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What HR tools should I use as a startup?

BY -

Phil Strazzulla

May 19, 2021

I’ve started two tech companies and wanted to share the technologies you need at the early stages to set yourself up for success.  This advice is mostly for companies with <20 employees who are primed for fast growth.

When young companies first start growing their team, there can be a lot of confusion around what types of HR software and tools they need.  This is especially true if you haven’t hired a dedicated HR person at this point.

I think about the tools you need in terms of core HR (paying people, setting time off policies, all the REALLY exciting stuff!), recruiting, solutions that are important to your specific company, and then of course thinking about your next phase of growth.

I also believe that the HR functions first as a basic need, and then evolves in most high growth companies to be a more strategic function that can drive value.  So, the tools below will align with that philosophy.

The Basics: Payroll, Benefits and Employee Records

When most people think of HR, they think of the basic blocking and tackling that human resource teams have historically been in charge of.  No surprises here that in the earliest days of a company, your HR tech stack mirrors those functions.

So, you’re going to want to make sure you have:

  • Payroll: From the get go, you’ll want to be able to pay yourself and employees.  You can get a light weight payroll provider like Gusto for US based employees and contractors (make sure to pay contractors via your payroll solution so that 1099s are automatically generated at the end of the year through that system, it’s much easier than doing it manually).  For international employees and contractors, you’ll want to take a look at cheap ways of transferring money internationally.  You can do this via your business checking account many times (we use Brex), as well as solutions like Transferwise.
  • Benefits: Employees of startups want top notch benefits in hot employment markets.  In other areas of the world, you can get away with skimping on benefits as long as your vision is compelling enough.  Either way, you’ll need to get a solution that allows your employees to select benefits (healthcare, other types of insurance, IRA, etc).  Many times this will be a part of your payroll provider.  
  • Employee Records: You’ll want a place to keep track of who’s employed, when they started, and their relevant paperwork (I9s, W2s, etc).
  • HRIS: Sometimes called HRMS or just HR software, a human resource information system is sort of your core people management solution that can usually do the prior three bullets (payroll, benefits, records) plus a few other necessities: PTO, time tracking, onboarding.
  • PEO: A professional employment organization can be a great way to satisfy all of the above with one vendor that typically handles the execution of payroll/benefits with a service offering, plus software that can do some of the basic workflows you’d typically look for in an HRIS.  PEOs are generally great until you hit 100 employees and then can start saving money and having a more bespoke HR department by doing it yourself.  Despite this cap, many venture backed companies will use a PEO for the first few years as it’s not that arduous to eventually switch off one (especially considering you’ll have to evolve your HR Tech stack over time anyways).

Startup firm human resource team meeting


A Startup’s Recruiting Stack

Once you start growing beyond a few employees, you’re going to want to standardize some of your hiring processes and build assets that will let you compete in the war for talent.

  • Applicant tracking systems: This is the core of your recruiting, similar to a CRM in sales. You’ll receive and process job applicants through this software. It may also build your career site, distribute jobs to job boards, and facilitate things like video interviews, onboarding of new employees, etc.  Some companies go a long time before getting an ATS, but there are many reasonably priced options out there - don’t go without one if you’re past 2 hires/quarter.  Even if you don’t hire people now, you’re building a database of future hires.
  • Talent sourcing: You may want to invest in a talent sourcing platform like Seekout or Hiretual to supercharge your ability to get in contact with talent. These are similar to SDR automation tools like Outreach or SalesLoft, but also have a talent database built in. It’s basically LinkedIn’s Recruiter platform but it has email/phone vs just the ability to message via LinkedIn. You can also use an automated sourcing platform like Fetcher which will put interview screens of relevant candidates on your calendar.
  • Employer Branding: Startups win the war for talent due to a strong employee value proposition - the answer to the question “why would anyone want to work at your company?” Take the time to build a strong career site just as you would a landing page for your product.  You need to convince people to work for you throughout the hiring and onboarding process, especially if you’re hiring the best people at average compensation ranges.  You can use an employer branding platform like NextWave Hire, your ATS (although most ATS’s have a subpar career site builder), or just build something in your website’s CMS.

Building a Strong Culture at Your Startup

Employee experience is really important, and culture starts at the beginning of any company’s life.  Assuming talent will be important to your future growth, it makes sense to start investing in employee experience software early.

  • Employee Engagement: Employee engagement software is a great way to take the pulse of your organization on a frequent basis to understand what’s working and what’s not from a culture perspective.
  • Performance Management: Performance management software can be found in most HRIS’s. However, a dedicated best of breed solution will also manage 1:1s, OKRs, and give you insights into what everyone is working on.
  • Recognition: Peer to peer recognition software is a great way to keep employees engaged. Look for one that integrates with some of your core employee tech (slack, gmail, etc) and has very high monthly active user stats vs one that you constantly have to beg employees to use.
  • Remote team building: Many teams are remote in the early days. Look into party game apps to augment Zoom coffees, slack channels, etc.

Planning for your next phase of growth

It’s important to align your HR strategy with your growth plan.  A bootstrapped company that is shooting for $1 million in revenues three years out is going to want different solutions versus a company that is planning to raise a $15 mm Series A and hire 50 people.

For example, in the bootstrap scenario, I may use a simple form and landing page for my ATS until I hit 10 employees before migrating to an actual recruiting system.  If I’m going the venture route, I’ll want to select a best in class solution that will fit me until I hit 1,000 or more employees (most best in class HR Tech for SMBs will be suitable until at least that scale).

Of course, there is technology, and then there are the people who use the tech.  At some point, you’ll hire your first PeopleOps person.  You can go the route of hiring a lower level employee to take care of payroll, benefits, etc.  This is what I’d recommend for slower growth companies.

However, for high growth businesses, it makes sense to invest in a more seasoned hire that can be a strategic asset as you fight for top talent, and deal with the struggles of hyper growth (re-orgs, changing comp plans, changing office spaces, etc).

Good luck in your journey to build your business.  It’s very satisfying to eat what you kill!  
You can always reference our “best HR vendors” lists which we keep updated frequently when looking to buy various types of software. We also have a community if you have specific types of HR Tech questions.

If you buy HR Tech and want to be a part of our community, you can learn more here.

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