"HR" stands for the Human Resources department of any business or organization. The HR department embodies professionals in this area who manage the interests and needs of the organization's human capital, or the individuals who work for the company.

Responsibilities of the HR department span from recruiting, administering payroll, creating a safe work environment, managing compensation packages for workers, and integrating new employees – more on these later.

For many startup founders, an HR team takes the backseat until their company grows larger. But contrary to this perception, having a functional HR team from the beginning in a startup often draws a significant line between those who succeed and those who fail.

Ethically, an active HR team is supposed to be one of the most important departments in any business. For startups especially, a functional HR team means an imperative key to achieving long-term success and especially transformational company culture.

But are you in doubt as to whether you need an HR team in your startup? Here are seven reasons that should convince you.

What benefits of having an HR team? 

If a dedicated HR department is ubiquitous among mega companies like Apple, Amazon, and so on, having a functional HR team from the beginning in a startup should also be prioritized. Why? At this juncture, I'll answer with reference to some statistics that emphasize the importance of an HR team to every startup.

1. Recruiting/Employees retention

According to research conducted by Glassdoor in 2021:

“Organizations with a strong onboarding process improve new hire retention by 82% and productivity by over 70%”.

The above statistics highlight the unique contribution of every active HR team to the growth, development, and overall success of a startup or an already established company.

How does this come about? The HR department of any organization is saddled with very important responsibilities and one of them is to recruit new employees. And if you don't already know, an organization's success is heavily reliant on its staff.

The HR department conducts the interviews, screening, testing, and onboarding of new employees. This is vital so that the proper individuals are hired for the correct job. 

As an aspect of the recruitment process, the HR team is further responsible for new employees' integration into the company. By answering questions relating to the employees' roles, job descriptions, and company culture.

After the hiring processes, the HR department also oversees employee retention in the company. How is this done? First of all, employee retention is a company's ability to keep productive and highly talented workers for a long time.

In this light, companies benefit from having an active HR because it helps reduce turnovers by providing an enabling work environment and positive organizational culture through training, engagement, compensation, and competitive salary.

2. HR department oversees employees' training and productivity

Another primary responsibility of the HR team in any business, organization, or startup is to oversee training programs for employees. This is so unavoidable because the world of business is an innovative and highly competitive one.

Hence, employees require continual training to upskill and stay relevant in areas like leadership and management, and transition into the evolving business world. The training also gears workers to remain compliant with any process modifications or legal regulations. 

To emphasize the benefit of an HR team to businesses in this regard, a study conducted by Aberdeen Strategy and Research; a division of Spiceworks Ziff Davis, reveals that:

"Companies with a programmatic approach to employee engagement report 64% greater annual increase in employee engagement rates compared to All Others (19.9% vs. 12.1%)".

3. Creating a safe and favorable work environment

Since the HR department is responsible for managing the human capital of a company, companies also benefit from this department because it is accountable for ensuring a safe and supportive work environment for everyone.

They design and execute policies and procedures that ensure a healthy and productive workplace. This includes providing employees with the resources and support they need to do their jobs well, and many other perks.

Furthermore, HR is frequently in charge of dealing with workplace safety, harassment, and discrimination issues. This includes investigating complaints, enforcing policies, and assisting personnel affected by these issues.

Through a safe and enabling work environment, the HR team also assists in developing a culture of productivity, creativity, and innovation which eventually benefits the entire organization.

4. Performance management

By performance management I mean the various metrics companies use to measure the productivity of their employees. 

Monitoring the performance of every employee in a company is crucial for the result which is; an overall increase in profit, growth, and development. 

The human resource management department is in charge of monitoring work efficiency and developing an appropriate performance management strategy. Such an approach would not only ensure maximum potential but would also boost job efficiency.

In addition, the human resource management department also assists workers in strengthening their abilities and encouraging them to be more exceptional in all of their jobs. 

5. Effective conflict management

It is  impossible to avoid conflict in a setting with people from different homes, cultures, sometimes nations, and religious beliefs. Professional management and solution to these issues is another emphatic benefit of the HR team to companies.

