When starting a business, there are many steps that need to be taken to ensure that it will succeed. A common area that is often overlooked when forming a startup is the HR department.  Although some may think that an HR department would have a negative impact on a company’s bottom line, this is the furthest thing from the truth. Does a startup need an HR department? Yes, and here’s why… 


What is the Importance of an HR Department? 

According to talentculture.com, businesses fail 23 percent of the time because they don’t have the right people working on their team.  An HR Department is responsible for overseeing the recruiting, interviewing, and hiring of new staff. In addition to hiring candidates, the human resources department can assist in maximizing employee productivity while protecting the company from any issues within the workforce. By creating strategic practices that help improve employee productivity, your startup will have a higher chance of retaining your top employees. 

Just like starting a new business, there can be many challenges within an HR department. Let’s explore some common HR challenges faced by startups,  and address how to avoid them.


Top 5 HR Challenges & How to Overcome Them

  1. Failure to Provide Proper Training for Development: Many startup businesses operate on a small budget. Allocation of this budget means that some things are sacrificed, which can lead to minuscule training of employees. 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 that they need. It is important to ensure that you have properly structured training to ensure that is offerable to all employees.
  2. Minimal Managerial Interest: When a business is in its startup phase, management is focused on one thing–making the business a success. HR functions tend to be seen as unnecessary cost that does not contribute immediately to the company’s revenue or profits. The management team may be unwilling to invest time and resources on HR processes and limits HR to focus on the hiring of resources. Management in startups need to realize the importance of good HR processes in driving the organizational culture, employee alignment, aligning employee performance, etc. It is the role of the Human Resource Manager to identify such critical processes and convince the management about implementing these while clearly illustrating the return on such investments.
  3. Low Employee Retention Rate: 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, many employees use those skills to get jobs with established companies that offer higher pay or better perks. Strong company culture and employee rewards can help feel employees feel more secure in their position.
  4. Little Document Policies & Performance: When HR issues arise, it is important to make sure that they are appropriately documented. 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. To combat this issue, create an employee handbook that can be given to employees upon hire. This will help employees learn and understand company policies and expectations as an employee of your business. 
  5. Listening to Employee Feedback: Feedback is a great way to understand what your employees feel about your company. 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. A way to prevent this issue is to use a variety of methods to obtain employee feedback including surveys, 360 reviews, and much more. 


How Do I Start an HR Department? 

There are many factors that are important to consider when starting an HR department in your business. A successful HR department is rooted in meaningful connections. Building these connections means having conversations with all levels of staff to learn about their priorities and concerns. One of the first steps that should be taken is to learn the priorities and concerns of the executive team. Ask the directors and managers for recommendations on whom to speak with among lower-level employees. Interviewing middle managers and regular employees is crucial—they are the ones who really understand the day-to-day routines and can provide the insight you need to build an effective HR plan.

In addition to meeting with the businesses managers, a realistic and achievable HR strategy should be created. Incorporate employee feedback and align the plan with the business’ culture and values. More importantly, provide solutions to the concerns and issues that permeate the workplace. Not only will this help you stay on top of your responsibilities, but it will also provide the opportunity to periodically sync up with the executive team and receive their feedback on your progress.


Final Thoughts 

For many startups, the value of an HR department can be difficult to see. Starting a business can be hard, but maintaining it can be even harder. Recognizing the HR challenges faced by a startup and taking measures to resolve them is critical and can go a long way in helping the startup to scale up.


Limitless HR Support in Gilbert, Arizona.

Looking for additional help in managing your HR department in Gilbert, Arizona? Limitless Investment and Capital has recently expanded its product offerings! Learn about the variety of skilled experts we have on staff, qualified to assist your business’s needs. Rather than struggling to manage your HR department, focus your efforts on a piece of your business that only you can. Contact us today to get started!