Importance of human resource management in tech startups

6 min read
Utkarsh Singh

So, you have started an IT company that grows every day. You have big plans but as you’re on a shoestring budget, you are finding ways to manage with minimum resources. It is quite natural to think of cutting some costs on the HR function and managing the employees on your own. In this article, we will discuss the importance of human resource management (HRM) for a small and growing IT company.

HRM is extremely useful for a company that has more than a few employees.

Human resource management is responsible for overseeing the people who work for a business. This function handles the hiring, training, compensation and termination of employees. It must also ensure the company complies with all labor laws.

If yours is a small IT company or a startup, you may not be sure about the need for human resource management. While you may be great at your technical skills, for growth you need people management skills as well. The importance of the human resource management department cannot be ignored — especially in an IT firm. Let’s discuss why.

5 reasons to have an HRM in your tech firm

It may be hard to justify hiring a human resources manager for your tiny firm. But the right manager can help you build the company you want. Here are five reasons to hire an HRM.

  1. The Indian employment laws.
  2. HRM is a full-time job.
  3. Hiring is a time-consuming process.
  4. Firing can be risky.
  5. IT is a highly competitive field.

Now let’s look at each of these five good reasons to have an HRM one by one.

1. The Indian employment laws

Importance of Human Resource Management Law Books
Most entrepreneurs aren’t familiar with all of India’s labor laws.
Photo: Mikhail Pavstyuk on Unsplash

Employment conditions in India are not only governed by the Indian labour law, but also The Companies Act, The Contract Act of 1872 and other industrial laws. Then there are central and federal rules pertaining to employment in particular states.

As a business owner, one needs to comply with the relevant laws that govern Human Resources (HR) practices in their industry and state.

Understanding employment law is not easy, especially in India. One has to be well-versed in the law so as not to get penalised for non-compliance.

2. HRM is a full-time job

Leaving aside the hiring and firing where the HR department plays a crucial role — managing monthly pay-slips, leaves and company policies is a full-time job in itself.

HRM’s job description also includes:

  • Performance management
  • Organization development
  • Safety and wellness
  • Benefits and employee motivation
  • Communication, administration and training

In short, HRM is expected to recommend processes and solutions that improve the ability of the group's people to effectively contribute.

You as a founder of the company cannot handle everything, especially if you are growing and have a significant team size. Setting up a dedicated HR role to manage and retain the talented pool of employees makes perfect sense.

3. Hiring is a time-consuming process

People are the biggest asset of any company. They define the culture, values and profitability of your company. You cannot hire and fire people like hit and trial. If you are a startup or a new company you need the right people to grow your business and reach the next level.

Finding the right fit for your company is not just a time-consuming task but also needs the specialised skill of headhunting.

As a founder, your focus should be on client engagement, project deliveries and defining the vision of your company.

From drafting the job descriptions to listing the prospective candidates, shortlisting them and scheduling interviews, hiring is a massive task.

An experienced and talented HR is more efficient and effective in managing these tasks. She knows where to hunt for quality talent by sifting through the resumes and finding diamonds in the rough.

4. Firing can be risky

Importance of Human Resource Management Man with Backpack
Your firm could be sued if you don’t adhere to the terms in an offer of employment.
Photo: Andrew Neel on Unsplash

Indian law does not mandate a written employment contract. But companies do document the terms and conditions related to employment.

You don't want to be sued for wrongful termination of an employee.

Hiring and terminating employees in India is governed by the contract signed between the employer and the employee during the hiring process. This is a legal contract, and you as an employer can be sued if you fail to adhere to the terms in it.

Therefore, it is advisable that an experienced HR professional should draft the offer letter in consultation with a lawyer.

5. IT is a highly competitive field

There is a huge demand for IT professionals in India. Be it a small startup or a global IT company, both are trying to hire the best talent.

Attracting good talent and retaining them for future can be challenging for a small firm.

This illustrates the importance of human resource management in tech firms over their counterparts in other industries. A good HR department can:

  • Write job descriptions that attract the best talent
  • Design and administer effective training programs
  • Create attractive career growth plans to prevent brain-drain
  • Plan team-building activities and milestone celebrations

It is the HR department that facilitates a good culture and work environment in a company. And this has a huge impact on the company’s success.

HRM — yay or nay?

HR is an important and inevitable function. It is even more important for a small and growing company where you are creating a team of shared values. Who you hire determines the organisation’s culture — one of the most important factors that is usually ignored. Good HRM can set the enterprise up for long-term success.

The importance of human resource management in summary

You need not go for a big team of the HR function. One experienced HR person can easily manage all the human resource-related activities for a small company. If you’re really tight on budget, you can explore options like hiring a part-time HR professional, recruitment consultant or outsourcing your HR activities to an HR agency.

Let the best one do the job.