There’s certainly no hard and fast rule on when to hire an in-house HR, but there are some rules of thumb to take into consideration
As an HR consultant for startups, I’m often asked this question by founders.
In the early stages of their startup journeys, founders typically spend the majority of their focus on product development or sales and marketing, with recruiting often left as an afterthought.
At some point, however, they always arrive back at the classic chicken and egg problem: in order to grow, they need the right talent, but in order to attract and retain the right talent, they need to grow.
To get out of that cycle, I usually advise founders to bulk up their startup’s HR muscle.
There’s certainly no hard and fast rule on when to hire an in-house HR, but generally after achieving product-market fit, there are some rules of thumb around team sizes founders can first take into consideration.
10-15 team members: Resources can be quite limited at this stage. As a founder, you probably didn’t have many issues recruiting the first few employees on your own, but as the business starts to scale and accelerate, the team will also need to expand accordingly. Bringing on outside talent to manage the hiring and onboarding process internally will be critical in preventing HR matters from occupying valuable mindshare.
15-30 team members: So you managed to get to this stage without hiring any dedicated person to handle recruiting. It still might be wise to bring in someone, as HR expands beyond just recruiting to also include retention. While attrition is quite normal in any startup, retaining an employee (granted they’re performing well) is significantly cheaper than hiring a replacement, which can often waste valuable time and resources.
30+ team members: If the startup has more than 30 employees and doesn’t have an HR yet, you may need to consider hiring for this role as soon as possible. At this size, sourcing job boards, editing job descriptions, facilitating interview and onboarding logistics will likely distract you from more mission critical things, such as fundraising, product, or business development.
Also Read: Avoid the Top Mistakes That Startups Make
HR pains of a scaling startup
Many early-stage founders refuse to hire an HR because they view it as an unnecessary expense, and one that’s more suitable for large enterprises. In reality, many founders are unaware of or substantially underestimate the HR problems and needs they’ll encounter as a startup scales and the team sizes grow:
Recruit specialists vs. generalists
In earlier stages of your startup, you’re likely hiring more generalists that can wear multiple hats due to limited resources. Once your company starts to scale, however, you’ll usually need to divide and conquer, that is recruiting more specialists that can significantly amplify the efforts of each function.
For example, full-stack engineers might be more commonplace in fresh startups, who would then gradually be replaced by separate front-end and back-end engineers as the organisation grows.
Attracting and retaining talents
This includes everything from building the employer brand and marketing specific job openings to sourcing better quality candidates to adjusting compensation/benefits and work-life balance policies to optimise retention.
Regulatory and compliance requirements
Labour laws can be quite complex from country to country. Founders need to stay informed on basic hiring and firing legal frameworks to prevent the company from encountering any lawsuits.
Company culture, mission, vision, and values development
Setting the vision, mission and values is extremely important, as these help create the company’s culture and establish objectives and goals that help employees navigate the organisation. Unfortunately, many companies lack these core components in the early-stages as the founding team is usually too occupied with other things.
Performance/OKR/KPI appraisal and compensation structure
Compensation and performance reviews are resource-intensive but nonetheless critical components of any growing startup.
Also Read: How know if your startup is ready for growth
Design effective training and development programmes
At a certain scale, a startup doesn’t necessarily need to go outside to seek out talents. Instead, it could facilitate internal training to upskill existing talents and cultivate leaders from within.
However, many founders are not experienced in properly assessing employee capabilities and designing training programmes for them.
The different types of HRs
So, you’ve started to face some HR issues as your company has grown bigger and have decided to hire a professional to give you some peace of mind. Actually, there are two types of HR professionals that you most often see in early-stage startups.
This role takes on broader duties and responsibilities, generally encompassing the recruitment, retention, training, management and development of employees; legal issues concerning employment; and salaries and benefits design.
Given the critical nature and time-intensive nature of talent sourcing, recruiters are often brought in separately to specialise in building a strong pool of candidates for hiring managers to choose from. The scope of their responsibilities include understanding the organisation’s recruitment needs, creating accurate job descriptions, posting job descriptions in different channels, and even attending career fairs or recruiting events to source for candidates.
Also Read: Avoid the Top Mistakes That Startups Make
They also conduct the initial screening interviews before passing the candidate along to the hiring manager, while also managing the job offer process and on boarding.
There’s no doubt you will need an HR professional in your organisation at some point. If you have strong hiring needs, and if budget allows, it is best to have at least one HR and one recruiter in an ideal HR team.
But if the budget only allows the organisation to hire one, then you should try to look for a candidate with a multi-tasking gene — that is an HR co-ordinator with a knack for marketing and sales, which are critical for acquiring talent in a competitive industry, or a recruiter with solid interpersonal communication skills, which will often be used internally for talent management and development.
Choosing one or the other is contingent upon the individual needs of each startup. Nevertheless, no founder wants to be brought down by back office operations.
Although certainly an investment upfront, hiring a high quality HR professional can actually save a founder a lot of time, resources and headaches, particularly those on a hyper-growth trajectory.