How to Craft a HR Strategy for Startups

Here’s the hard truth – there’s no shortcut to craft a HR strategy for your startups. Your approach to people needs to be as distinctive as your vision and business strategy. Which means, you need to build a HR strategy that is unique to you.

The Fallacy of the Generic HR Strategy

Most startups begin with a very small team. As they grow, they cobble together HR practices, often borrowing templates or advice from larger, more established companies. This leads to a Frankenstein’s monster of policies and processes that don’t fit the specific needs of the business.

Why does this happen?

• Lack of resources: Startups often lack dedicated HR expertise in the early days, leading to reactive, piecemeal solutions.
• Focus on immediate needs: The urgent demands of product development and customer acquisition overshadow the importance of long-term people strategy.
• Belief that “HR is HR”: Many founders assume that HR is a standardized function, failing to recognize its potential as a strategic differentiator.

HR as a Strategic Differentiator

The most successful startups understand that their people are their most valuable and sustainable asset, and that a well-crafted HR strategy can be a powerful source of competitive advantage that cannot be easily copied or imitated.

Here’s how to move beyond the generic and create an HR strategy that’s as unique as your startup:

1. Start with the Business Strategy

Your HR strategy should be a direct reflection of your overall business strategy. What are your company’s core objectives? What are the key challenges you face in achieving those objectives? Where are you trying to go, and what kind of people and culture do you need to get there?

For example:

• If your business strategy is to disrupt an industry through rapid innovation, your HR strategy should focus on attracting and retaining highly creative, risk-taking individuals, and fostering a culture of experimentation.
• If your business strategy is to achieve hyper-growth through aggressive sales and marketing, your HR strategy should prioritize building a high-performance sales team, developing scalable training programs, and implementing a compensation structure that rewards results.
• If your business strategy is to build a premium brand based on exceptional customer service, your HR strategy should center on hiring people with strong interpersonal skills, providing extensive customer service training, and empowering employees to go the extra mile.

What if you don’t have a business strategy? It happens, we get it. Here’s what you can do instead.

2. Identify Your Critical HR Challenges

Don’t try to boil the ocean. A good HR strategy focuses on solving a few key problems that are critical to your startup’s success. What are the biggest people-related challenges that are keeping you from achieving your goals?

These challenges might include:

• Attracting top talent in a competitive market
• Retaining key employees who are being poached by larger companies
• Building a strong company culture that can scale as you grow
• Developing effective leadership to guide your expanding teams
• Managing rapid growth without sacrificing quality or culture
• Improving employee productivity to meet ambitious targets
• Creating a diverse and inclusive workforce to foster innovation

3. Decide Where to Dominate, and Decide Where Not to Play

A powerful HR strategy, like any good business strategy, involves making choices. You can’t be everywhere and everything to everyone. Decide which HR areas are most critical to address your key challenges and support your business strategy, and focus your resources there.

For example:

• If your biggest challenge is attracting top engineering talent, you might decide to dominate in areas like employer branding poised to grab the attention of high quality engineers and provide interesting engineering projects that challenges engineers. You might choose not to play in areas like implementing an elaborate performance management system that makes the leadership happy but stifles innovation and creativity.
• If your priority is scaling a high performing sales team, you might dominate in areas like extensive sales training, internal support and attractive incentive structures. You might choose not to play in areas like complex career pathing yet.

By making these choices, you can maximize the impact of your HR efforts and avoid spreading your limited resources too thin.

You want to aim for a one to three well developed HR programs that positively impacts business outcomes, rather than twenty halfway ones every year.

4. Craft Unique HR Solutions

Once you’ve identified your priorities, it’s time to get creative.

Don’t just copy what other companies are doing. Look at the research and develop HR solutions that are tailored to your specific context, culture, and challenges.

Here are some examples of how startups have crafted unique HR solutions:

• Buffer, a social media management company, created a culture of radical transparency, sharing salary information and company financials with all employees. This not only attracted talent but also fostered trust and alignment.
• Zapier, a workflow automation company, embraced a remote-first work model, allowing them to hire talent from anywhere in the world. This gave them access to a much larger talent pool and reduced their overhead costs.
• Netflix, the streaming giant, famously eliminated traditional HR policies like vacation days and performance reviews, opting instead for a culture of “freedom and responsibility.” This attracted high-performing individuals who thrived in an environment of autonomy and accountability.

As long as it is not illegal, there is really no rules when it comes to creating a distinct and compelling HR solutions for your startup.

5. Measure and Iterate

Like any other business function, HR needs to be measured and evaluated. Track the impact of your HR initiatives on key business metrics such as productivity and revenue growth.

Use this data to refine your strategy and ensure that it continues to support your company’s goals.

The Bottom Line

A generic HR strategy is a recipe for mediocrity. To truly thrive, you need an HR approach that is as unique, innovative, and disruptive as your core business. By aligning your people strategy with your business strategy, focusing on your biggest challenges, prioritizing ruthlessly, and crafting unique solutions, you can build a company where both your people and your business can flourish.