Startup businesses are renowned for their agility and disruptive ideas. They often require employees to put on different hats and multitask in a way that large enterprises don’t.

This creates a rollercoaster of ups and downs for the early days of a startup. 

The truth is that an HR function in a startup is often overlooked. By underestimating the benefits a dedicated HR unit provides, startups struggle from years 2 to 5, and in many cases simply fail, resulting in company closure.

Without an HR department, startups face difficulties connecting top talent with their vacancies, which can have severe consequences. In fact, 23% of new businesses fail because of hiring difficulties, with 80% of SMEs and startups having no formal HR department at all!

So we’re here today to get into the strengths of an HR function and an action plan for setting one up in your startup.

Why is HR so crucial for your startup?

We’re outlining exactly what makes a solid Human Resources function so important for your startup. The nature of startups means that at one point in time, almost everyone will need to multitask and provide some support for what an HR team can provide. 

But as your startup develops from humble beginnings to localized expansion, not having a strong HR function is a recipe for disaster. They ease a manager’s workload and align everyone with the company’s long-term vision.

The truth is that startups need to consider a strong HR department to survive. An infographic from Entrepreneur details the reasons behind business failures for SMEs and startups, showing how long they typically last (hint, 50% fail by year 5). A lot of the factors that cause this failure are stopped by a dedicated HR unit.

So let’s outline 6 factors that an HR function brings to a startup.

1. Recruiting and hiring talent

Establishing effective HR for a startup is no easy feat. At times you feel like you’re on a rollercoaster, with every twist and turn bringing new challenges. In a startup environment, flexibility and creativity are crucial, with many team members needing to multi-task between roles. Distributed teams need hiring and managing in new ways, as our lessons from Canonical show us.

Hiring individuals who can handle the dynamism needs a strong HR setup. Recruiting and maintaining real talent takes dedication, so HR staff need to be dedicated to the company onboarding program. 

Having an effective HR strategy from the beginning helps to streamline the whole hiring process, saving time and resources. They’ll help make sure the company isn’t just filling in blank positions, but instead filling vacancies with skilled recruits who are aligned with your vision. Use your HR team to set the foundation for long-term startup success.

2. Employee engagement

Another crucial aspect covered by a solid HR setup is keeping employee engagement high, which is indispensable for the dynamic startup environment. We know how fast-paced the startup world is, so keeping everyone motivated and invested in their role can be a lifesaver if times get rough.

Startups typically need longer hours and a higher degree of dedication from teams. A lot of tasks need everyone’s input, which you will only get from motivated and engaged team members. Good HR practices also address any potential issues before they arise by getting communication lines open and being proactive about employee concerns.

While a lot of engagement can be created in-office, HR teams can also take care of organizing company benefits and perks. Having them help to organize a company retreat for the startup (run by us!) is a fantastic way to boost engagement. Keep your startup employees engaged for their best results.

3. Career development

A strong HR function in your startup is paramount to success. An HR team supportive of clear paths for career growth makes a massive difference. A good HR can design and carry out effective career development programs that tick all the boxes of the aspirations of your high-flying teams. 

The startup world is fast-paced and competitive, so attracting the right talent is often as important as keeping them. An HR team invested in developing employees' careers is a fantastic way to strengthen employee retention in the long run. Employees with healthy career development initiatives align more strongly with the company mission over time, too.

So don’t overlook the significance of a strong HR squad who have career development in their arsenal. Prioritizing staff growth attracts and retains top talent, driving the company forward. Invest in career development to lay the groundwork for your company’s future mission.

4. Health and safety

Health and safety might not be the first thing that comes to mind when thinking about a startup, but it’s a fundamental aspect of why a strong HR function is important. Health and safety is sometimes seen as a bit of an eye-roller, a load of bureaucratic rules and regulations, but there’s no way around it.

Creating a safe and healthy workplace sets the atmosphere for productivity. This includes everything from ergonomic workspaces to resources that support mental health. This is key for many startups, as long hours and tight deadlines are not uncommon. Hopefully it doesn’t, but over time this really can result in dangerous stress levels for employees.

So have your HR teams keep health and safety regulations in their playbook. A startup with good health and safety practices through HR is much more likely to create a positive and strong work environment.

