The term Human Resources (HR) is one that many have recently associated with a “pink slip” or as the people responsible for their benefits and paycheck. In the corporate environment I remember dreading the call from HR or having to do HR related tasks. I often wondered “why are these people here.” I kept asking myself, don’t they realize I am trying to run an organization and why are there so many rules and procedures?
It is even funnier when I reflect back to the first business I started and remember promising myself that if I ever started a business I would do things my own way and not have all these rules. My ego and vision only allowed for an environment of fun, free from rules and policies that might hinder the explosive growth I had dreamed about. I could not have been more wrong.
So why should the new venture founder be concerned with human resources? I have seen business fail as a result of theft (client, IP and embezzlement), poor hires not removed quickly, and cash flow losses due to litigation costs. In addition, for many professionals the thought of firing someone is gut-wrenching and they prefer not to react unless they are compelled to, which is often too late.
When starting a business it is easy to overlook the role of HR right at the very beginning. The reality check occurs when you understand that the rules, policies and functions of HR are there for your protection and will promote growth of the company if properly set up. We live in a litigious society and you could lose everything you have built on a single hiring or firing mistake.
But the role of Human Resources is much more that policies and procedures. Human resources should reflect the culture and vision of the founders as well as handle any legal issues and are your first line of defense in IP protection. In many new ventures, the functions of HR are likely to be done by a senior executive until growth permits the hiring of a HR professional.
In contrast, larger better funded start-ups often hire their HR professional before they hire staff employees. Larger start –ups may even have a general counsel on staff. The issue is not who performs the tasks, but making sure they are done at the very beginning with the very first hire or partner.
The first tasks of Human Resources should include:
· The establishment and formalization of policies and procedures and the framework for establishing the “Culture” of the company. Your employees are your “Human Capital”. Policies and procedures may prevent costly turnover or lawsuits. The culture of your company will determine everything from how to create and manage innovation to the company image portrayed to your clients. Ask The Entrepreneur’s Advisor™ how to establish a culture for your company.
· Establish payroll procedures such as pay frequency, deductions, and benefits. **
· Develop or purchase a policies and procedures manual for all employees. Items most frequently included are terms of employment, time off, ethical standards, harassment, conditions of employment, termination, training, benefits, workplace health and safety, etc. **
** Note: These functions are often outsourced to payroll services or Professional Employer Organizations (PEO’s).
· Establish the first line of your Intellectual Capital (IC) protection for items such as “Trade Secrets”, non-compete clauses, and Confidentiality Agreements etc.
· Make sure the founders vision is tempered by the legal environment in which you operate.
· Establish hiring and termination procedures:
The Entrepreneur’s Advisor™ strongly recommends that you seek legal counsel on all rules, procedures, policies and anything that may require protection of your Intellectual Property. If you need assistance in obtaining legal counsel or Human Resource professionals please contact us at https://blog.theentrepreneursadvisor.com
For assistance in getting your venture going, contact The Entrepreneur’s Advisor™. We are the elite yet modestly priced to fit most budgets. Our advisory and implementation services range from simply having someone to talk to, HR questions, business plan assistance and review, setting up operations and infrastructures, raising capital and mentoring.
I agree with you that HR is often overlooked with start-up companies. In addition, I believe that many organizations that have HR departments still do not include that area like they should. Many organizations rely on HR for many necessary tasks. However, they do not consider HR as an essential strategic function of the company. This is a huge mistake, similar to the one you described. HR has a liability on them that most do not even realize. With all of the legislation that has been passed just this year alone, they have an even larger burden on their shoulders. It bothers me that while companies are spending 50% to 70% on total labor expenses, on average they spend less than 1% of revenue on HR operations. The HR department’s role should be strategic with the organization’s mission. It is not to spend all of their time cleaning up messes because they are not provided with the necessary tools to perform their jobs efficiently.
A number of small start-ups venture forward on their own as you describe your HR experience, Stuart.
Many young or start-up companies try to save money by ‘winging it’ because they, budgetarily, can’t afford to hire a full-time HR Generalist. That’s a time consuming approach, at best. A more effective route is to hire a consultant, like myself, who can develop your policies,procedures,forms and handbooks. We can also develop ads, interview candidates and, if you like, even hire for you.
This way, your company has a legal ‘leg up’ and no long-term commitment to an HR employee until you need and can afford to bring one on board.
Sandy Lachs