Earlier this week I talked about the importance of HR in a startup. Whenever I talk about this topic I receive questions about what exactly I’m referring to when I say HR. Is it just the legal stuff like paying employment taxes or is there more. It’s a good question with an answer that would probably differ depending on who you asked. Here is my idea of HR 101 in a small business or startup environment.
Essentially there are three things that I believe small businesses need to think about in the very early stage of their people development. I do believe it is important to start thinking about these things with the very first hire. The degree to which you should build strategies around these areas grows with every hire.
The baseline nature of HR is tacit. The role was invented to ensure compliance. While it has evolved in the last few decades to much more, the necessity to ensure legal compliance remains, especially in states like California. Setting up and growing a business dictates the need to be legally compliant in hiring, payroll, performance management and more. This is HR at it’s most basic and the bare minimum of what all small businesses should consider.
At this stage, companies are figuring out what payroll service provider they will use, acquiring unemployment tax ids and workers’ compensation insurance and ensuring workplace posters are legal documents are available to all employees. This is where ensuring you understand laws around documents required at hiring (tax forms, I-9 etc) is important. Writing handbooks, understanding the law around required benefits (if any) and making friends with legal counsel are all important parts of the compliance area of HR infrastructure.
Quite possibly the most important step for early stage small businesses is figuring out the recruiting process. It’s not enough anymore to just place an ad and hire the first qualified person you see. Small businesses have a lot at stake. The first few hires are crucial. I encourage small business leaders and especially new founders to really think about the type of person you want to hire beyond the job description. This requires thinking about what type of environment you want to build in the long run and what intrinsic characteristics a person needs to help you get there.
Let me give you an example from my own business. I started this business because I wanted to be able to navigate being mom and worker. I wanted the utmost flexibility, beyond what even a 100% telecommuting job would give me. I wanted to be able to completely own my schedule. One thing that has made me successful in doing so is that even though I may not sit down and work a typical 8-5, I am extremely responsive to my clients needs. This means I may be taking calls at swim practice or answering texts while grocery shopping, but responsiveness is important to my clients and so I make it a priority. When I started to think about hiring employees, I knew this was a trait I needed in them. I don’t care when, where or how they work, but when I or a client reaches out, I need them to be responsive. That doesn’t mean stop everything and do what the client asks, but it does mean giving some response to let the client know you are on it. Beyond any skill set they may have from their past experience, this trait is the most important for me.
I have clients who say they need critical thinkers or individuals not afraid to push boundaries. Whatever those things are, the hiring process should seek them out. The process has to be thorough enough to sift through a person’s experience and character to make the best decision.
I’m often impressed with business leaders who know ahead of time the type of organizational structure they want to build and then are very deliberate in keeping it so. What normally happens is that leaders let business growth, or the ideas of other leaders, dictate the type of organizational structure. With that, you either end up with too many leaders or not enough. Small businesses can go through times of explosive growth. With that comes decisions around how to break out departments and how the reporting structure should be. While this can be organic to some degree, thinking about how this builds out early helps focus development.
Regardless of what other consultants may say, there is no one right structure for small businesses. Some of my clients are very flat while others have multiple layers and leaders even though they only have 100 employees. While I prefer a more flat organization initially, that doesn’t mean it always works best. Much of what works is dictated by the founder or CEO’s personality and preferences. How involved do they want to remain in the minutia and how much are they willing to let go.
I often lump leadership development in this as well. As you think about organizational structure and potentially adding layers to a business, it’s imperative you also think about how you are going to develop those leaders you hire or promote. Assuming they need no development is short sighted. All leaders need continual development opportunities and the need for this doesn’t change because a business is small. In fact, I would argue it increases.
While HR infrastructure is so much more, these three areas are the most important for new businesses or those in an early stage of growth. Thinking about them early rather than waiting until they are broken will prevent so many headaches down the road. In future posts we will break down these areas one by one to give more detail and guidelines on how to build strategies in each area to set you on a path of success with your people processes.