5. Conflict resolution and mediation

Like most areas of life, conflict is inevitable, but how you deal with it can make or break the company. The way conflict is managed impacts a startup’s culture in many ways, so have a strong HR function that is ready to resolve conflicts that arise and mediate any disputes.

A company’s HR is there to lay out expected workplace behavior through clear policies and procedures for conflicts. They ensure fairness and transparency when handling disputes, which is not uncommon in the stressful early stages of the startup’s life.

An HR department provides training and education for extremely important workplace practices. After delivering conflict resolution and mediation techniques, a lot of the time, minor work conflicts are solved independently between disputing parties. Just in case a conflict isn’t resolved or it escalates, the HR function acts as a neutral mediator. Their training helps staff to see each other’s perspectives and find a mutually agreeable outcome. Don’t overlook this critical aspect of your startup’s operations, better safe than sorry!

6. Diversity and inclusion

Modernizing workplaces have increasing requirements for diversity and inclusion in their business practices. By making sure your HR team delivers strong diversity and inclusion ethics, your startup is open to becoming a workplace where everyone feels valued, regardless of their background.

It starts with recruitment, by making sure you attract a wide range of potential employees, regardless of their socio-economic background. More and more workplaces are finding that diverse perspectives lead to more creative solutions, so put your startup in the right position with strong diversity principles.

HR can also set up support systems for anyone who wants a sense of community and team camaraderie. They’re great for underrepresented employees. They’re likely to feel that with the right support, they can bring their whole selves to work and their contributions are appreciated. Use HR diversity and inclusion methods to create a workplace that is adaptable to the challenges that so many startups face.

A 6-step action plan for your Startup’s HR function

So we’re laying out an action plan for your HR setup. We’ve kept the challenges that many startups face in mind, so include as many of the steps as you can for the strongest HR function in your startup.

Step 1: Establish HR Foundations

Taking the first step seriously sets the stage for a robust HR function in your startup. Align HR with business strategy through HR foundations. Roll up those sleeves and get started in the first step toward your startup’s full potential

☐ Align with business strategy: Take a close look at your overall business strategy. Your HR goals should directly align with it, from upscaling the business to company culture, so ensure your HR goals are in sync.

☐ Set measurable objectives: Set some clear and measurable objectives for the HR department. Things like reducing turnover rates in the first year, or improved levels of customer satisfaction. Benchmarks like these help you to track progress and make adjustments if they’re needed

☐ Develop HR policies and procedures: Create an employee handbook you’re proud of, that really sings the song of the company culture and expectations. Serious procedures like legal compliance and key policies should be clearly defined. Cover all details, from punctuality and dress code to workplace conduct and performance reviews.

Step 2: Implement HR technology and automation

Moving forward into the next step, consider all of the aspects of HR operations you can use with tech and automate. Leveraging tech and automation in your HR department streamlines many operations and leads to a more efficient and modern HR function.

☐ Set up an HR Information System: A strong HR Information System (HRIS) can streamline a lot of the HR process. Employee records, attendance, payrolls, and benefits admin can all be handled in an HRIS, making it a powerful tool for your startup’s HR crew.

☐ Optimize data analytics: Use HR analytics to give you the most accurate insight on easily trackable statistics at work. List out these data points, like employee performance, engagement, and company turnover rates. Use objective data-driven decisions to refine your HR strategies and improve efficiency more broadly.

☐ Ensure data security: With all of this tech being leveraged, don’t overlook the importance of securing the data you collect. Ensure your HR department understands the significance of data regulations. The last thing you want is a breach of your data security.

Step 3: Focus on talent acquisition and onboarding

So now your foundations are set up and you’ve optimized HR technology, you’ve got to think of the best way to attract top talent into the company. Keeping your HR focused on talent acquisition and onboarding helps build a motivated and skilled team, moving your startup into driving gear.

☐ Effective job descriptions: Now that the foundations are laid, clearly outline the specifics of each role in the startup for new recruits. What skills do they need? What will their daily tasks be? Detailed job descriptions help bring in the right candidates and set clear expectations from the start.

☐ Formalize recruitment strategy: Keep the net cast wide for your talent sourcing channels. Job boards, social media, industry events, and employee referrals. Tailor all these channels for the roles you’re hiring for to attract talent far and wide. Applicant Tracking Systems (ATS) work well here.