The HRM department takes prompt action and resolves conflicts within the company.   The HRM department also handles one-on-one conflicts that may arise between employees.

Are startups with an HR team more successful than those without a dedicated HR team?

According to a publication by HRWorld – the flagship digital platform for the HR vertical of The Economic Times, Palash Agrawal; the founder of the home decor startup "Vedas Exports" with a team of 200 employees said:

"Our team strength is around 200 people…I have managers in the team. Who looks into day-to-day operations and other people-related issues and I am in complete know of things. For us, right now, we don't think having a dedicated HR team works honestly".

On the other hand, in the same publication by HRWorld, Amit Bankas the founder of an eco-social network known as WeNaturalists stated that an active HR team is an imperative unit of a company. Whether the company is or not a startup.

From these two founders, we see a contradicting perspective toward the notion of an active HR team in a startup company.

Now, to answer the question "Are startups with an HR team more successful than those without a dedicated HR team?"

It must be acknowledged that an active HR team is just one of the many factors that contribute to the success of every startup. Hence, whether a startup has an HR team or not does not always determine its success or make it more successful.

Instead, a robust team with a diversity of expertise is often necessary for startups to succeed. 

However, looking at the benefits that startups with an active HR team enjoy, there's arguably a greater chance of success they may equally enjoy that surpasses those without an HR team.

For instance, performance management of employees will no longer abound on the founder's desk. Like Agrawal said, "...I am in complete know of things".

The HR team takes sole responsibility for measuring the productivity of employees and formulating measures for further improvement.

With this responsibility lifted from the founder's shoulders, founders can focus on sourcing investors, and partnerships and creating a favorable public space for the company.

Furthermore, the hiring and onboarding processes become more excelling and handled by trained and skillful professionals – as the HR department is a niche of its own with programs designated to pioneer standards and expertise.

That being said, an HR team is a department every startup should establish because of the benefits of having one gives the startup an edge, and considering the challenges that faces startups, every little advantage counts.

7 Reasons you need an HR Team in your startup

1. To sort out the legal compliances

By legal compliances I mean all the systems and procedures that a business has in place to make sure that it complies with all applicable laws, rules, and best practices.  Legal compliance in business involves following the rules that are required of you as a business owner.

To avoid you from winding up in hot water with the government, your HR team is responsible for assisting you through the maze of employment laws. For instance minimum wage and overtime rules.

The HR department further helps you create employment contracts and ensure you comply with anti-discrimination legislation. Solely because no one wants to be accused of being discriminatory at work, you need an HR team in your startup for this purpose.

2. To set up a payroll system

Before going over to discuss how important you need an HR team to set up your company's payroll, what is a payroll? A payroll is a list of employees in a company who are eligible to be paid for the work they have done.

It contains information such as the employee's name, number of hours worked, salary or hourly rate, and any deductions or taxes that must be deducted from their pay.

Payroll is legal compliance – since it helps companies comply with labor laws and tax requirements and equally guarantees that employees are paid correctly and on schedule. 

Managing payroll can be a daunting task especially as your company expands which is why you need a specialized department like the HR team. 

Allowing a specialized unit like the HR team to take care of the salary calculation, taxes, benefits as well as other deductions saves you time as a CEO while ensuring that your workers are paid on time and accurately.

3. To help with employee onboarding

Before now, I mentioned that the HR team is responsible for onboarding employees. And yes, hiring new staff is wonderful, but it also requires a significant amount of labor. The HR team can help you in developing an efficient onboarding process that ensures new employees are welcomed, oriented, and trained for their new position. 

They also have to develop an orientation strategy, provide an employee handbook, establish a training program, and assign a mentor or guidance to assist new hires in settling in.

4. To define the company’s hiring process

Founding a startup is one task. Finding the proper personnel for your startup is an even higher task that can define the success and failure of your company.

It is the duty of a trained human resources manager to help you in defining the company's hiring process, create job descriptions, and screen possible candidates to guarantee you hire the best people. 

You need an HR team to do the posting of job positions on numerous platforms, screen applicants, conduct interviews, and run background checks.

