Building an HR Foundation For Startups: What to Consider

Eric Mochnacz
June 8, 2023

The Importance of HR in Startups 

With our experience working with a number of startups, we have firsthand experience in recognizing the importance of HR in a business’s early stages. As a business grows, it’s critical for its people function to grow with it.  It’s easy for a startup founder to delay building out a human resources department, but there’s immense value in partnering with interim, fractional HR from the beginning. They work hand in hand with you to help you grow your business with attention to critical employee lifecycle processes.  

Business owners are great at building their businesses. They may not have the direct human resources or people management experience essential to building out a strong HR foundation.  That’s why it’s critical they work with qualified HR professionals sooner rather than later, so every aspect of the business scales in tandem.  

What to Consider When Building an HR Foundation For Your Startup

Establishing a firm foundation for your HR function as a startup founder can be a daunting task.  But, how you build HR from the start sets the tone and structure for the future of your people operation.  We outline the myriad of things that fall under HR’s purview and how each business function contributes to your startup’s infrastructure and its success.

Establishing Compensation and Benefits 

Finances are at the front of mind for any startup founder. You are meticulous about what money is coming in and where and how you are spending it. Payroll and benefits generally are the most expensive part of running a business.  Working with a skilled HR partner, developing a comprehensive compensation philosophy and salary structure early on helps you avoid overinflated salaries and untenable pay expectations from your workforce. Part of a strong startup HR foundation involves understanding what you can afford to pay your people long and short-term and articulating how you want to pay people comparable to the market.  

HR uniquely understands how benefit programs supplement employee pay and assist you in selecting the right benefits offerings for your employees.  How you pay your employees and what benefits you offer impact their perception of your total rewards program and influence your employer brand.  Having a strong employer brand amplifies your position as an employer of choice, meaning job seekers may choose to work for your company, even if you aren’t able to pay as much as a big-name competitor.

Creation of Employee Handbook

An employee handbook is a useful tool that outlines company policies, general expectations for all employees, and employee rights and responsibilities. A clear, accurate, compliant handbook is a key part of a strong HR foundation because it clearly outlines expectations in the early stages of your business’s development. Policies change as your company grows, but having a handbook available for your first hire ensures you have a clear understanding of how you want your business and employees to operate.  

Working with an interim HR manager ensures your employee handbook is aligned with your specific company practices and compliant with state and federal laws. An employee handbook takes your acceptable ways of working and translates them into actionable and compliant policies.  Employment law is always evolving, and your handbook is a living document that evolves with the changes in the employment landscape. Starting your business with an HR-reviewed handbook establishes a strong foundation for your employee experience and how you manage your workforce and it allows for quick revisions and updates as you scale. 

Fulfill Recruiting Needs  

As a startup founder, making your first hire is exciting. You are in a position where you can financially support someone else’s salary. Establishing strong recruitment and interview practices early on in your business creates the infrastructure for when you grow beyond one employee.  Having strong job descriptions, compliant interview questions, and a commitment to candidate experience from the beginning means you don’t need to reinvent the wheel as you scale.  Ideally, your fiftieth employee says they had the same positive interview experience as your first employee did.  

Working with an interim HR manager at the early stages of your startup means access to interviewing and recruiting best practices. Interim HR services provide the material and information you need to develop best-in-industry recruiting strategies. They train your hiring managers in effective interview techniques like behavioral interviewing. There’s value in trusting your entire recruitment function to an HR consulting team through Recruitment Process Outsourcing. Using RPO frees up your time as a startup founder to focus on growing your business while trusted HR professionals build and execute your talent acquisition process and strategy.  

Creating an Efficient Onboarding Process

How a company makes their employee feel on their first day has a direct impact on employee retention. When you’ve made the effort to hire someone, that same effort should be reflected on their first day. If someone reports to work on day one and their email isn’t set up, no one introduces them to the company,  they don’t have a schedule, and they don’t know who they should meet or what they should be doing, they may be considering their next career move before the end of their first day! Creating effective onboarding to acclimate your new employee to the company is critical to building a strong HR foundation for your startup.  

Onboarding is your opportunity for a great first impression. The goal of an onboarding process is welcoming the new hire to the team, helping them acclimate to their role and its responsibilities, and integrating them into the culture. The best way to do this is through a formalized schedule on their first day and ongoing support, both formal and informal, through the employee’s first 90 days. HR is skilled in developing engaging and effective onboarding programs to set new hires up for success on their first day and beyond.   

Developing Training and Development Programs

Once you’ve hired and onboarded your new team, focus on retaining them. A strong HR foundation for your startup focuses on hiring the right people and having a structure for their ongoing training and development. A strong training and development program contributes to internal career growth which supports employee retention. Human resources is uniquely poised to help you develop industry-specific, tailor-made training and development programs for your company.  

Don’t Be Afraid to Outsource HR 

As a startup founder, you are responsible for every aspect of your business. When you’re ready to grow your workforce and set up a foundation for success, it’s critical you have access to expert human resources professionals. You may not need full-time HR, and that’s where a consulting firm like Red Clover, and our team of certified consultants, can help. We offer fractional, interim HR support which is perfect for a startup on the precipice of growth. We allocate our resources based on your business needs and shift our people and our time to adjust to the ebbs and flows of a small business. Let’s talk and construct a strong, reliable HR foundation for your startup!

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