Startups: One thing You Just Cannot Afford to Ignore!

I recently came across a resp from a startup employee to a job applicant that said, “Startups have no HR. We do everything by ourselves wearing multiple hats. I shall call you sometime in the evening to discuss further.” This got me thinking – do startups even need HR?If I define HR as many small companies often see it – a mid level recruiter who is brought in and asked to not just recruit but take care of all people related issues, systems and processes, my answer is a big NO! Don’t get me wrong; I have tremendous respect for recruiters and believe they are an integral part of the talent management ecosystem. My objection is to the handing over of what is probably the most critical success factor for a young company, to someone having exposure to just one aspect of the area, that too at a purely operational level! It is this myopia that makes HR one of the biggest challenges that startups face.

So let me instead, take up each aspect of the HR function and share my thoughts on how it should be managed in a startup:

1. Recruitment: I said this in my last article and I will say it again – do not expect to build your startup team on the merit of screening some resumes and conducting multiple rounds of interviews. “Your search for good people cannot be restricted to scheduled interviews; as an entrepreneur, you need to be looking for good people 24 X 7. And if you, as an entrepreneur, are not a people's person, make sure you get a partner who is.” Even if you do need to go the cv sourcing route, at least for operational tasks, consider using technology for automation or outsource these tasks.
2. Onboarding & induction: I firmly believe that experiences of the first couple of weeks at a new job shape how the employee sees the company for the rest of his/ her stint over there. Adding a new member to the startup’s family should be a grand occasion that involves every existing member of the family. Of course, you do need someone to own the process and get others involved but ask yourself – who should take ownership of shaping how the new family member will see the rest of the family?
3. Employee relations & grievance management: This is a critical area which even many large, established companies get wrong. A supervisor or people manager is not meant to be someone who just allocates tasks, grants leave and proposes performance ratings. He/ she should be the true cultivator of relent and owner of the relationship between the company and the employee. I recently met a large Indian company that really focuses on driving the bond between employees and their supervisors. In this company, some new recruits have even stayed at their supervisor’s houses when they relocated to join the company. In spite of being an extremely modest pay-master (diploma engineers are paid an entry level salary of <INR 8k pm), ~25% of the employees have been with the company for 5 years of more! I also want to borrow from an article where Aditya Kulkarni had said that disgruntled customers need an outlet for their grievances and that companies should act on this feedback. Now think of employees as internal customers; employee relations should be handled by those to whom the employees can “relate” and those responsible for handling grievances must be empowered to take action.
4. Performance management: Even in large companies, HR is just an enabler to ensure consistency and timely process completion. Going back to the point under employee relations, it is the supervisor who needs to cultivate and groom talent. In sports, would the coach and manager not candidly tell the players where they are going wrong or celebrate their achievements after a great match? Why then do most supervisors put the onus on HR for performance management? That is almost like a manufacturing company expecting the Quality/ Six Sigma team to maintain expensive machinery! This team’s role, like that of HR, is to lay down processes and monitor implementation. But it is the plant maintenance team that actually finds problems and fixes the machinery.
5. Compensation & benefits: Here, there are 2 ends of the spectrum. At the operational level is payroll management and benefits administration. Here, like with the operational aspects of recruitment, my advice is to automate with technology and/or outsource. For the strategic aspects, determining pay levels and benefits outflows is like managing a portfolio of investments. Bad decisions could lead to huge losses or at least sub-optimal utilization of the company’s funds. It would be extremely irresponsible to leave this to someone who’s answer to what offer to make to a candidate is “30% more than they are currently making”.
6. Learning & development: Should L&D be just about coordinating a bunch of training programs or should it be a larger, more strategic process of developing organizational capabilities? In large companies, the latter is complex enough to require an entire department headed by a senior expert. This is because when the manpower base becomes large and there are different parts of the organization having their own development needs, you need someone who can take a 30,000 feet view of the situation and strategically prioritize the organizations’ spending on L&D. In fact, L&D is often a separate department, reporting directly to the CEO. At a startup, it is much easier to do this analysis. But it definitely can’t be entrusted to someone at the operational level.
7. Exit management: I have seen innumerable cases where the employee serving notice suddenly becomes this ostracized character; a disgraceful deserter who has failed the company. Remember that in most cases, it the company’s inability to keep the employee motivated and retained that is the real point of failure. Ex-employees, apart from being potential future recruits, can also be great ambassadors of the company to other prospective recruits and even clients. Moreover, if handled well, exit interviews can be a great source of information on what can be done differently or better by the company. Of course, this requires someone who is genuinely interested in finding things out; not someone who treats it as just another bullet point on their job description. For a startup, I truly believe that the entrepreneurs must themselves speak to every quitting employee and as Shradha wrote in one of her articles, never hold a grudge against those who leave you.

 In conclusion, I believe that for a startup, you don’t need that mid level HR manager; the operational aspects can easily be outsourced. What you need is a leader (or partner) who truly understands the criticality of talent management - devotes at least 50% of his/ her time to it - and builds this understanding into the next rung of supervisors. Yes, startups definitely need HR…

- Saurabh Deshpande, Human Resource Consultant

(Twitter Handle: S_desh)