5. To help with staffing and recruitment

As your company expands, you may need to extend your crew or team members. You need an  HR team for the recruiting activities like job advertisements, resume screening, and interviewing. Y

ou also need an active HR team to conduct talent sourcing, develop a talent pipeline, and attend job fairs and networking events. This can go a long way in helping you attract the top talent in the industry and remain competitive in your niche.

6. To help with employee training

Keeping your staff trained and up to date on the newest skills and information is very important to their progress and the success of your business in general. You also need an HR team to develop training programs and provide opportunities for continued professional development. 

Since they're trained in human management and resources they are best positioned to identify training requirements, develop training materials, and organize workshops and seminars for workers. 

7. To help establish an organizational culture

Creating a happy and productive work environment should be one of the goals of your company if you desire employee retention and high performance. To bring this goal to bear, you need a human resources manager to develop and implement initiatives to foster a healthy and engaging work environment. 

They may assist you with defining your company's values, mission, and vision, as well as aligning them with the aims and aspirations of your personnel. They can also assist you in developing a feedback, recognition, and collaboration culture, which can boost employee morale and performance.

Challenges to setting up HR in a startup

Some founders and business owners have a pessimistic approach toward raising an active HR for their companies because of the challenges associated with it. Some of these challenges include:

When is the right time?

For founders like Agrawal, knowing the right time to set up an HR team is challenging. He said:

"For us, right now, we don't think having a dedicated HR team works honestly".

So even with a startup of about 200 people, Agrawal is yet to grab the right time to bring in an HR team.

It is worthy of note that this challenge is not peculiar to Agrawal alone. Generally, for startups, deciding when to establish an HR department can be challenging because it depends on several variables. Including company size, growth rate, and budget. 

Establishing an HR department too soon can be expensive and may not be necessary while delaying it too long can lead to employee dissatisfaction and legal problems.

Nevertheless, parameters such as the size and rate of growth of the business go a long way in determining the ideal moment to establish an HR department. 

And Janeel Patel, a Quora user and a founder of two successful startups in his answer to the question How many employees should a startup have before hiring an HR manager? opined that the right time to hire an HR manager for your startup is when you're 30 employees strong.

In Patel's words:

I did it when we were around 30 employees strong.

Hiring the ideal candidate

After figuring out the right time to establish an HR team for a startup, the next big challenge is often the question of "who" to hire. Without a doubt, it can be difficult for startups to find a soothing HR professional. 

Especially if they lack the funds to offer competitive salaries or perks. Additionally, startups may need HR experts that are at ease working in a dynamic setting and who can assist in creating HR procedures and guidelines from the beginning. 

Some tips for hiring an ideal candidate include; looking for individuals who have experience in the startup environment, as well as a passion for building and scaling HR processes. Additionally, a person with strong communication and organizational skills should be considered.

Selecting the right tool for your HR team

Even after passing the two major phases above, many startups still get hooked on the process of figuring out which tool to use. The difficulty around this phase is often heightened by factors like the number of options available and the potential financial constraints faced by the startup in question.

However, to scale through this phase, startups should also think about the requirements of their HR team and make sure that the solution they choose is scalable and expandable along with their business.

Deciding between In-house management or outsourcing

Deciding between managing the HR department internally and contracting out HR duties to a third-party professional is another challenging phase every startup encounters in the cause of setting up an HR unit.

And although it may cost more, in-house management gives you more control over HR procedures and regulations. Though it may result in less control and flexibility over HR activities, outsourcing can be more cost-effective.

The solution to this challenge is this; the startup's unique requirements and financial constraints should determine whether HR responsibilities are managed internally or outsourced. 

And startups with the means to do so may choose to have more control over HR procedures and guidelines. On the other hand, startups that wish to concentrate on their primary company may find that outsourcing HR tasks is a cost-effective solution.

That being said, while there's so much contention that small businesses, especially startups, may scale without an HR team, the truth is that the advantages of having one outweigh the disadvantages.

Statistics even prove that startups with a committed HR team succeed more than those without. Undoubtedly, building an HR team may be difficult, particularly for early-stage firms with little funding.

But it is at the same time undoubtedly feasible to overcome these obstacles and create a powerful and effective HR function with the appropriate plan and approach.

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