Human Resource Tips for Start-Ups & Small Businesses

Hiring and retaining the right people is essential to a business’s growth. Lacking the right team is one of the top five reasons that small businesses fail. However, despite the importance of leveraging human resources, many early firms, especially tech start-ups, undervalue HR.

This lack of investment in HR could indicate that start-ups and small businesses are initially more interested in expediting administrative tasks and saving costs.

As well, some business owners may possess a bias against HR departments, perceiving them as lacking vision, overly focused on documentation, and restricting employers’ abilities to act on gut feeling.

By way of illustration, in the American version of The Office, manager Michael Scott frequently gets frustrated with his HR rep, Toby, exclaiming on one occasion, “Honestly, every time I try to do something fun or exciting, you make it not that way.”

The Cost of Making HR an Afterthought

Whatever the reason for leaders to initially downplay HR, the need for HR policies is likely to increase as a business grows. While in the early days of a start-up, hires might be pulled from a tight circle of those the owner trusts, when the firm requires more employees, the lack of a clear HR strategy could lead to bad hires, a toxic workplace culture, and high employee turnover.

The cost of turnover can be incredibly high, with researchers estimating costs at anywhere from 30% to 100% of a departing employee’s salary.

Drive Growth: Best HR Practices for Start-Ups and Small Businesses

Hire for Your Company’s Culture & Goals

An effective HR strategy starts with an excellent organizational strategy. Look at your growth targets, then decide what kinds of people you need in order to achieve them.

In the case of a company in an industry with seasonal peaks (e.g. tourism), employees will need to be able to adapt to periods of higher work levels when required. Once an employer has established this requirement, he or she can use assessments, such as EQi, to hire candidates who fit this profile of flexibility.

Also, use a proactive approach to hiring and try to anticipate future gaps in the company’s team. For example, if you are hiring additional salespeople, you may also need to hire extra customer service reps to support new clients.

Invest in Training & Development

In the first years of a start-up, training may be informal. However, as a firm takes on new team members, a more structured onboarding procedure gives employees the skills they need to be confident, succeed in their roles, and adapt to the company culture.

69% of employees are more likely to stay with a company for three years if they experienced great onboarding. Further, organizations with a structured onboarding process experience 50% percent greater new-hire productivity (SHRM).

Investment in development is also essential. Most employees, especially high performers, need clear development goals, whether that means taking on a new skill or eventually moving into a new role. Regular development meetings with managers can therefore boost retention.

Use Cutting-Edge HR Practices

Business owners might want to look around at what other firms are doing. Start-up tech companies and other early-stage businesses are implementing some of the most cutting-edge practices in HR.

Personalized Employee Benefits

More employers are shifting away from a one-size-fits-all approach to benefits. Instead, they allow employees to select their own benefits: some employees may value coverage for extended parental leave, for instance, while others want coverage for laser eye surgery.

Online health benefits providers, such as Benecaid and League, use chatbots and other digital tech to allow employees to select and manage benefits digitally, streamlining the claims process.

Flexible Work Arrangements

Abandoning the traditional nine-to-five workday, more companies have adopted “flextime,” where employees choose their start and finish times each day, as well as “flexplace,” which allows employees to work either at the office or offsite.

Flextime and flexplace provide several benefits for employers, such as improving performance, reducing absenteeism, and attracting more job applicants.   

Reduced Work Hours

There is ample data indicating that reduced work hours can actually increase, rather than decrease, productivity, as shorter hours lessen employee fatigue.

Plasticity Labs in Kitchener, Ontario, recently reduced working hours from eight to six hours per day. President Jim Moss says that the reduction has not only made him happier, but more productive as well, as he has more energy available to complete his work (CBC).

Workplace Harassment Prevention

In the era of #MeToo, businesses need to address workplace harassment. Have a policy that employees can readily access, and make it clear how they can address issues of harassment (e.g. who should they report it to).

Such policies are particularly important in start-ups, where informal atmospheres may make questionable behaviours more common, and where the closeness between company founders and early employees may make it difficult for later employees to raise complaints.

Creating a respectful culture can be especially important for tech companies. A recent survey found that 43% of women in Canada believe that tech companies don’t really want to hire women.

Tech and other organizations that create a healthy workplace culture for all genders will not only be acting ethically, but will have access to a wider pool of qualified job applicants.

Leverage Innovative HR Technology

To help develop an HR plan for a start-up company or small business, as well as save time and reduce costs, leaders can leverage the most recent HR technologies. The latest Human Resource Information Systems (HRISs) use artificial intelligence to simplify HR tasks. Moreover, sophisticated online assessments, such as those offered by Plum and MHS, support more effective hiring practices.

New training technologies can also assist with onboarding and development. For example, the platform from Axonify uses science-based adaptive microlearning with gamification elements to improve employees’ skills and knowledge retention.

Several other companies offer technology to address harassment. Vantage Point uses virtual reality to provide sexual harassment training, and Bravely’s platform connects employees with certified coaches and HR business partners who help them create game plans for resolving conflict.

Reduce HR Costs: Small & Start-Up Businesses in Canada

Even if you can’t financially justify hiring an HR manager yet, consider hiring a consultant to help you identify the best HR practices for start-ups and small businesses, or leverage online human resource tips.

Additionally, there may be ways that you can offset some of the costs of your HR strategy. The federal and provincial governments offer hiring and training programs for both established and start-up businesses in Canada. These programs provide grants to help cover the costs of hiring new graduates and employees from underrepresented groups, as well as the costs of training new and current employees.

Mentor Works provides occasional updates on the start-up funding landscape through our blog. Whether sharing news of upcoming start-up events or funding programs aimed at early-stage businesses, you can find details of funding opportunities by registering for our weekly Government Funding Snapshot newsletter.

Canadian Small Business Funding News

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Sunnie holds a PhD in English from Dalhousie University, and has published her writing in several academic journals, as well as in magazines, newspapers, and blogs. She combines years of experience as a professor in English with practical experience in the private sector as a trainer in writing and analytical thinking.

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