HRM in the age of start-ups
The recent sexual harrasment allegations against founder one of India’s top rated startup has raised some important regarding Human Resource Management in startups. Let us not restrict ourselves to the issue of women work safety in startups and delve deeper into the domain of “HRM & Startups” by analysing the following key areas:
Role of HR in success of startups:
Three things are essential for a start-up to succeed –a product that is in demand, a good team and minimal expenditure. Hence, a company must look to hire professionals who share the company’s vision and are willing to work hard. Compromising on an HR team to save up on initial investments might result in hiring inefficient employees, affecting the company’s long-term progress.
Thus, Human Resource management is very crucial for any start-up.
There are two ways in managing HR; either the founding members can be in charge of recruiting professionals or they can seek the help of an HR professional. Both have their ups and downs.
When founders double up as HR managers, they end up investing a considerable amount of time and effort in building an employee base, leading to lower productivity. The only upside to this model is that one might end up saving some costs. However, if the start-up requires a small team to begin with, then this could be the ideal way to go.
The other way to do this is by hiring a small HR team or a consultant. Recruitment consultants can be quite effective. However, this tends to increase the company’s expenses as most of them work on the basis of heavy commissions. Also, unlike HR employees, consultants do not help in retaining a company’s talent pool. Many consider an HR department as an unnecessary cost when establishing a business venture.
However, an effective HR department saves money by lowering recruitment costs, reducing attrition rate (resulting in lower training costs), and even save the company from some legal ramifications.
Although it is not mandatory for start-ups to invest in an HR department, it offers a great return on investment for most. Companies initially employ a professional to handle their HR needs and eventually strengthen the department when they have the capital to expand.
HR challenges faced by startups:
The startup world is full of challenges – everything – right from the finances to logistics has to be run on a shoestring budget, customers and vendors don’t take you seriously most of the time, and the investors are either not interested or ask for the moon. And then there is one more set of people that can make or break your company – the employees.
Some of the challenges faced by HR in field of start-ups:
Quality Hiring & Retention: A Google or a Microsoft has candidates lining up for jobs. But the word ‘startup’ scares prospective candidates away. Most would avoid them if they could because startups are synonymous with long working hours, intense work pressure, delayed joining, delayed payments of salaries, and in some cases, firing without prior notice or explanation. Further, working with an xyz.com which is a “startup” wouldn’t impress your family; in fact it may make them worried about your career. For parents, a “stable job” in a reputed company for their kid is the second best thing to a “government job”. So, a job with a startup doesn’t even count. In order to counter this, HR for startups try to come up with everything from Social Media campaigns to hiring disabled individuals, but yes, it is an uphill task. If they do get a quality employee, retaining him or her is a task in itself, often leading to added expense and stress.
Policy Framing: Larger organizations have HR manuals, thick deck of policies and procedures, the well defined ‘yes’ and ‘no’ (read rules) to for everything. However, startups normally start with an “anything goes” culture. There are manipulations, extrapolations, gray areas and scope for subjectivity, something that the HR has to deal with.
Office Politics: When an organization is small but expanding, group formations are inevitable. The good old nepotism, sycophancy and favoritism have a way of creeping in. Then there are the fiefdom wars. The CFO wants to run his writ and the COO thinks he owns the place, both have a set of troops loyal to them and the stage is set for a civil war. Finance vs. Marketing gang wars are most common and most brutal too. The poor HR person tries hard to broker the peace between these warring factions, as they can bring the house down faster than the strongest business competition.
Millennial Workforce: Gone are the days when employees used to be grateful to “have a job” in order to feed the family and would report to duty with neatly parted, well-oiled hair, wearing an inconspicuous tie. The millennial worker turns up with his distressed jeans and messy hair, chewing a gum. If he feels his boss is too bossy or the company is too boring or the job content is not as per his expectation, he will quit. Not afraid of being fired, he may paint your not so flattering picture all over the social media within hours of being buffed.
High Turnover: The bread and butter of the HR person was and remains the ability to curb the turnover. The employee churn in the new age industries is extremely high and for startups, it is at nightmarish proportions. Most employees are not committed and use the startup as a “stop gap” arrangement before they find a “stable job” at a “good company”. The churn not only leads to refill costs, but the training and learning tenure is a sheer expense. While HR people at all organizations are struggling to keep pace with the rapidly changing environment, the startup HR guy has to fight this out with one or rather both hands tied behind his back. He has a lack of funds, brand name, loyalty, leadership support and has to compete with the giants.
However, all is not doom and gloom for the startups. In the world of technology, they have access to zero cost publicity and brand building activities. They have the freedom to draft ground breaking policies that bigger companies cannot or will not allow. They actually have the elusive “seat at the table” which most companies do not provide their HR! The HR of a startup can actually make the difference.
Startups and Pay Packages Bubble:
Startups are also making headlines for the big pay packages they are offering to their prospective employees. This, though, attractive for the employees led to creation of salary bubble which has started showing its true colours.
In the last few years, India’s top startup companies took salaries of freshers to ridiculously high levels. That was when the startup sector was witnessing a maddening expansion.
But now when funding has dried up and profitability shrunk, startups are laying off those high-paid workers. When they go out looking for new jobs, employers want them to take huge pay cuts. Startups had hired these people at salaries many times higher than the industry standards, creating a salary bubble which is bursting now when the startup sector is facing pressures. Today, the situation is so bad at startups that a large number of startups have been banned by the IITs from campus recruitment for going back on offers.
Startups in field of HR:
In the age of start-ups, several new ventures such as Talview, PiQube, Zeta, and Belong — are bringing in better methods of recruiting, assessing candidates and managing employee payrolls.
HR is no longer an internal job. Companies are increasingly outsourcing HR ops to startups, which use everything from videos to artificial intelligence to find the best candidate and pay out salaries on time.
The HR industry is going through its own disruption. Technology is becoming a big disruptor in the industry and most breakthroughs have come from the smaller companies.
To sum up “First there was e-commerce, then there was food tech, now fintech seems to be the trend. HR technology is going to have its moment next.”