Every year in the United States, about 600,000 new businesses open up.
Whether your new business is a one-person grocery store or a well-funded Silicon Valley tech company, it’s still a startup. And like most startups, you’re bound to face numerous challenges, including managing your human resources.
HR challenges aren’t new. But if you’re a startup, failing to overcome them can result in failure. The best way to prepare yourself for these challenges is to learn about them.
In this article, we are fleshing out some of the biggest workforce challenges, and what you can do to overcome them.
Table of Contents
1. High Cost of Skilled Labor
Employers have a legal obligation to pay employees for their work. The cost of skilled labor has been on the rise in recent years, meaning employers have to dig deeper into their pockets to pay wages.
If your startup is running on a shoestring budget, you’re certainly struggling to expand your team because you can’t afford the salaries. To work around this issue, some organizations are resorting to hiring people who’re unqualified since they don’t command higher salaries. This can hurt your workplace productivity and even increase your costs because you might have to invest in their on-the-job training.
Of course, every employer wants to hire professionals with the right qualifications for the job. But what can you do if your startup is being priced out of the labor market?
Try to get creative with the compensation packages you’re offering. Yes, most job seekers focus on the salary, but they can also settle for lower-paying jobs if the perks that come with the job are attractive.
For example, you can offer a flexible work environment. More and more workers are opting to work from home, so having that option can win them over. Other ideal perks include plenty of vacation time, frequent company retreats, and career advancement opportunities.
2. Labor Shortage
One of the factors making job applicants demand higher wages is the current labor shortage. After COVID-19 reached American shores, the labor market saw substantial disruption.
The number of fresh graduates entering the job market declined, and there has been what’s dubbed the “Great Resignation.” Millions of workers left the workforce due to health and safety concerns and others chose voluntary retirement.
The acute labor shortage doesn’t make things harder just for startups on limited budgets. It also affects organizations that don’t have a strong talent pool. This means it’s taking longer to find the best candidates.
Labor shortages will always come and go. However, your startup needs to find ways to fill its open positions.
An effective way to do this is to build a strong employer brand. The modern job seeker wants to work in companies with a strong culture, attractive compensation, and great work-life balance.
Another way is to partner with local colleges and other professional training institutions. This will enable you to build a talent pipeline, giving you the opportunity to pick candidates before they enter the job market.
3. Pre-Employment Screening
Did you know the cost of replacing an employee can be as high as 6 to 9 months of their annual salary?
You’ll find yourself replacing employees more often than not if your pre-employment screening isn’t effective. Yet, this is an area most startups struggle with.
In most young startups, the founder is typically responsible for recruitment. If you’re in this situation, you likely don’t have the right recruitment expertise. Consequently, you might not have the skills and tools to properly vet job applicants before hiring them.
The end result is you could end up hiring people with fake credentials. Considering that close to 80 percent of job seekers lie on their resumes, the likelihood of hiring someone who’s not properly qualified is high. In fact, you can inadvertently hire a person with a criminal background.
The best way to vet pre-employment candidates is to use a screening service. You’ll pay a service charge, but the investment is worth it. You’ll have peace of mind knowing everyone you’re hiring is authentic and meets your requirements.
4. Onboarding New Hires
You have conducted interviews, picked the best candidates, and sent out job offer letters. Your new hires are ready to get started with the new roles in your startup. What else could go wrong?
Well, a lot could actually go wrong, depending on your onboarding process.
For starters, onboarding is the process of facilitating a new employee’s transition into their positions, as well as integration into the company. It involves taking them through a series of training sessions to equip them with the specific skills and knowledge they need to do their jobs.
There are employers who don’t take the time to develop an effective onboarding strategy. This leaves their organizations unable to give new hires the best transition. Left largely on their own, new employees struggle to settle in, which hurts their competence and confidence.
Proper onboarding requires you to build a checklist and best present to guide and be present to train the hires. Although onboarding tasks can be repetitive and boring, technology solutions like WorkBright’s HR software can help you automate most of them. Check out WorkBright.com to learn more about the capabilities of the technology.
5. Employee Retention (High Turnover)
Employees will always leave in search of green pastures. Some will quit to follow new passions. Others will retire early.
While employee departures are expected and organizations prepare accordingly, a high turnover can be costly. When many employees are leaving after being on the job for a short time, replacing them isn’t going to be easy, especially when there’s a labor shortage.
