Did you know that only about 10% of start-ups succeed in the long run? Why do so many fail, even with visionary entrepreneurs and strong business ideas behind them? The reasons are numerous, ranging from issues that can be addressed through effective workforce management solutions to challenges that are much harder to overcome. Among these, a common set of challenges that affect start-up businesses comes from the HR administration.

What are HR Challenges?

HR challenges are challenges businesses or organisations face while managing their workforce or employees. Each organization, depending on the nature of its business model and operation has to deal with several human resource management-related challenges. With the evolving nature of workplace culture and working conditions, the nature and complexity of such challenges continue to change. For instance, work-from-home (WFH) was not a usual thing businesses followed before COVID-19 and thus they didn’t have to bother managing employees remotely. But when the pandemic forced companies to manage their employees remotely due to the imposed restrictions on human interactions, the management had to look for more effective ways such as adopting modern HR automation tools to engage the employees and get the work done on time.

HR Challenges for Start-up Companies

Start-up companies have a different work culture which is quite different from that of large organizations. Additionally, the HR challenges in start-up companies keep changing as the company evolves and scale up. In the initial stages, start-ups have to manage every HR function with one or two HR professionals. As the company scales up, more professionals have to be brought in to streamline functions and keep the business running smoothly. At the end of the day, the goal of every start-up is to scale up and evolve to the level of a larger corporate entity, addressing all the challenges on the way while maintaining their unique startups culture.

Common HR Challenges Start-ups Encounter

Let’s now look at some of the common HR challenges that start-ups face.

1. Lack of enthusiasm towards HR policies and compliance:

Unlike large conglomerates whose management consists of several top-level employees like the CEO, CFO, and Heads of multiple departments, in the start-up ecosystem, the number of people at the management level is very limited or mostly consists of the founders and investors. The common tendency among the management will be to bootstrap their resources to increase productivity and drive revenue rather than investing time and resources in creating strong HR policies and ensuring compliance. This negligence towards HR policy building will lead to several issues like legal disputes, and unmotivated employees. As long as you care about the long-term stability of your start-up, it is important to implement robust HR policies and ensure employee well-being through their compliance.

2. Managing time-consuming HR duties:

Start-ups have budget constraints. With limited budgets, they may resort to manual HR processes. Consequently, the few HR professionals employed there are forced to spend most of their valuable time doing repetitive HR tasks. This inefficiency further hinders productivity and may even lead to increased operational costs. Manually handling the HR duties will involve a lot of paperwork and cost your business more money on printing and storage costs. Another big disadvantage of conventional workforce management solutions is the loopholes they contain for fraudulent activities. Employees can alter attendance, leave or payroll records with dishonest intentions causing financial loss to the company.

3. Developing a good company culture

Having a good startups culture will benefit companies in the long run as it directly influences the employee’s performance and decisions. Company culture is a broad term that is used to refer to the shared values, beliefs, attitudes, and behaviours that shape the work environment and employee engagement strategies within an organization. In a start-up company setting, the company culture is influenced by the values the entrepreneurs follow rather than a set of well-thought-out ones. Even if the founder is the driving force of the company, the one with great vision who has established it, he alone cannot drive it to success. For a company to scale and mark new milestones, it should have a fully motivated and engaged workforce that is characterised by diverse culture, equality and inclusivity. When the company culture is influenced by its founder alone, it will suffer from a lack of diversity, resistance to change and risk of founder dependence.

4. Conveying company policies to the employees

Since start-ups operate with limited resources, including personnel dedicated to human resources functions, establishing and communicating comprehensive policies may not happen at the early stages. Additionally, the evolving nature of start-up business models makes it essential to adapt to the new changes in the policies and keeping all your employees informed about such changes and subsequent amendments in the HR policies for startup company can be a daunting task.

5. Ensuring continuous performance feedback

Start-ups that do not have a continuous employee performance management and feedback system in place fail to make use of their employee’s full potential. Continuous feedback for employees is essential for start-ups that want to decrease attrition, boost collaboration and engagement and enhance productivity. There are several reasons why start-ups don’t have a solid system for performance feedback sessions - lack of time, lack of personnel, informal procedures, etc. Additionally, in a start-up, most employees donne multiple hats and their responsibilities keep changing from time to time. This would essentially mean big challenges in establishing consistent performance metrics and feedback mechanisms.

How to Solve These HR Challenges?

Embracing innovation in workforce management solutions is the key to overcoming the diverse HR challenges faced by start-ups. By introducing a robust employee management system, start-ups can streamline their HR processes, enhance efficiency, and create a foundation for a thriving workplace. Let's see some of the edges it offers in workforce management.

1. Data-Driven Decision-Making

Through a modern workforce management solution, companies can have real-time access to data which allows the management to make informed decisions in alignment with the evolving nature of their business.

2. Enhanced Employee Experience

Since start-ups operate with limited resources, including personnel dedicated to human resources functions, establishing and communicating comprehensive policies may not happen at the early stages. Additionally, the evolving nature of start-up business models makes it essential to adapt to the new changes in the policies and keeping all your employees informed about such changes and subsequent amendments in the HR policies for startup company can be a daunting task.

3. Conveying company policies to the employees

Poor employee engagement creates a troubled workplace. By introducing a smooth and user-friendly system with self-service options for your employees to mark their attendance, apply for leave, record working hours etc., start-ups can create improved employee experience and higher engagement and retention rates.

4. Scalability

As start-ups grow, the workforce management system that scales to accommodate the changing demands helps the organisations to ensure continuity in the HR processes.

5. Compliance and Security

A robust system helps maintain compliance with regulations. It enhances data security and safeguards sensitive employee information.

In conclusion, innovative workforce management solutions can serve as a single solution to many of the complex HR challenges start-ups face. While investing in modern technology may seem like an extra cost initially, it is a farsighted decision that can not only help mitigate existing issues but also pave the way for a more agile, efficient, and future-ready HR ecosystem for startups.