In this exciting, fast-paced, and risky realm of startups, dreams of changing the world come together as innovators work to revolutionize sectors and create the future. Too often they fail because of lack of capital, a bad business model or intense competition. Lurking beneath the surface of many failed ventures is a silent killer: poor people processes. DreamingCrypto elaborates on the perilous effects of not prioritizing the human resources (HR) function in startups. More than that, though, it presents actionable strategies founders can use to lay a sustainable HR foundation.

With innovation and ambition in their DNA, startups often skip the beat on the essential role of HR as they take off. Instead, the eye of ambition is usually focused super tightly on product-market fit, fundraising, and hyper-growth. Without a proper HR infrastructure, the risks to startups are severe. Otherwise, they risk making their organizations a toxic work environment, out-talent themselves and in the end, never fully achieve their potential. Ignoring HR comes at an exorbitant price. According to recent research, the cost of a bad hire can cost an organization between $17,000 to $240,000. This accounts for costs associated with lost productivity, training, and the eventual exit process. The costs of laying off an unsuccessful hire can be steep. When you include the cost of recruiting a new employee, they add up to around 30% of an annual salary.

Through case studies and by the numbers, this article aims to shed light on the behind-the-scenes impacts of bad people processes on startup failure. Even more important, though, is that it provides founders with actionable guidance to avoid these pitfalls. It highlights why it’s crucial to create a sustainable HR infrastructure from the outset.

The Hidden Costs of HR Neglect

The biggest misstep that so many upstart startups take is continuing to see HR simply as a transactional or administrative function – processing payroll and ensuring compliance. A strategic HR function is key to recruiting, developing and retaining a high-performing workforce. It helps to create a diverse workplace culture and complies with the law. When these respective areas are not prioritized in tandem, the results can be fatal.

Talent Acquisition and Retention

Perhaps the biggest trap of them all is assuming that talent development should take a backseat. Fearing a derailment of their fast track to the top, growth-focused companies frequently ignore employee development in the race to scale. If an organization isn’t careful and doesn’t have a good way to track the flow of resumes, it can get stuck paying several sources for the same candidate. This mismanagement results in wasteful spending. For most positions, hiring costs can be anywhere from 30-50% of a worker’s pay per year, depending on how senior the role is.

  • Ignoring Talent Development: Startups need to invest in training and development programs to help employees grow and stay engaged.
  • Inefficient Hiring Processes: Streamline the resume management process to avoid overpaying for candidates.
  • Poor Candidate Selection: The average cost of a bad hire is $14,900 per employee.

Bias and Inequity

Even within women-led businesses, hiring and promotion biases can take hold. For instance, research has found that men are four times as likely as women to ask for a salary increase. Startups need to be better about establishing clear, fair, and transparent HR processes. Moving forward with this new approach means creating a level playing field for all staff members. Poor onboarding and annual review processes are two other key drivers of employee frustration and attrition. When you don’t make the time to create structured onboarding processes, annual reviews, and feedback mechanisms, employee engagement takes a hit. Disengaged employees are much less likely to stay at the company.

Culture and Engagement

An environment that fosters innovation and creativity builds a healthy startup culture, propelling the company to its ultimate success. A collaborative workplace culture, generous work-life balance via flexible schedules, and extensive employee benefits have all increased employee morale and wellness. A culture that trains employees to raise hell when they see a problem is pretty damn important to a startup’s mission. Your input is essential—constructive criticism underpins all great advances. A sense of purpose and a strong company culture are key in attracting and retaining the top talent every startup needs to succeed.

Building a Sustainable HR Foundation

To prevent falling into the HR underbelly void, startups should take intentional steps to establish a future-forward HR infrastructure. This means implementing best practices in talent acquisition, employee development, compensation and benefits, and workplace culture.

Green HRM

Making sustainable business practices part of HR policies and procedures lays the groundwork for a sturdy sustainability foundation. This holistic approach is one of the pillars of Green HRM (GHRM). Recruitment is an essential aspect of GHRM. Eco-friendly recruitment translates the concept of GHRM. Specifically, it focuses on incorporating green practices at each stage of the recruiting cycle. Green induction can be a first step to engage employees in eco-friendly behaviors at work and provide a foundation for potentially more advanced green training. HRM in this way is “two-way.” Startups should look beyond the bottom line and focus on how their HR initiatives benefit the company as well as society.

Best Practices

  1. Talent Management:
    • Conduct regular one-on-ones with managers.
    • Implement peer feedback sessions.
    • Create performance improvement plans.
    • Establish goal-setting and tracking initiatives.
  2. Compensation and Benefits:
    • Conduct market research to determine competitive salaries.
    • Set up a payroll system.
    • Build a competitive benefits package.
    • Ensure compliance with regulations.
  3. Employee Retention:
    • Implement a predictive model for employee turnover.
    • Use data analysis to identify high-risk employees.
    • Develop strategies to retain them, such as managerial interactions and lateral career moves.

Company Culture

Educating employees on key values enables them to incorporate these standards into their everyday lives. Most importantly, it connects everything they do to the mission of the organization. This not only gives everyone a shared compass heading, but it’s the secret ingredient to a much more energized and effective employee base. Aligning employees with the core mission of the organization is imperative to winning in the long haul.

By prioritizing HR and investing in their people, startups can create a work environment that attracts and retains top talent, fosters innovation, and ultimately increases their chances of success. Within the cryptoverse, magical protocols awaken as courageous new startups explore and settle their fortunes in a digital West. A solid HR groundwork will make all the difference between you becoming a living breathing success story and joining the startup graveyard.