Why Startups Don’t Need an HR Team

When I first started my company, the idea of hiring a Human Resources (HR) person felt like an unnecessary overhead. I wasn’t alone in that thinking, either. Many founders believe that HR simply adds to the costs without delivering enough tangible value in return. The personnel department of decades past has been rebranded into “human resources” or “employee relations.” Today, HR is nominally tasked with “curating company culture”, advocating for diversity, ensuring competitive salaries and benefits. All too often, HR also becomes a legal instrument, protecting the company against lawsuits (or, sometimes inviting them inadvertently). What HR is not great at is identifying the right talent. Hiring the right people is one of the most critical job of a startup CEO.  And, in many ways, HR always felt somewhat disconnected from the heart of my business. I would advise founders to hold off on HR as long as possible.

HR Wouldn’t Solve My Hiring Problems

Let me give you some personal context. I had to be arm-wrestled into hiring my first HR employee. And it wasn’t because I thought I needed one. It was because my personal assistant, who had been keeping track of employee benefits and salaries, wanted to get rid of that responsibility. Reluctantly, I agreed. At the time, I justified it as something which will reduce employee turnover.  And ensuring that we were paying everyone equitably to keep them happy and also to make sure we were not overpaying (founders worry about that, too). But deep down, it felt more like giving in.

As a founder, you’re always worried about running out of cash. Every decision, including salaries and benefits, carries weight. Early on, I would simply ask potential hires what they expected, and we’d negotiate from there. What I didn’t understand at the time was that in startups, employees don’t get paid market salaries—they get stock options. But figuring out the right mix of salary, equity, and bonuses? That’s complex. And I’ll admit, I lost a few good candidates along the way. Did I underpay them? Did they want more stability? I’ll never know, because people rarely give you the real reason when they decline a job offer.

Now, here’s the thing: even when I eventually brought HR on board, these challenges didn’t disappear. Some people that I hired told me they took salaries well below market but believed in the potential of the company. Other people seemed ecstatic to get paid less to work for a company where their ideas could blossom and they rewarded with added responsibility. To retain the people which was most valuable to me, HR didn’t have a clue, other than offer more money. That was my job as founder — to speak to my team, understand where they were coming from, and how to keep them.

I would say I spent over 25% of my time on sourcing talent and hiring people. This never really slowed down, even as we got bigger. I still had to be in the hiring loops for middle management. I needed to see a spark in their eyes, to hear them think, in front of me. Granted, we never became a massive company — but we were hundreds of people.

This is said over and over again. As a founder, hiring is the most critical aspect of your business, and it’s one thing you could never fully delegate. That means not just interviewing but also identifying candidates as you pass through the world and making it clear to your employees that they should send anyone promising, however unusual, to you. This is not something HR, which primarily focused on resumes, can ever do the same way a founder can.

HR Lacks Business Acumen

But that’s not my only issue with HR. From my experience, HR professionals often lack a deep understanding of what’s good for the business. They operate in their own bubble, focused on compliance and employee relations, rather than driving value for the company. I remember an experience from my time at Bell Northern Research (BNR). When I resigned from the company, the HR rep called me in for an exit interview. I was honest—I left because I didn’t get a promotion I believed I deserved.

What happened next floored me. The HR rep asked if I felt I was passed over because I was a woman. It seemed like an invitation to file a lawsuit, not an honest discussion about career progression. This was the furthest thing from my mind. I never felt discriminated against at BNR. Why would they put that thought in my head? I walked away thinking, “HR doesn’t understand business—they understand risk mitigation.” This mindset is bad for business and tends to create a strong bias towards avoiding risk, at all costs.

I understand that women may be discriminated against and that HR’s job may be to protect the business against hidden discrimination. It is a legal risk, after all. Some people may say that my disapproval of using HR for this invites more discrimination. I don’t think that’s true. At Digital Link, all I emphasized was getting the best people who were creative thinkers.  Gender or ethnicity used to be far from our thoughts, as finding good candidates was hard enough.  In my mind being singularly focused on the quality of candidates, results in DEI.. We all were open, transparent and clear on our focus. This flowed down to our employees. We didn’t need HR to make this point. It’s how we ran the business.

I hear from my daughters, who work in high tech, that HR provides a buffer zone where employees can voice concerns in confidence. In a smaller company or a startup, if you need an HR team to create a “safe zone” for frank conversations, you probably have much bigger problems with your culture. Your employees don’t trust you to do the right thing. That’s not going to change because you have HR.

I understand that in today’s corporate culture, employee engagement and company culture are essential for retention. But here’s my question: is HR meant to be a counselor for employees, or should they be focused on advancing the business? And isn’t the most important part of a job whether its interesting, fun, and something employees feel is worth doing? HR is never going to create these conditions — even with a massive budget for fancy espresso carts, on-site gyms, and unlimited paid time off.

Outsource HR Functions and Stay Involved

There are now many HR software providers that can handle significant operational jobs usually done by HR. There are third-party benefits consultants you can use to help guide you as a founder through building out benefits packages. You can purchase compensation reports to benchmark against peers. A full-time HR person is unnecessary until you are a fairly large firm.

In early-stage companies, every single employee must add tangible business value. In startups, especially, HR tends to become a compliance officer, rather than a strategic asset. They don’t have the same entrepreneurial mindset that drives the business forward. Their role is often reduced to following protocols rather than understanding the bigger picture.

If you’re running a small company or a startup, you don’t need a full-blown HR department. You need people who understand your business, who can wear multiple hats, and who are as invested in the company’s success as you are. You can outsource a lot of the nuts and bolts. And, a lot of what HR is supposed to do should fall on you, the founder. Keep in mind, as well — your first job is telling a compelling story about the future of the company that motivates, energizes and retains employees. If you do this well, good employees will come and stay – regardless of your perks and, within reason, regardless of your salary offers.

At the end of the day, I believe in keeping HR lean, if not non-existent in the early stages. Focus on building your business, not adding unnecessary overhead. HR is there to follow the rules. In a startup, your job is to create something new, not follow the rules.