage startups to gain access to high-level expertise without the cost of hiring internally. “Outsourcing human resources functions can reduce your administrative workload and free up your time so you can focus on your business objectives,” says Inc.

For more information on outsourcing human resources to Growthwright, visit us here.

Bridgette is the Director of Human Resources at Growthwright, with 12+ years of experience in all areas of Human Resources including: Benefit Administration, Employee Relations, Performance Appraisals and Compensation Management, New Hire Orientation and Onboarding and Recruiting.

You may also enjoy:

Growthwright  © 2018