Does A Startup’s Limited Budget Need To Make Room For HR?

I’ve started a few companies in my day. While the products change, there’s one thing that’s always the same: resources, or a lack of them. Inevitably, you push what little you have toward getting your product off the ground. So you hire engineers over marketers. Once you have a product, you put everything you have into getting it to market, so you hire marketers instead of support staff.

Now I’m going to be the bearer of bad news: there are problems with this approach, because every time you hire someone new, you create a greater legal need to invest in the management of your startup’s staff and make sure you’re not doing things that could land you in lots of legal hot water.

What am I talking about? HR. At startups, it’s usually the last thing on the owners’ minds. Online publication Motherboard found that, for most startups, perks like “ping-pong tables and free tacos” were higher on the must-have list, noting that “Time and funds are limited, and the founders need to build and refine their product rapidly to appease investors. Given the confines, they devote hiring efforts strictly to personnel they deem immediately essential — software developers, marketers, product managers — pretermitting infrastructure and, often, legal compliance. Google, for instance, had 63 employees before its first HR hire in 1999.”

An article on FastCompany echoed the sentiment: “In 2012, a curious person on the web — likely an enthusiastic entrepreneur — asked a simple question on Quora: Does a startup need an HR person? … [It’s] unsurprising that the first and most popular answer provided was this: ‘No, you don’t need an HR person,’” wrote the publication.

I know, I know — I’m in HR so I’m obviously biased. But I also had a reason for getting into HR: because I started my share of companies and saw what could happen when you pushed HR into the “afterthought” category.

But what if you only have 5, 10, or 50 employees? You still need to make sure HR is covered. Not having an HR strategy doesn’t work. Your best employees leave for better pay, working conditions and benefits. Wannabe recruits find somewhere else to sign. Risks of harassment, discrimination, retaliation or non-compliance skyrocket, and lawyers start eyeing up all the things you’re doing wrong.

If you need proof, take a look at what happened at Uber, Tinder and GitHub, all of which had their share of (expensive and very public) problems stemming from a lack of HR expertise. Their tales read like horror stories for business owners.

When you’re finally ready to dive into HR

There’s one other problem — figuring out how to address HR. Convincing yourself that you need HR is only part of the mix. The rest is deciding how deep you want to go.

Basically, there are three ways to spend your HR dollar: get HR software, outsource HR, or build an in-house team — or you could count this as four if you want to separate PEO (Professional Employer Organizations) from other HR outsourcing solutions.

I created a chart that shows what you’re in for with each, which may also help you decide which works best for your organization. Low-end is more DIY, high-end is more hands off, but any option is better than doing the work yourself.

If you’re still not convinced that your startup needs HR …

I understand: you really want that shiny new developer or product headcount. Who doesn’t? But, as a business owner, I know what it’s like to wear so many hats that it seems like you never get anything done. That feeling is double when you’re stopping to answer questions like “Does my insurance cover dental implants?” or “Why was my paycheck different this week?”

The worst part? If you keep this up, you may never find the time to hire that developer you really want. Of course, you could have HR handle that, too.

John Farnsworth is a serial entrepreneur and owner of Stratus.hr.