If there is one fact that does not change regardless of shifting economic cycles, it is this: yesterday’s surviving startups are today’s stable businesses. And as a startup shifts into becoming a stable business, its needs change - including the need for HR services.
For example, a startup may be able to get by on a shoestring budget with a staff to match. But as the startup grows up and becomes an established business, expenses increase along with staff. As staff increases, there is a need for additional oversight and management to ensure compliance and competence.
This post will explore the reasons why the future of HR looks bright even for startups.
HR Provides Structure to Startups
In a marketplace where a solopreneur innovative app can attract million in angel funding literally overnight, many startups don’t stay in startup mode for long. Pinterest, Box, Square, Instagram, WhatsApp and other apps are all examples of just how quickly “startup mode” can cease to exist.
Unfortunately, along with this overnight success comes exposure to a variety of HR-related issues such as diversity in hiring and promotion, implementation of workplace policy, creation of corporate culture and management of a virtual and often far-flung global workforce of salaried and hourly workers plus independent contractors.
HR Guards Startups Against Legal and PR Issues
One issue many startups struggle with is how to manage a young, talented and diverse workforce that is good at what they do but not necessarily good at fitting in or getting along well with teammates.
This is a recipe for toxic company culture without the oversight of an HR department to craft policies and monitor compliance in the workforce. HR is the department that ensures mandatory trainings have been completed, payroll and benefits are accurately awarded, diversity and equal opportunity hiring and promotion practices are in place and protects the startup from the type of PR and legal issues that could literally close its doors.
Software Isn’t Sufficient as an HR Substitute
The right workforce software tools in the hands of the right HR professionals can be a powerful combination. Software is designed to automate routine processes and free up productive work hours for more useful ends.
But software cannot successfully mediate disputes between co-founders, distribute service awards equitably and disarm potential troublemakers before they dismantle the startup from the inside out.
Only human HR staff can successfully navigate these critical tasks in such a way as to help a startup survive its own early days.
HR Safeguards a Startup’s Future
In most cases, a company will spend an average of a quarter of a million dollars in court defending the typical employment or discrimination lawsuit.
Even if a startup chooses to settle out of court rather than gamble on the jury voting its way, there is still an estimated $50,000 minimum payout for most such cases.
Many startups may be able to swing these kinds of expenses once, perhaps twice, but after that, it may become a question of whether or not to stay in business just to pay legal bills.
A knowledgeable, effective and professional HR department can help a startup company avoid these pitfalls. With mandatory trainings, signed employment waivers, documented complainant policies, thorough pre-hiring background checks and written recruitment and hiring practices, HR can get employee relations off on the right foot the first time.
For these reasons and many others, it would seem that the companies most in need of what HR can provide are, in fact, the ones who use it the least - startup companies.