We are living in a world where start-ups are booming. It feels like every day we hear about some new company that has just launched a brand new service or product, which is out of this world and wonder why it wasn’t us who came up with this fantastic and seemingly easy to generate concept. I’m sure we’ve all been there.
What has been troubling me though is not the increasing number of Start-Ups, but the HR behind it all. To be more specific, what are the HRM processes that could support the sustainability of such organizations?
First of all, let’s identify the source of power of these small, but potentially mighty, beasts. Entrepreneurship, one would say, is the essence of every Start-Up. It all begins with a crazy idea or realization, followed by a lot of work, pain, and failures. It’s a messy process for the people those involved. Filled with a lot of experimentation, ups and downs and learning through failing.
In some rare cases though, this process leads to something magical: The creation of value, which can be financially exploited. Of course, this is only the beginning. If everything goes well and the newly formed company starts to generate revenues, the next big issue is to continue doing so through further development and sustainability of its entrepreneurial mindset.
So it’s obvious that entrepreneurship is vital not only for the creation but also for the continuity, of such organizations. This article will explore ways that HRM processes can enhance entrepreneurship, making Start-Ups more viable and fruitful in the long run.
A Process of HRM Experimentation
To keep its level of entrepreneurship high, an organization has to keep experimenting. Experimentation means taking new risks, making mistakes and losing time and effort on things that aren’t guaranteed to generate high ROI, if any at all. The point of this process is the constant knowledge creation and the improvement of existing products. Without this risk taking, the spark of entrepreneurship can very easily die. Traditional HRM practices that focus on performance and compensation management from a result-oriented perspective, can contribute to this unfortunate turn of events, or they may prevent it, if altered properly.
For example, instead of measuring outcomes and rewarding people based on their results, HR could evaluate people based on their ideas and the effective experimentations in the framework of these ideas. Let me elaborate a bit on that.
Making Entrepreneurial Behaviour a Success Factor
Pursuing an idea, involves high levels of risk, as the outcome is not always certain and measurable. Plus, the product of the effort is not always aligned with a short-term business goal. If a company has identified entrepreneurial behavior as a key success factor, it should encourage such behavior through its performance management system. Meaning, it should evaluate people based on the effectiveness of their risk taking. This way, the perceived high risk surrounding the experimentation will be reduced, since performance won’t be influenced by a possible failure. Instead, the performance will be formed on the basis of people’s effort and the organizational knowledge created through the process itself.
The same principle is valid for compensation. Rewarding rational risk-taking behavior, which leads to knowledge generation, is an effective way to encourage people to experiment more and thus develop a more entrepreneurial attitude.
Creating a Fruitful Workplace Environment
The next positive contribution of HR in supporting the entrepreneurship of a Start-Up lies within the organizational environment and HRM’s capability of influencing it positively. Certain HRM practices can promote employee citizenship and develop richer networks of informal relationships. Both of these elements are crucial because they result in greater knowledge sharing, easier access to resources and better collaboration, all of which lead to organizational learning, the essence of innovation!
Most entrepreneurial acts take place due to innovation either in processes or in products. So, as you can imagine, reinforcing innovation within an organization, through specific HRM practices, can also influence positively entrepreneurship.
To sum up, we’ve seen how HRM could increase risk taking and foster a collaborative organizational environment, suitable for experimentation, organizational learning, and innovation. All of this in order to keep the entrepreneurship going within the organization, increasing its chances of survival. Ultimately, it’s not about the specific HR practices. For me it’s more about the fact that HRM is a game changer even at this early stage of life of an organization and being aware of this or not, could mean either the survival or the decline of it.