How to develop an HR strategy for a startup company

Only 62% of startups make it to the fourth year. The rest fall victims to various difficulties new businesses are exposed to.

HR issues, from lack of motivation to inability to hire the right professional for an open position, add to the failure statistics. This means, an HR strategy established right from the beginning is not overrated.

Based on individual goals, challenges and factors, the strategy requires thorough analysis and a good dose of creativity. That said, there are typical difficulties that startup companies are dealing with, and taking them into account is a reasonable way to come up with efficient steps of an HR strategy sooner.

Key HR challenges of startups

It’s a commonplace to describe startup life as a series of various challenges – and that’s true! HR processes, regardless of their form and intensity, are also influenced by typical difficulties startups are facing. So what are key challenges that affect the HR part of a startup’s life?

• Unclear goals. You only have a team of six employees and the amount of HR work is not that high, so what could be the reason for creating a strategy? But it’s not that HR goals don’t exist at all: rather, they are too unclear and not actionable.
• Lack of human resources. Even when an HR strategy exists, assigning its implementation to a specific team member can be problematic, as everyone already has too much on their plate. Lack of skills necessary for handling HR tasks is another part of the issue: HR background is not typical for startup founders, and hiring an HR professional is rarely an option.
• Lack of finances. As trivial as it may sound, implementing a strategy requires financial resources. Taking into account relatively low priority of the HR strategy, insufficient funds become a challenge.
• Difficult hiring. Lack of job security, unclear perspectives, no employer brand, and too vague responsibilities make the hiring process particularly complicated. Attraction and retention of talented professionals takes more effort than in established businesses. Unclear goals add to the problem, resulting in too vague requirements to job candidates.
• Too early scaling. You’re planning growth and getting funds – it looks and feels like you’re doing everything right. The trick is, growth is rarely predictable when you’re not ready to scale yet. Focusing on stability instead of speed is sometimes hard, but it’s key to establishing a sustainable growth process.

HR challenges don’t limit to the common problems listed here: they are individual and depend on industry, region, available funds and resources, founders’ and employees’ professional background, or even team members’ personality match. Identifying your particular challenges and prioritizing them is the prerequisite for formulating an efficient HR strategy.

Steps of creating an HR strategy

Knowing the difficulties means being ready to handle them. After you’ve identified what are your key challenges, it’s time to design steps to tackle them. These steps, structured, prioritized, and adapted to your resources, can already work as an HR strategy. Here’s an example of what you can develop a strategy from:

Step 1 – Define your goals and align them with your resources. Among possible goals, the following can be top priorities:

• Organizing work process (implementing basic procedures, establishing legal employment practices, setting up leave management process, etc.);
• Attracting and retaining employees;
• Improving or maintaining healthy work environment;
• Developing attractive compensation packages;
• Motivating employees;
• Increasing employee satisfaction.

Step 2 – Quantify your goals. Define what exactly you’re aiming at: parameters you need to achieve, or indexes you’re expecting to improve. Document your goals to make them measurable and actionable, and keep track of the progress later on a regular basis.

Such parameters as employee satisfaction can be hard to measure. In that case, think of ways to assess their dynamics – for example, prepare survey forms, and ask your team members to fill them out regularly. Another possible problem is the lack of representative data, for example in the case of retention rate: it’s hard to get actionable results of it when your team is under seven. In this case, consider introducing that specific parameter later, when it can bring you any value.

Step 3 – Develop and document HR processes. Even if the processes are quite obvious, make sure they are clearly documented and available to the employees. Prepare employee handbooks, hand them out during the onboarding process, and encourage employees to use them. The handbook can be issued as a hard copy or published in the company’s intranet system. The following processes are typically worth documenting:

• Hiring;
• Employee onboarding;
• Leave & absence management;
• Salaries, compensation and benefits management;
• Work environment management;
• Incident management;
• Promotion;
• Training;
• Performance improvement;
• Termination & retirement;
• Improvement of HR processes.

Step 4 – Implement it. Create an actionable plan with timelines and milestones. Define the dates by which you need specific processes to be established and goals to be achieved. Assign a responsible person to put it into effect.

Step 5 – Improve it. Monitor deadlines, track progress, and see what can be improved. Use your team members’ feedback, and process it on a regular basis. Learn more about common practices existing in your field, and find what works for your team. In addition, use HR technology to help improve employee feedback and streamline HR processes.

To sum up, your HR strategy must be goal-oriented, focused on stable growth, and open to changes. Proactive action plans are typically considered preferable, but in real life reactive strategies work better for many startups, as they are better aligned with team’s resources.

Final thoughts

Developing an HR strategy for a startup business is a creative process of fitting viable solutions to challenges in existing time and budget limits. There’s no “one size fits all” approach here: tasks, ambitions and challenges are individual – so should be the solution. In short, the following is key for maintaining sustainable growth and achieving future success of your business:

• Align your actions with your goals, but scale them to available resources;
• Plan for future, but prioritize solving today’s tasks;
• Aim high, but focus on maintaining what you’ve already achieved.