Kobus Krüger – June 2022

Many young organisations experience some difficulty in establishing the HR function. For many, the HR function is usually set up under pressure – there’s after all more fun to be had in running the business than in finding someone who will “take care of the people problems”. The team frequently set out to find an HR partner, but with little insight on what HR work is needed in a new organisation.

While searching for an HR partner, someone with experience in a multi-functional HR team might seem an attractive hire. However, someone with experience gained in a corporate organisation may not necessarily have the full grasp of what is needed to design the less diverse functions required in a start-up organisation.

In my view: it is best to find a generalist, not a specialist. I‘d even recommend hiring a lesser experienced generalist with good credentials and a good understanding of the organisation’s regulatory environment, over someone with a speciality in a sub-discipline in the HR field.

A good way to approach the design of HR for a new organisation is to plot the employee life-cycle within the organisation, and to deliver the HR service model with an individual or a small core team who can focus on the bare essentials of HR: usually recruitment, admin and payroll. Where more specialised services are required in the initial life of the organisation, it can be insourced on a consultancy basis. As things progress and the organisation can afford it, the HR budget and resources may well become available to build a more functional team to deliver services that were previously insourced.

What then is the HR value chain? Again, if we view it through the lens of the employee life-cycle, it may include a whole list of typical HR activities, which each can be a specialisation in its own right.

  • Candidates have to be found, assessed and recruited if they have the skills the organisation needs;
  • they have to be paid and be provided with benefits;
  • they should be socialised (or “inducted”) into the organisation;
  • their skills should be developed, so they stay relevant and to help the organisation reap the benefits of cutting-edge knowledge and skills;
  • the impact of the workplace on their health and wellbeing should be carefully reviewed and programmes to help them cope should be implemented;
  • talented employees should be provided with growth opportunities lest they flee to competitors;
  • they may need to be disciplined (if their behaviour deviates from norms), and their grievances should be listened to (if they have any);
  • their contribution should be directed, recorded and assessed through performance management and their performance should have an impact on their reward and development,
  • and, last but not least, their exit should be managed appropriately and within the scope of what the law allows.

I may well have missed some item in the HR value chain, but clearly it can be an expensive exercise for a young business to cater for the full HR life-cycle too soon. It pretty soon becomes a thing of the “art of the possible”, particularly when it is passed through the lenses of the leaders’ aspirations, the high level organisational plan, and – what else – the budget.

Before the HR partner can even start bringing people into the organisation, there is a lot of foundational work that needs to take place. It starts with the organisation’s plan – the plan does not need to carry the lofty title of a “strategy”, but it has to reflect the founders’ view of where they’d expect the organisation to be in two or three years (five years is usually a stretch for most entrepreneurial organisations). From the overarching plan, a skilled HR partner can construct a view of the emergent business through an organisational design lens. This should include a rudimentary structure with an early view of spans and layers, not forgetting vital functions such as finance, HR, marketing, engineering, logistics, etc. in addition to production – of course depending on the type of organisation that it is to be.

Then there is the HR budget, where reality starts grinding and reshaping the elegant “mean machine” of the vison to an “art of the possible” workhorse.  Not surprising, when the entrepreneurial team is finished reviewing the emergent organisation through the lens of the HR budget, it leads to a reconsideration of growth plans (including plans about who to hire first) and what employee benefits the young business can afford. This cathartic experience is very necessary if the organisation is to have a solid base from which to start populating structures that will actually work.

After the budgeting process, the HR partner is likely to have a rough plan of the organisation’s immediate HR needs for at least six months. A wise HR partner will also know that HR plans during the start-up phase will be changeable, and will defy lock-in, because organisational growth is not neat, predictable and steady. However, even if the HR plans are elastic, grounding it in an HR budget provides a reasoned basis to test shifting priorities against.

A vital part of the young organisation’s HR architecture is its compensation and benefits structures. Before hiring can really get into motion, at least the minimum mandatory benefits should be designed, and negotiations with service providers for pension and medical aid should be completed or at least well under way. Talented candidates – who are spoilt for choice in the jobs market – do not want “vapourware” benefits, vague promises as options.

A further item that needs early consideration from HR – with the collaboration of a financial specialist – is the necessary registration with the Department of Labour and also with the South African Revenue Services (SARS) for all the different taxes and levies that need to be paid. This also highlights the need for setting up a strong HR administration function to support management and employees with record keeping and information.

The decision to hire a fit-for-purpose HR partner is one of the more critical moments in the life of a new business, and should be approached with careful consideration of what HR services the organisation really needs.

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