Startups are a progressive form of business that face some specific challenges in terms of its Human Resource. To understand the various HR challenges faced by Startups and understanding the solution-based approach to resolve them is necessary. Here, we have identified some of the key challenges faced by startups.

  • Lack of interest by management to invest time and money into HR policies and compliance
  • Absence of well-documented HR policies and compliance system to tackle personnel problems
  • A proper system for continuous performance feedback for employees and employee feedback for better management
  • Lack of conscious efforts to build an organizational culture that aligns with the promoters’ view of the organization that they want to build
  • Unwillingness to identify employees’ training needs that align with the required skill set

Modern Performance Management systems typically provide features that can help startups to manage these challenges.

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Over the past decade, Startups have become common in our business world. Most startups are started by entrepreneurs looking to bring change into the world with their products and services. Successful startups tend to adopt a modern-day, dynamic, and progressive culture that differentiates them from traditional or old-school enterprises.

“Human Resources isn’t a thing we do, it’s the thing that runs our business.”- Steve Wynne

Startups look for employees who are multi-tasking, charge-taking people and can get the work done. These new-age companies don’t get dragged down by bureaucracy and concentrate solely on their core competencies. To inculcate and drive such an ‘agile’ work culture, startups have different requirements in terms of Human Resources Processes and hence the HR challenges they face.

Let us look at the Top 5 Human Resource challenges that Startups usually face and how to tackle them.

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Challenge 1: Lack of Buy-in From Management

Problem: Startups, as the name suggests, start lean and the management is busy with developing the solution/service and the business. Given the other priorities that the management has, HR functions tend to be seen as an unnecessary cost that does not contribute immediately to the company’s revenue or profits. The management typically may be unwilling to invest time and resources on HR processes and limits HR to focus on hiring of resources. The other critical aspects of HR take a back seat.

Solution: Management in startups need to realize the importance of good HR processes in driving the organizational culture, employee alignment, aligning employee performance, etc. It is the role of the Human Resource Manager to identify such critical processes and convince the management about implementing these while clearly illustrating the return on such investments.

“Humans, not financial capital must be the starting point and ongoing foundation of a successful strategy.” – Bartlett & Ghoshal


Challenge 2: Policy Documentation & Performance Alignment

Problem: Not documenting policies can prove costly as and when a problem arises. Startups operate with limited resources and there could be a view that any HR or personnel issues can be managed as and when they crop up. Most startups forgo the documentation process for their HR policies and make them when they are faced with personnel challenges. Similarly, aligning performance of employees with the organization is not felt necessary given the small size of the team. The need is recognized only when the team grows bigger.

Solution: Any company small or big should have clear documentation of HR policies like paid leave, holidays, attendance system, etc. in place. A booklet of HR policies and compliance for employees can be used for reference in the future. Given that Startups are more tech savvy, they should invest in a modern-day, digital Performance Management System that ensures that its employee’s performance is aligned with the company goals and its policies. This becomes quite critical in scaling up business quickly and absence of such system can become a limitation.

“To win the marketplace, you must first win the workplace.” – Doug Conant

Challenge 3: A Continuous Feedback System

Problem: Like other HR challenges, processes like feedback system are kept for ‘later’ as other things take priority. While startups focus on hiring people who are good at their work, they do not have any formal feedback system in place that can provide timely inputs to the employees on their performance or the other way round. Failure to collect and give feedback can lead to disengagement between employees and management and can lead to loss of productivity.

Solution: Including a 360-degree feedback approach can lead to employees feeling more involved and engaged in the organization. A digital performance management system will allow the startup’s management to assess employees’ performance and provide feedback. This can be critical in designing timely interventions. It will also provide an effective solution for continuous give and take of feedback improving the overall organizational communication system.

“When feedback is included as part of regular, ongoing performance discussions throughout the year, the employee, the manager, and the organization are all better off. “– Shawna McKnight


Challenge 4: Building Culture in Startups

Problem: Most entrepreneurs and mangers in startup are focused on their core areas of work that drive the business numbers. It is assumed that the company will develop a culture on its own or that the promoters’ values will be automatically imbibed by the employees. Very rarely conscious efforts are made to drive a cohesive culture that is understood by employees.

Solution: Startups should define their organizational culture in tune with the organization they want to build and through intentional policies and decisions. Defining HR policies and values that the company and the employees should not compromise on is critical. Employees demonstrating alignment with this culture should be recognized and suitably rewarded.

Investing time in building a company culture tends to contribute greatly to the business performance in the long term boosting the ROI. Deploying a digitized recognition program for employees will motivate them to align with the startup’s culture.

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Challenge 5: Impart Training & Development

Problem: Startups focus on hiring employees that are good at their job. However, in this fast changing business space, employees need to be continuously up-skilled through training and development for improvement and growth. Continuous training & development is not a luxury anymore, it’s a necessity. Startups generally consider training and development of employees as an unwarranted expense and tend not to go for it.

Solution: Startups need to recognize that 1) training is a necessity, 2) Training helps you up-skill your current employees, saving you the time and cost of hiring new employees again for the same job, 3) it helps you retain employees for a longer period.

One way to identify the need for training and development in your startups is to adopt a competency-based assessment approach for employee’s performance management. The PMS can identify the gaps in the current skill set and the required skills as per prevailing industry standards. These identified gaps can be used to identify the current need for training and development of employees and can go a long way in helping your employees grow with the company.

“Train people well enough so they can leave, treat them well enough so they don’t want to.” – Richard Branson



Startups are a different generation of business entities and hence their HR challenges differ from established organizations. Recognizing the HR challenges faced by a startup and taking measures to resolve them is critical and can go a long way in helping the startup to scale up. A modern well-designed Performance Management System can provide the necessary tools needed to address most of these issues.

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