Cooper HR Solutions Founder, Laura Cooper Shares the Hidden Power of Human Resources in Accelerating Profitability

The Venture Capital (VC) market creates the runway that drives new and compelling startups to enter key industries and the 2024 market forecast revealed an expected reach of $468.4 billion. Despite over 5 million startups joining the market in 2023, data indicates that 90% of startups will fail within the first five years, making it more important than ever for startups to have effective strategies in place to accelerate their profitability and long-term stability.

Many factors impact startup success, and several of them are directly influenced by investing properly in Human Resources early in the startup lifecycle. The unfortunate reality is that HR is generally neglected as a priority in startups. This oversight leads to many financial, cultural, and operational pitfalls that create significant obstacles to profitability. Founder and startup HR Expert expert, Laura A. Cooper, Esq., breaks down how leveraging the hidden power in Human Resources accelerates the speed to profitability in early stage startups.

Key Components of Profitability-Focused HR 

Traditional HR focused on processing paperwork, maintaining compliance, and performing operational tasks around the workplace. “Startup’s utilization of HR often falls into these similar expectations which are far from the discipline’s true value. Human Resources has evolved far beyond running back office operations. An investment by early stage startups in strong HR should be considered as critical to the success of the company as Finance or Product.” says Cooper. She highlights that multiple overlooked HR functions are integral to profitability and can make the difference between the success or failure of reaching profitability.

HR, the Secret Utility Player 

Taking HR seriously up front, and implementing several HR strategies in the early stages of the startup lifecycle can have a dramatic impact on several different levels. It will extend the startup’s operational and financial runway considerably while closing the gap between expenses and profitability. Here is what Cooper recommends:

Culture 

Company culture influences how an organization behaves and how likely employees are to thrive. “And a great culture is only as great as the worst behavior it tolerates. When companies have empty values that they don’t implement, they lose tremendous ground by failing to align impactful values into hiring, performance, and business practices. However, when company values and behaviors are meaningful and regularly rewarded,  employee morale and productivity exponentially grows, accelerating productivity as well as market share”, Cooper explains.

Recruiting 

Startups cannot afford to compromise on talent and need top-quality employees to launch their venture successfully. “Recruiting is the first, and most often overlooked foundation for startup success with  CEO’s and founders relying on friends, networks, and relationships to build their ranks. Many early-stage startups that need to move fast don’t invest enough time in understanding what they’re hiring for, fit and behavior. and because they don’t know, they can’t translate that information into good hires.” Recruiting correctly, both strategically and operationally, can accelerate startup growth by catching the attention of aligned top talent, exciting them about the mission and installing them in the company where their talents and skills will be put to amazing use,” insists Cooper.

Meritocracy 

High performance is a major differentiator and catalyst behind startup success. Cooper stresses that one of the single best ways to motivate high performers is through recognition and reward programs based on merit. A meritocratic philosophy regarding performance has fallen out of favor over the last few years, but that neglect is destructive to startups. “A meritocracy is essential,” says Cooper. “When identifying and incentivizing employees based on merit, HR is the lynchpin that builds the methodologies necessary to ensure that top performance is acknowledged and compensated. “The emotional commitment that a strong meritocracy creates with high performers is unmatched and the company benefits in the form of faster growth, efficient operations, superior teamwork, and stronger revenue production.” All of this leads to greater profitability. One startup that partnered with Cooper HR Solutions stopped tenure-based promotions entirely and shifted to merit-based advancements. The outcome? Increased achievement of goals, significant financial savings, and improved retention.

Managing Low Performers 

Although it would be ideal for every team member to be a top performer, it simply isn’t reality.  “The failure to manage low performers is a consistent problem in early stage startups and costs them dearly in tangible, as well as, cultural ways,” Cooper notes. As important as rewarding high performance, it is just as important to manage those who are not thriving within the company. “It is an interesting juxtaposition that it’s actually better for a startup to have no employee in a role than to have a poor performing one. Unfortunately, it is prevalent for startups to tolerate low performance for extended periods of time and to the great detriment of their organization-  not only in a wasteful financial cost, but also a damaging social cost.  When an employee does not, or can not perform in a way that aligns with the goals and expectations of the company, the disastrous outcome of tolerance can destroy revenue almost as fast as a bad market.” And this can be rapidly cured through leveraging HR. With methods that are discreet and diplomatic, HR will see the company through these situations to quickly regain the overall operational, financial, and cultural health of the organization. “Overall performance can turn around quickly when people know the organization is serious about performance,” reveals Cooper.

Retention 

Top performers in any company have a large and sweeping positive impact. “The loss of a top performer has multiple devastating consequences; the gap in productivity, the doubt in company stability over the departure, and as is often learned later, the defection of that top performer is often to a competitor, giving all the knowledge share over to a direct market threat. The open market is compelling. Aggressive, external recruiters promising the world will pique the curiosity of most top performers to explore if the grass is greener elsewhere. Early-stage startups rarely know how to manage this, but HR does. HR has the strategies necessary to both identify the top performers, and create programs that motivate, reward, and lock in retention.” The longer a startup is able to retain its performers, the stronger its chances at accelerated profitability.

Workforce Planning 

“Centered around optimizing the workforce to support business plans and goals, workforce planning is a practice that can take time, but is always worth the effort,” Cooper explains. “When HR teams are given the ability to map out the potential workforce and organization, they are equipped to effectively source the correct candidates at the right price and position them for the best utilization of their skills. The people they onboard will likely carry the startup for years.” It can seem like a big initial commitment, but it is worth it to achieve long-term business success. Through workforce planning, Cooper HR Solutions was able to reduce the hire-fail rate by 20% for the client while cutting unnecessary spending on non-critical hires.

The Real Benefits of Experienced HR in Startups 

Startups prioritize fast and furious growth in their desperate race to profitability without building the foundations that increase their chances of a successful exit. Those who want to succeed need to prioritize these HR foundations as a strategic imperative.  Investing early in building a strong HR machine is, when done right,  one of the differentiators that accelerate the successful run for profitability.

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