When is the Right Time for a Startup to Hire an HR?

Izza Lin, Recruiting Master (林于荃 / 招募輔導長)

Izza is a Recruiting Master responsible for advising AppWorks Startups on all talent acquisition matters. Before joining AppWorks, she built a successful early career in headhunting firms such as Rising Management Consulting and Recruit Express, where she specialized in recruiting quality talents for internet and e-commerce companies, guiding hundreds of engineers, product managers, marketers and general managers to fulfill key positions for her clients. In between Rising and RE, she headed Southeast Asia Market for an e-commerce startup, USO HK, where she found her passion for helping small guys break the status quo. Izza received her B.A. in Economics from Washington State University and spent 5 years of her childhood in Myanmar and Cambodia. This diverse background has inextricably contributed to her love for traveling and “wine tasting”.

As a HR consultant for startups, I’m often asked this question by founders. In the early stages of their startup journeys, founders typically spend the majority of their focus on product development or sales and marketing, with recruiting often left as an afterthought. At some point, however, they always arrive back at the classic chicken and egg problem: in order to grow, they need the right talent, but in order to attract and retain the right talent, they need to grow.  To get out of that cycle, I usually advise founders to bulk up their startup’s HR muscle.

There’s certainly no hard and fast rule on when to hire an in-house HR, but generally after achieving product-market fit, there are some rules of thumb around team sizes founders can first take into consideration.

10-15 team members: Resources can be quite limited at this stage. As a founder, you probably didn’t have many issues recruiting the first few employees on your own, but as the business starts to scale and accelerate, the team will also need to expand accordingly. Bringing on outside talent to manage the hiring and onboarding process internally will be critical in preventing HR matters from occupying valuable mindshare. 

15-30 team members: So you managed to get to this stage without hiring any dedicated person to handle recruiting. It still might be wise to bring in someone, as HR expands beyond just recruiting to also include retention. While attrition is quite normal in any startup, retaining an employee (granted they’re performing well) is significantly cheaper than hiring a replacement, which can often waste valuable time and resources. 

30+ team members: If the startup has more than 30 employees and doesn’t have an HR yet, you may need to consider hiring this role as soon as possible. At this size, sourcing job boards, editing job descriptions, facilitating interview and onboarding logistics will likely distract you from more mission critical things such as fundraising, product, or business development. 

HR pains of a scaling startup

Many early-stage founders refuse to hire an HR because they view it as an unnecessary expense, and one that’s more suitable for large enterprises. In reality, many founders are unaware of or substantially underestimate the HR problems and needs they’ll encounter as a startup scales and the team sizes grow: 

1. Recruit specialists vs. generalists. In earlier stages of your startup, you’re likely hiring more generalists that can wear multiple hats due to limited resources. Once your company starts to scale, however, you’ll usually need to divide and conquer, that is recruiting more specialists that can significantly amplify the efforts of each function. For example, full-stack engineers might be more commonplace in fresh startups, who would then gradually be replaced by separate front-end and back-end engineers as the organization grows. 

2. Attracting and retaining talents. This includes everything from building the employer brand and marketing specific job openings to sourcing better quality candidates to adjusting compensation/benefits and work-life balance policies to optimize retention.

3. Regulatory & compliance requirements. Labor laws can be quite complex from country to country. Founders need to stay informed on basic hiring & firing legal frameworks to prevent the company from encountering any lawsuits.

4. Company culture, mission, vision, and values development. Setting the vision, mission, and values is extremely important, as these help create the company’s culture and establish objectives and goals that help employees navigate the organization. Unfortunately, many companies lack these core components in the early-stages as the founding team is usually too occupied with other things. 

5. Performance / OKR / KPI appraisal and compensation structure. Compensation and performance reviews are resource-intensive but nonetheless critical components of any growing startup. 

6. Design effective training and development programs. At a certain scale, a startup doesn’t necessarily need to go outside to seek out talents. Instead, they could facilitate internal training to upskill existing talents and cultivate leaders from within. However, many founders are not experienced in properly assessing employee capabilities and designing training programs for them.

The different type of HRs

So, you’ve started to face some HR issues as your company has grown bigger and have decided to hire a professional to give you some peace of mind. Actually, there are two types of HR professionals that you most often see in early-stage startups.

HR coordinator: This role takes on broader duties and responsibilities, generally encompassing the recruitment, retention, training, management, and development of employees; legal issues concerning employment; and salaries and benefits design. 

Recruiter: Given the critical nature and time intensive nature of talent sourcing, recruiters are often brought in separately to specialize in building a strong pool of candidates for hiring managers to choose from. The scope of their responsibilities include understanding the organizations’ recruitment needs, creating accurate job descriptions, posting job descriptions in different channels, and even attending career fairs or recruiting events to source for candidates. They also conduct the initial screening interviews before passing the candidate along to the hiring manager, while also managing the job offer process and onboarding.  

There’s no doubt you will need an HR professional in your organization at some point. If you have strong hiring needs, and if budget allows, it is best to have at least one HR and one recruiter in an ideal HR team. But if the budget only allows the organization to hire one, then you should try to look for a candidate with a multi-tasking gene—that is an HR coordinator with a knack for marketing and sales, which are critical for acquiring talent in a competitive industry, or a recruiter with solid interpersonal communication skills, which will often be used internally for talent management and development. 

Choosing one or the other is contingent upon the individual needs of each startup. Nevertheless, no founder wants to be brought down by back office operations. Although certainly an investment upfront, hiring a high quality HR professional can actually save a founder a lot of time, resources, and headaches, particularly those on a hyper-growth trajectory.

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Photo by Campaign Creators on Unsplash