☐ Onboarding Process: Before any new hire’s first day, you’ve got to make sure their onboarding process is on-point. All necessary equipment, relevant software, and work schedules should be laid out clearly. Structured orientation to the company’s vision needs to be established too. Keep the onboarding process smooth.

Step 4: Design compensation, benefits, and performance management

So by now, the talent is trickling in and performing steadily, so here you need to make sure the HR function is utilizing the most appealing aspects of the job, like compensation rewards and company benefits. Here’s a small checklist of actions.

☐ Design compensation and benefits packages: Crucial to retaining the top talent in your startup is having attractive and competitive salaries and benefits. Keep your packages meeting industry standards, but also reflect your own company’s commitment to valuing your new recruits (and senior members too).

☐ Promote transparency and fairness: On top of competitive packages for staff, the trust factor is also crucial to keeping staff motivated. Clearly lay out how salaries and benefits are chosen. Keep communication as clear as you can to cultivate a more positive working environment and have everyone contribute their best work.

☐ Unique and standout work benefits: As workplaces globalize and company perks diversify, offering unique benefits can really make a difference to your employees. Like the sound of organizing a work retreat, but feel like it’s a lot to arrange? Reach new teambuilding heights on one of our work retreats! 

If you’re serious about optimizing HR to get the most out of your teams, why not organize a work retreat? Here at Surf Office, we know how important teamwork is in the office. A twice-annual team retreat is a great way to go about getting your teams flying high.

We've had the pleasure of organizing over 700+ retreat experiences, including remote teams, for many different companies. Here’s what we offer:

1. Stress-free transfers? We got you! ✅
2. Quality-assured accommodations? Check! ✅
3. Engaging team-building activities? Our speciality ✅
4. Restaurant reservations? That's on us! ✅
5. Expert retreat planning assistance? Of course, we have this covered! ✅
6. Onsite support, tailored to your needs? Absolutely ✅

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Not only this but we also have access to 160+ locations around Europe, APAC, the US, Latin America, and now Africa, meaning the sky is your limit when it comes to choosing the right location for you and your team.

Utilize your HR and keep them ready to work with us setting up a work retreat. Your teams will thank you for it, newbies and veterans alike. Spaces are limited, so get in touch now.

Step 5: Keep employee relations strong

In the later stages of setting up your HR unit, increase the focus on how your employees relate with the company, and the best ways you can help their development moving forward. At this point, it’s crucial to celebrate achievements and cheer on victories. Here are some actionable steps.

☐ Training and Career Development: Have your HR department ready as you invest in ongoing learning and development opportunities tailored to each department’s needs and goals. HR-supported workshops and certification programs work great here. Set up workshops aimed at team cohesion strategies to strengthen the bonds in your startup.

☐ Dedicated achievement board: Use communication channels like Slack to display victories for the whole team to celebrate. Offer rewards and certificates for members who really stand out and contribute to the startup’s success. Dedicated annual or monthly achievements work well to boost team morale.

☐ Prioritize a positive work environment: Keep your HR up to speed and focused on encouraging employee work-life balance. The early days of startups are often filled with extra layers of stress and multitasking that huge corporations don’t have to face, so be supportive of work-life balance to ensure success. Make the most of teambuilding activities to keep good vibes up at work.

Step 6: Continued compliance, strategy, and feedback

The final step of the plan ensures you’re focusing on continuous improvement through proactive methods. Feedback is one of the strongest ways your HR department can push the startup’s continued success moving forward. Keep the future in mind as you implement these steps.

☐ HR Metrics, Planning, and Feedback: Develop and maintain a comprehensive HR dashboard. Plan for your HR unit to track key metrics like diversity and inclusion, employee engagement, and training program effectiveness.

☐ Ensure Legal Compliance and Safety: Now your company’s core is established, an HR department can focus on ongoing compliance with work policies for everyone. Have them organize regular training sessions to raise any concerns about safety issues or legal compliance. Collaborating with legal counsel or HR consultants is a great way to go about setting this up.

☐ Continuous improvement through feedback: Develop a structured performance management system that includes regular check-ins, goal setting, and performance evaluations.

☐ Feedback surveying: Spend time creating a survey system that reviews work culture and your employee satisfaction levels. Cross-functional training works well, as members across departments can update the HR team with areas of improvement. This keeps organizational health a priority.