If you’re struggling with employee retention, there is usually one or more causes. Perhaps your startup isn’t providing adequate job training and career development opportunities. Or maybe the workplace culture is toxic. Or you aren’t offering competitive compensation packages.
You have to get to the root cause(s) in order to properly address the high turnover. Conducting employee exit surveys is the best way to do this investigation. From their feedback, it’s easy to pinpoint the problem.
Depending on your findings, there are a number of steps you can take to improve employee retention. For the most part, though, it boils down to building an organization with a strong culture. Perks also go a long way.
6. Career Progression Opportunities
Many startups are unable to offer adequate career progression opportunities to their employees. Combine this with the fact that many people feel stuck professionally (and personally, to be fair) and you can see a real problem boiling.
Every employee wants career growth. They want to transition into senior positions with more pay.
If an employee feels that they’ve been in the same position for too long and there isn’t a clear path to progression in your startup, they’ll likely call it quits. Yet, you don’t want this to happen because it will increase your employee turnover rate.
It’s understandable that startups don’t have the capacity to offer career advancement opportunities enough for everyone. Heck, even most multinational corporations have limited advancement opportunities.
However, as a startup, it’s in your best interest to go out of your way to provide as many career progression opportunities as possible. First, ensure you’re promoting from within. It’s not a good show when you’re bringing professionals from outside to fill senior positions in your organization.
Second, take a keen interest in your employees’ development objectives. Your startup might not have enough opportunities, but your employees will feel and appreciate your care.
Third, rotate employee roles, encourage mentoring, and support (financially) their training.
7. Resistance to Performance Appraisals
You expect your employees to put in a proper shift every time they’re at work. Unfortunately, not all employees are always enthusiastic about doing what you pay them to do. This is why many organizations are developing performance management strategies.
The objective of a performance review is to identify employee weaknesses and strengths, skills gaps, and more. With this data, employers are able to develop training programs and take other steps to improve employee performance.
But also, let’s not forget that some employers use performance reviews to weed out non-performers. Employees know this, so it’s not surprising to see them mount serious resistance to performance appraisals.
As an employer, you’ve to be cognizant of the fact that most of your employees might have a negative attitude toward your performance management program. This, though, shouldn’t stop you from implementing it. You just need a smart implementation approach.
You might want to start by gathering your employees’ views on performance reviews. Make it clear that the intention isn’t to punish. It’s to offer constructive criticism and make everyone better.
If their attitude is still mostly negative, find creative ways to change it. For example, you can introduce employee rewards and recognition program alongside the performance management program. And don’t just reward top-performers; reward those who record improved performance after a review as well.
8. Employee Theft
75 percent of businesses encounter employee theft.
Your startup doesn’t have to be a retail outlet for you to worry about employees stealing your stock. Even if you’re a service-based tech started with a 100 percent remote team, there’s something your employees can steal from you: data.
Data breaches are fast becoming a concern for startups. One breach can disrupt your operations for months and even cause the business to collapse.
Stopping employee theft starts during the hiring process. You already know that many startups struggle with pre-employment screening, so if you’re hiring without checking their backgrounds, it’s easy to end up with employees who steal from you.
Install surveillance systems and take steps to secure your data. Not every employee should have access to confidential data.
9. Remote Team Management
Pre-2020, remote work was gradually becoming popular. But it wasn’t until the COVID-19 pandemic struck that remote work became the norm. Left with no choice, many companies large and small scramble to create virtual workspaces.
Two years later, remote team management still remains one of today’s biggest HR challenges for startups. It’s difficult to supervise employees when you can’t see them. Other challenges include enforcing workplace policies and maintaining company culture.
Although the pandemic is easing and workers are returning to the office, remote work remains the preferred option among the majority of workers. So, you have to resolve the remote work challenges you’re facing instead of hoping for a full return to the office.
Invest in good team collaboration platforms and provide your remote workers with computers and other tools they need to work. Check in on them often and maintain an open line of communication.
If possible, hire a remote team manager dedicated to resolving the problems your remote workers encounter.
Overcome HR Challenges to Build a Strong Team
Behind every successful startup is a team of a dedicated, high-performing workforce. For employers, building such a team isn’t all rosy. Every day, there are HR challenges waiting for you.
The good news is, whether you’re struggling with recruitment, high turnover, or employee theft, there isn’t a shortage of solutions. However, keep in mind that a solution that works for company A might not work for company B. Some challenges require custom solutions.
Explore our blog for more HR management tips and advice.