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Buying HR Tech for Startups and SMBs

Looking to improve your startup hiring and retention processes? Read here for top HR tech-buying...

Phil Strazzulla
HR Tech Expert, Harvard MBA, Finance and Software Nerd
June 3, 2022
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In the startup space, gaining and retaining talent is key to building a thriving company. But as any small business knows, recruiting and managing employees can be a challenge. Startups have double the attrition rate of larger companies, even if said startups happen to be unicorns. So how do you make sure your company doesn’t become a statistic?

One way to combat high employee turnover is to invest in HR technology. Much like sales and marketing automation has helped startups scale quickly, HR tech can help manage the People Ops side of business just as effectively. 

We spoke to HR professional Kimberly Bozeman, who is the founder and principal consultant at KNB Sensible Solutions. With over 20 years of experience in HR at companies like Blue Shield, Caltrans, and Constellation Brands, she had some incredible insights to share into the HR tech world.

“HR is not a one-size-fits-all model for every company. In the startup space, it’s about getting them the foundational structure that they need to optimize gross growth. And that's what I do for fun. I love it.”

Read on for the highlights of the conversation, or access the full recording here.

Do you work mostly with smaller companies and startups? (4:03)

As someone with 20 years' experience in HR, Kim has worked with small businesses, startups, corporations, and everything in-between. Right now, she's working with a mid-sized team and learning lots about the value of early implementation.

"I’m witnessing the challenges that come when you don't do a proper HRS implementation – understanding where you're going to be in a year, understanding what you need. And then you get all these systems that don't integrate well with each other. And it's creating a lot more manual work and a bottleneck for efficiency.”

In 2022, PwC research indicates that 58 percent of companies use HR software systems to improve the hiring process and human resource management – but that leaves almost half of companies who don’t. If you’re a startup or SMB, it can be hard to know where to start when it comes to HR technology.

HR manager hiring a new employee

When should small companies first start thinking about buying an HR system? (4:53)

“I'm going to die on the hill with immediately. When you think about starting a company, you need to think about your systems.”

Kim explained that, a lot of the time, companies do too little and too late.

“I think that that is a huge mistake that people make – they think ‘We don't need HR right now, we don't need those systems right now. We can get those later.’ But the reason that a startup fails is [not having] the right people and the right team.”

She’s right; in fact, not having the right team is listed as one of the top reasons for startup failure by CB Insights, almost on-par with pricing and cost issues. And, without the right systems in place, it’s made infinitely more difficult to find and retain the team you need to thrive.

“If you don't implement a proper ATS and systems that get you the right experience for your potential employees, you are creating a problem,” Kim insisted.

When do you think a system of record is necessary for a startup? (6:06)

While 74 percent of businesses plan to invest in better HR systems and technology, when and how well they implement those systems is another story. Kim finds that far too many companies procrastinate the task until an issue arises and makes things more difficult.

“Before you hire, HR should be an integral part of your business strategy to be effective to help you optimize growth. Not all companies need full time HR. That's not what I'm saying. But you should be speaking to a consultant. Bring HR in at the beginning of the conversation, and implement a strategic plan.” 

Fortunately, for small businesses, there are now a wealth of affordable and easy-to-use HR technologies on the market. There are also over 50,000 HR consulting companies in the US that can help businesses design and implement HR solutions. Thus, implementing HR measures early on is more than achievable.

If businesses leave these crucial steps until too late, they risk sinking in a competitive job market.

“If you think about what type of experience you want your potential employees to have, the future of work is drastically changing. If you're not proactive about those decisions, you're going to waste time, you're going to waste money, and you're probably going to lose talent in this market.”

What HR tools do small businesses typically have? How do they use those tools? (8:35)

When companies are just starting out, they tend to let their hiring processes fall to the wayside in favor of perfecting workflows and pipelines for their products or services. 

“How do they hire? Do they have a system in place? No, they are usually just networking and saying that they need a position to fill and not having an application on file. That's hiring – it's a lot of chaos. It's just chaos, more chaos and more chaos, because of the failure to plan.” 

This lack of planning can be a huge mistake, as the wrong employees can doom even the most promising startups.

“By the time they get to me, they're stressed out, they're overwhelmed. The founder is stretched paper thin, because they're playing admin, office manager, and HR. And they're losing out on really solidifying themselves in their potential market, because now they've got to go back and do all this cleanup.”

Two female HR persons disgruntled and burnt out

Similarly, what sort of HR systems should a more developed startup or small business have in place? (11:00)

To assist those companies struggling to make the first move – or recovering from their lack of proper planning – we asked Kim what companies look like when they do it right.

“If you have 50 employees, you should have a really robust HRIS system with a learning management system in place. Your ATS should be able to meet your future needs for the next 50 to 100 employees that you hire. You should have an effective onboarding system in place, and it should all be integrated.” 

In other words, if you’re a small or medium-sized business and you haven’t put the right HR tech in place yet, it’s time to do so. And that's not all – according to Kim, it's also important to start thinking into the future before you've even conquered the present.

“You'll also be thinking about where you want to be, based on how you’ve grown. Do we plan to be at 125? Do we expect rapid growth where we might have to hire 150 employees? So that you can be prepared— that's an ideal world.”

At what point should small companies hire a dedicated HR professional? And are they the ones that are managing all of these systems? (12:48)

Kim was very clear about this: “HR should have a seat at the table immediately.”

