HR Strategy for Startups

I’ve seen startups either skyrocket to success or crash and burn.

And in almost every case, the difference wasn’t just the idea, the funding, or the tech – it was about their people strategy.

Founders juggle hundreds of things: product development, fundraising, marketing, sales. It’s easy to see HR as just another box to check, a compliance hurdle or simply an administrative function.

But if you want to build a company that lasts, that scales sustainably, you need to think about HR differently.

The Startup HR Reality Check

Founders often say having the right talent as their key growth driver and at the same time one of their biggest challenges – yet most don’t do enough when it comes to their talents.
Founders are facing the reality that payroll often makes up a huge portion of their P&L – yet it is the most mismanaged expense.
Founders differentiate their products and services in the market – yet they do not differentiate in how they hire, manage and reward their talents.
Founders wants a HR partner to guide their HR strategy – yet relegate them to tactical or administrative tasks.

Founders, you need your HR to be a strategic partner that attracts, manages, and optimize your investment in your talents. The HR strategy must aligns with the business strategy, and every HR outcome is tied directly to a business outcome.

Here’s what I’ve learned works:

1. Culture: Your Operating System

Define it early: Culture isn’t something you slap on later, like a coat of paint. It’s the fundamental values and behaviors that shape how people work together. Define it before you hire your first employee. What do you stand for? What behaviors do you reward? What kind of environment do you want to create? A strong and clear culture will attract the right talents who thrives, reduce ambiguity as your team grows, and align everyone at all levels towards a way of working, all of which directly impact profitability and growth.
Live it from the top: Founders set the tone. If you say you value full transparency but then hoard information, your employees will see through it. Walk the talk, even when no one is looking. Consistent leadership behavior builds trust, which is essential for attracting and retaining top talent, and for fostering a high-performance work environment.
Formalize, but don’t fossilize: As you grow, you’ll need to document your culture. But don’t create a rigid set of rules that stifle creativity and innovation. Keep it high level, easy to understand, and adaptable. A flexible culture enables agility and responsiveness to market changes, which is crucial for startup survival and growth.

2. Talent Acquisition: More than just Job Description and Resumes

Ditch the vanity chase: Founders often make the mistake of over-hiring, especially once they have money in the bank from a recent fundraising. Don’t get caught up in vanity metrics such as headcount growth. It is more impressive to achieve 10million revenue with 20 people than 30 people. Only hire if that role is absolutely critical for company growth.
Define your ideal candidate profile: Go beyond the job description. What specific problems are you trying to solve with this role? What are the essential skills, traits, and experiences needed to solve that problem? What are some early indicators of success in the role within the first 3 months? What does long term success mean for this role in term of career progression? Seriously, spend time pondering these questions before jumping into hiring with a generic job description. You will save time and tons of headaches later.
Go beyond interviews: It is scary to think some founders make a five to six figure per year hiring decision from an hour of interviewing that particular candidate. Founders often overestimate their ability to select the right candidate from interviews and unfortunately interviews (especially unstructured interviews) are also not the best predictor of job success. A lot more can be done to increase the chance to predict the job success of a candidate. For example combining structured interviews with intelligence tests, personality tests or integrity tests are some of the highest predictor of job success.
Build your employer brand: What is the one thing you want to be known as an employer? Just like how you solve that one thing for your clients really well with your product or service compared to other companies, double down on that one thing you do really well as an employer to differentiate yourself from other companies.
Don’t compromise on quality: It’s tempting to fill roles quickly, especially when you’re under business pressure. But hiring the wrong person can be incredibly costly, both in terms of money and morale. Look out for candidates who can bring in multiples of the value of what they are getting paid. For example – a 10x candidate getting paid $5000 per month will create $50,000 worth of cost savings or value per month. If you cannot or do not want to quantify it this way, ask yourself how will you measure success after this person joins.

3. Performance Management: Ditch the Annual Review

Focus on continuous feedback: In a fast-paced startup, waiting to get feedback during a schedule review is not enough .you need to provide regular, ongoing feedback. This helps people improve in real-time and stay aligned with your goals. Here’s a secret your managers won’t tell you – most of your managers are not giving enough feedback, leading to missed opportunities and disappointments. Feedback should be focused on the task, activity or project, and not the person.
Set clear expectations and goals: Make sure everyone knows what’s expected of them and how their work contributes to the company’s success. Use a framework like SMART goals or OKRs (Objectives and Key Results) to track progress and ensure accountability. Clear expectations and aligned goals ensure that everyone is working towards the same objectives, maximizing efficiency and driving revenue growth.
Embrace a learning culture: Create a culture where feedback is seen as an opportunity to learn and improve, not as criticism or a political tool. Encourage employees to experiment and learn from their mistakes.
Recognize and reward: Celebrate successes, both big and small. Recognize and reward employees who go above and beyond. This reinforces positive behaviors and motivates people to do their best work. On the flip side, be transparent when employees are not performing and what are the consequences of sustained non-performance.

4. Learning and Development: Invest in Your People, Invest in Your Future

Create a learning culture: Encourage employees to learn new skills and take on new challenges that are aligned with the company strategy. Provide them with the resources and support they need to grow.
Identify skills gaps: As your company evolves, your needs will change. Proactively identify the skills you’ll need in the future and develop programs to train your employees to address skills gaps it needs to execute its strategic goals. This will reduce the need for expensive external hiring and improving time-to-market.
Offer diverse development opportunities: Development plans should be personalized as everyone developmental needs are different and responds to training differently. Offer a variety of learning options, such as online courses, workshops, mentorship programs, and on-the-job training. The 70/20/10 framework is a good place to start.
Promote from within: Promoting employees are success stories that other employees sees and will follow but promote wisely. Do not make the age old mistake of promoting your best engineer or top sales person who lacks people management skills to a managerial position. Performance is not potential. Remember that.

5. Compensation and Benefits: Be Competitive, Be Creative

Pay at market rate: You don’t necessarily have to pay the most, but you need to be competitive. If you are deliberately paying your talents under the market rate, it must be supported by a solid strategy.
Offer equity: Equity is a powerful tool for attracting and retaining top talent, especially in promising startups. It aligns employees’ interests with the company’s success and gives them a sense of ownership. Equity as a long term incentive however, is becoming less attractive to employees as length of tenure is decreasing, and employees prefers cash on hand.
Get creative with benefits: Think beyond the standard health insurance and generic benefits. Offer benefits that are meaningful to your employees, such as flexible work arrangements, paid time off for volunteering, or professional development stipends. Stand out by making your employees feel special when working for you.
Communicate transparently: Be open and honest about how compensation and benefits are determined. This builds trust and helps employees feel valued. Transparent communication builds trust, reduces employee dissatisfaction, and fosters a culture of fairness, leading to improved employee relations and productivity.

The Bottom Line

Building a successful startup is a multi-year marathon and your people are your way to sustainable advantage over your competitors. Don’t waste time or resources on HR that doesn’t directly drive business outcomes.

By prioritizing HR from the beginning, by creating a culture of growth and opportunity, and by investing in your employees’ development in ways that are directly linked to your company’s success, you’ll lay the foundation for a company that can weather any storm and achieve long-term success.

It’s not easy. It requires time, effort, and a willingness to challenge conventional wisdom. But the payoff – a thriving, engaged workforce that’s passionate about your mission and driving tangible results – is more than worth it. I’ve seen it firsthand.

Now, let’s go build something great.