How startups can build a scalable HR department

By: Sheldon White

Date: 25 June 2019

A small business owner and a member of staff shake hands after a successful HR meeting

Here in the UK, startups and small to medium-sized enterprises (SMEs) account for 60% of all private sector employment. Even so, many startups lack in one critical area: human resources management. That's because many startups see HR as an add-on service, and something to be addressed further down the line once the company enters a growth phase. In reality, they couldn't be more wrong.

What many startups fail to comprehend is that their biggest strengths lie in the talented people they employ – and that keeping those people around is a prerequisite for continued success. To do that, it's critical startups invest in creating an HR structure that takes care of employees and their needs. If your startup hasn't established an HR department and related functions yet, here's how to go about it.

Establish your company culture

Before establishing an HR department, it's important you decide what your company culture will be. Once that's decided, your company's core values should be documented to form the beginnings of an employee handbook. That handbook will be among the first things that new employees will see, and it will be up to your HR department to flesh it out to cover the essential employee topics. Plus, it's crucial that all HR personnel understand your startup's culture, so they recruit qualified candidates that will be a good fit. Neglecting this step can have disastrous consequences down the line.

Choose an HR manager with the right skills

In most situations, the first (and sometimes only) HR professional that a startup will hire is an HR manager. If your startup is still in a nascent stage, it may be too early to justify a larger HR function. For that reason, it's essential you choose an HR manager that has a broad range of skills to handle the workload as your startup begins to grow. To find an ideal candidate, look for someone who:

  • has experience working in a small company
  • has completed CIPD training and certification
  • has a thorough understanding of employment law and compliance
  • is willing to help you build an HR function from the ground up

Of course, finding a candidate that meets all of those requirements isn't easy. It may be helpful to engage a recruitment agency with the industry knowledge and connections to find the right person for the job. Once the right candidate is on board, they can help grow the department based on the business's needs.

Establish a realistic HR budget

Like it or not, running an effective HR department, even as a startup, is going to cost money. The key to making sure that the business can accommodate the anticipated needs is to create a realistic HR budget in advance. Working with your new HR manager, your accounting and finance staff, use the following factors to create a solid budget projection:

  • current staffing levels and anticipated new hires for the budgetary year
  • a cost projection of existing benefits and new benefits under consideration
  • compliance or legal costs and fees
  • expected churn rate
  • an average of already-incurred costs per operating year

Using this as a guide, it should be possible to project how much budget you will need to meet your startup's HR needs. It will also help you identify which areas might benefit from additional attention, such as building an employee development and training program to reduce employee churn or altering your benefits packages to attract new talent. In turn, what you learn will help to form the basis of an ongoing HR strategy, aligning the HR department's efforts with your business needs.

Create a sound onboarding and induction process

With HR staff and a budget in place, the next step is to create an onboarding or induction process to get new hires up and running as quickly as possible. This is one of the most important early tasks for a start-up's HR department, and one that all too many SMEs tend to get wrong or ignore completely. Without a proper onboarding process, your employee retention and engagement initiatives will be crippled from the beginning, having a lasting and widespread impact on your business. An effective onboarding process should include:

  • Sound pre-employment preparations - Before a new employee shows up for work, get everything they'll need to succeed ready and waiting for them. That means assigning them a workspace and setting up their email, phone, and other necessary tools. Then, reach out to each new hire and go over everything they need to know for their first day, from working hours to dress code and everything in between.
  • A day-one orientation – There should be a pre-arranged schedule for each new hire that allows for introductions to other staff members, a tour of the office, and a detailed explanation of everything they'll need to know before beginning to work. Doing this increases the employee's comfort level and helps them build confidence in their new position.
  • A review process within the first week – Any decent onboarding procedure should allow time to meet with each new hire after their first week to go over any of their questions or concerns, and to reinforce the business's expectations. At this point, it's appropriate to assess and schedule any necessary training to support the new employee's work functions.

It's important to realize that a proper onboarding process doesn't end after an employee's first week on the job. It's important to delegate the task of checking in and supporting new employees over several months while they settle into their new roles. Although this may seem like more effort than it is worth, it will improve engagement and retention and make the HR department's life much easier over the longer term.

Review and refine your HR function

At this point, the initial set up of your HR department should be complete. Of course, the HR department will need to expand upon this initial work to make sure that all necessary HR functions come under their remit.

Once that happens, management and HR need to work together to refine the new HR procedures on an as-needed basis to make sure they remain aligned with business objectives. That should provide a solid HR foundation for any startup, and one that will grow with company as it develops and expands into the future.

Copyright 2019. Article was made possible by site supporter Sheldon White