HR Beyond Recruitment & Payroll In Startups
It is evident that the human resources function within the startup ecosystem is frequently limited to recruitment and payroll management. Unfortunately, many startups tend to under-prioritise the broader aspects of HR responsibilities, which can result in detrimental consequences over the long term.
Founders and co-founders in the startups are known for their unwavering commitment to their vision and the pressing problem they are determined to address. They actively seek individuals who share their fervour for this vision, which understandably, can present challenges in the selection process. Consequently, from the beginning, new hires often face pressures to perform, occasionally with limited opportunities to demonstrate their capabilities, resulting at times in their premature departures from the organisation. This underscores the critical role that human resources play in effectively communicating and instilling the company's vision, mission and values, as well as in facilitating the success of new employees in their roles.
The recruitment process becomes paramount for a startup's success during rapid growth. Founders are primarily fixated on the pivotal task of attracting and onboarding top talent to align with their organisational objectives. In their ongoing pursuit of top talent, some founders may go to great lengths, making enticing promises during the hiring process. However, this eagerness can subsequently become a significant concern for founders, mainly when commitments such as employee stock ownership plans (ESOPs), performance-linked incentives (PLI), variable pay and retention bonuses are made to prospective employees and at the time of disbursing them it becomes a challenge.
It has come to my attention that some startups have faced challenges in fulfilling these commitments upon the completion of the agreed-upon periods, leading to anxiety and instances of delay or deferral in payments. Furthermore, there have been reported cases of founders denying these payments on various pretexts. This highlights the imperative role that human resources (HR) must play in instituting a consistent and equitable compensation policy.
Compensation structuring has often been neglected or relegated to external parties, such as chartered accountants or online resources, rather than involving HR professionals with the necessary expertise in this domain. It is essential to emphasise that compensation structuring is a critical function within an organisation and HR professionals are well-equipped to undertake this task adeptly.
Additionally, it has been observed that some startups fail to provide essential employee benefits. One of them is gratuity, a notable oversight that should be addressed to ensure the organisation's compliance with employment laws and government regulations.
In my observations of numerous startups, I've noted that many often overlook crucial stages in the recruitment process, such as reference checks, medical tests and comprehensive interviews. Due to the intense pressure to fill roles quickly, founders and recruitment professionals sometimes bypass these essential steps, potentially compromising the quality of hires.
In a startup context, it is widely acknowledged that team members are expected to take on multiple roles and thrive in an environment of ambiguity. While this versatility is generally accepted, complexities arise during the appraisal process. Founders often encounter challenges articulating their employees' key accomplishments, leading to skewed salary increments and appraisal ratings. This, in turn, can foster demotivation and attrition within the organisation.
In this context, the HR function assumes critical importance. HR professionals are instrumental in ensuring that job descriptions are accurately documented and communicated to employees, establishing KRAs and KPIs, and transparently elucidating the parameters underpinning each employee's appraisal process. HR's responsibility encompasses designing and implementing the entire Performance Management System, aligning expectations accurately for every team member. This approach empowers employees to explore multi-disciplinary roles within the startup while maintaining clarity regarding performance metrics.
Hire and Fire is not something unusual for startups. However, the founders / HR fail to understand that the employee who has joined them has left a paying job and joined them, as their patience to see them perform is very short. What is missing is the time given to the employee to succeed in their job. One does not realise that much time, effort and energy goes into recruiting an employee. If founders do not give time to settle the new hire to perform and acclimatise to organisation culture and nuances, it is unfair to ask them to go. Suppose one is not performing after a reasonable amount of time. In that case, it is required that the employee is put on the performance improvement plan and given a chance to prove his potential and capability. Post which one may ask the employee to leave if he fails to meet the organisation's and role's expectations. This simple process helps to part ways amicably, and the employee does not backbite the company. We know it is all a networked world and past employees' experiences with the organisations matter a lot in attracting talent.
In the initial stages of a startup, the dynamics are often informal, with a small group of individuals, including friends and colleagues, displaying flexibility in punctuality, attendance and leave management. However, these lax practices can become significant issues as the startup expands.
The founders initially faced challenges in ensuring that all employees consistently mark their attendance and adhere to prescribed work hours and leave policies. This situation can ultimately transform into a disciplinary concern. Furthermore, some employees take advantage of the absence of attendance records and leave procedures, which can lead to disputes between the HR department and employees.
In their quest for agility and a relaxed work environment, startup founders may overlook fundamental aspects of discipline, such as punctuality, attendance and leave management. As the organisation grows, regaining control over these aspects for all employees can pose a considerable challenge.
A noticeable absence in many startups is a dedicated learning and development sub-function within the HR domain. Founders would do well to recognise that training and development play an essential role in their business. The imperative to continuously enhance the skills and knowledge of an organisation's workforce is instrumental in achieving sustained success.
Startups often pay a steep price when they fail to invest in upskilling and training their talent pool to equip them for progressively challenging roles. Without proper training and development initiatives, there's a greater reliance on recruiting external talent with the requisite contemporary skills, incurring additional costs and creating imbalances within the organisational structure. These imbalances can, in turn, lead to attrition issues.
In my perspective, the primary focus areas for founders and co-founders of startups should encompass Culture, Capability and Communication. These key elements are paramount for ensuring the startup's comprehensive growth and enduring sustainability.
Culture:
Capability:
After establishing the organisation and achieving a certain level of growth, the management's primary focus should shift towards enhancing both capability and capacity.
Communication:
It would be entirely accurate to assert that the HR function within startups extends well beyond the realms of recruitment and payroll. Founders should leverage the full spectrum of HR sub-functions to diligently cultivate resilient organisations that prioritise delivering an exceptional employee experience.