Why? Because technology can’t manage the employee lifecycle by itself. It needs to be integrated with actual human processes, which is where HR comes in. An HR professional can help you set up your systems and make sure everything is running smoothly.

“Do you need a full time HR person? No, you might not – but you should be speaking to a consultant. Have some strategy sessions and have a well thought out three-year plan. Again, the future of work is changing, technology is rapidly changing. So today in three months may look very different.” 

However, Kim did warn that implementing new systems should not fall solely on the HR professional’s shoulders. The entire process should be a collaborative partnership in which the consultant and the business work together to deliver the most effective systems.

“HR should not own it. It has to be a collaborative relationship where there's communication, respect, and a cohesive, working relationship. But we should definitely be having a seat at the table to guide the founder on what they need to do to really accomplish their metrics.”

Why do so many startups and small businesses discount HR? (14:59)

“Unfortunately, there are many companies and individuals who have written off HR as a useless and intrusive job that does nothing to improve key processes. These are all misconceptions, but they originate from poorly-done HR jobs and a misunderstanding of the role description.

“I will be very frank – there's a lot of bad HR out there. And there's an assumption that HR is a cost center, and we just suck money. So they don't see it as an investment.”

This is truly unfortunate, considering that HR professionals have the potential to transform your business into a well-oiled machine. With their extensive expertise in the areas of both technology and people, HR reps are valuable to any organization.

“HR should really come alongside you and be your business partner. People always say, ‘Why do you want to get into HR?’ and I say, ‘I like people.’ You need an HR person that likes business and people.”

An HR person shaking hands with a new candidate smiling

Of course, some HR professionals aren’t given the opportunity to work their magic – especially when companies misunderstand what their role is supposed to be. 

“HR sometimes becomes a dump center for things that should not belong to them. And so they're left not being able to really focus on strategy and help the company grow. We're not party planners— we are strategic business partners that really want to help you optimize growth and help you find the right people.”

After being in the industry for more than 20 years, Kim knows these issues like the back of her hand. It’s frustrating to see a truly instrumental role be misinterpreted and underappreciated.

“It's a combination of both bad HR and a lack of understanding, and I think we can do a lot more to really educate startups and business owners of the role that HR plays. I get that a lot of startups are really risk averse. But they also really care about their brand and their people. And that is why you need to work with HR immediately.”

How do you know when a small business needs an ATS? Where do they start? (18:52)

After commencing work with a company, Kim informed us that she begins by posing several important questions. Collecting information is a crucial step in her plan.

“I start with a discovery call with my potential client and I just want to listen. What's going on in your business? What are your values? Where do you want to be? What type of talent do you need? Do you want talent that is local? Are you going to offer remote work?”

Why all of these questions? Well, in order to prescribe the right combination of tech systems and people-based strategies, Kim needs to know every detail about the company’s vision for their dream team. The entire process must be tailored specifically. 

“If you don’t want anyone out-of-state, your ATS system needs the capability to eliminate people in a certain mile radius. Where are you going to advertise? If you're going to be advertising on LinkedIn, that's a checkmark for what type of ATS you need.”

Kim also makes sure to stay up-to-date on tech advancements – particularly when things like AI-induced biases come into play, as they can seriously impact the hiring process in terms of who is filtered out and who ends up being interviewed.

“I'm seeing a lot more companies think about diversity, equity and inclusion. We know that AI can be biased – so do you want an ATS that removes the candidates name and location to mitigate bias? Usually, it's just listening, because what I want to do is really understand who you are so I can effectively build a plan. Where do you want to be? What type of candidate is going to be drawn to you? What are your needs?”

An interview group using ATS software on a laptop while talking to a candidate

What is a realistic budget for a small company for their first ATS or HRMS? (22:15)

A barrier that often stops businesses from purchasing the right software systems is how much they cost. Prices don’t have to be exorbitant, however.

“Gusto is $36, and then $12 per employee, but some of the more advanced are up to $145 per employee. So it really just depends, because the prices are all over the market. But the average right now per year for a smaller organization is about 8000 a year.”

How can SMBs rationalize the purchase of HR Software? (23:13)

Budget is a serious concern for startups; that’s understandable, considering their limited resources when starting out. But people are everything – and without the right systems in place to engage the right people, failure is imminent.

“It may feel like it's a lot of money now. But how much are you wasting on attrition because you have a poor onboarding system? You don't have an LMS in place, and so your employees are not getting trained. Add those dollars up, and it's way more than your ATS.”

Final Thoughts on Buying HR Tech for Startups and SMBs

Often, the HR Practice is given a bad rap. It’s often seen as a necessary evil; a department that is needed to ensure compliance but that doesn’t really do anything else.

Professionals like Kim, however, are the reason that companies thrive and build incredibly effective workforces. With the right software systems in place, HR can be a powerful ally for startups and SMBs, automating tasks, providing reporting and analytics that help businesses make data-driven decisions, and even serving as a strategic partner in helping to grow the company.

When it comes to HR technology, there is no one-size-fits-all solution. The best approach is to take the time to understand your specific needs and then find the system that matches those requirements. Don’t be afraid to ask for recommendations from other businesses or consult with an HR consultant to help you find the right solution for your company.

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Phil Strazzulla

Phil is the founder of SelectSoftware Reviews, a website dedicated to helping HR and Recruiting teams to find and buy the right software through in-depth, expert advice. Phil started his career working in venture capital before getting his MBA from Harvard Business School.

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