Discover how empathy, technology and Gen Z insights can effectively attract and retain top talent in startups and established companies, with expert tips from venture capitalist Victor Orlovski
Human resources is crucial to the functionality of an organisation, particularly startups. In my role as a venture capitalist (VC), I’ve observed how the people profession extends beyond administrative management and training to significantly influence talent acquisition. My involvement with various startups has afforded me insights into effective people strategies essential for both attracting and retaining top talent – critical for achieving organisational goals and satisfying customer demands.
I see strong HR strategy not only as a marker of a well-run company but also as a significant predictor of its long-term success and scalability
Strong people strategies are pivotal in securing top talent, a major driver of organisational success. According to the Society for Human Resources Management’s State of the Workplace Report, 58% of HR executives report that insufficient time and personnel are the largest obstacles to reaching their 2024 objectives, underscoring the struggle departments face without proper resources.
Effectively identifying and deploying resources to recruit skilled and qualified personnel is vital for young enterprises, impacting overall organisational performance. My experience in venture capital not only involves investment but also advising startups on developing robust HR frameworks that promote a competitive, innovative and resilient workforce.
Emerging vs. established companies
Emerging companies often face rapid growth and frequent changes in job roles, requiring employees to be adaptable and versatile across multiple functions such as sales and software development. In contrast, established companies typically have clearer job descriptions and more predictable growth patterns, allowing for more stable role management.
As a venture capitalist, I’ve noted that the fluidity in startups can be a double-edged sword: while it offers opportunities for innovation, it also demands robust management and organisational skills from founders who may lack experience in scaling businesses. This dynamic makes leadership development and adaptability key areas of focus, crucial for sustaining growth and attracting VC investments.
The characteristics of emerging enterprises
Emerging companies focus intensely on solving a specific problem, using their limited resources towards a single goal. This focus helps avoid resource dilution and subpar outcomes. I see the importance of a clear vision not only for product development but also for attracting investment. Niche companies gain strong market positions and reputations, building trust and enhancing funding prospects.
These companies typically embrace a “fail-fast” strategy, rapidly testing and adjusting ideas to assess their viability. This approach, which demonstrates a company’s agility and market responsiveness, is valued by venture capitalists for fostering sustained growth. It’s crucial for HR and L&D to cultivate adaptable teams ready for quick pivots. As an example, Microsoft promotes a growth mindset through programmes that encourage continuous professional development, such as talent initiatives, high-risk projects, and hackathons.
How technology advancements are transforming businesses
There’s been a significant change within the last five to 10 years: the dramatic boost of technology capabilities to automate work, creating the need for a new generation of employees. Generative AI’s integration with robotic process automation 2.0 (RPA), which automates repetitive and mundane tasks throughout a company’s systems, has potential to bring advanced automation to fruition. This technology significantly impacts job roles by enabling even junior-level employees to perform tasks traditionally reserved for more senior staff.
Capabilities such as dynamic adaption, enhanced decision making and data synthesis, which were previously performed by mid-to-senior-level employees, are now within reach for a wider range of workers.
Emerging companies must invest in advanced technology alongside high-quality talent to develop sophisticated algorithms capable of handling complex tasks with minimal manual effort. For critical areas like large language models or database management, it is essential to employ highly skilled individuals with in-depth knowledge to manage these complex systems efficiently.
Emerging companies fall into two categories: those using AI to reduce reliance on highly trained staff, and those focusing on foundational platforms requiring top-tier talent. This distinction influences venture capital investment strategies, as we favour companies that innovate and skilfully balance human talent with advanced technologies.
Gen Z’s role in the workplace
Gen Z, generally regarded as people born during the late 1990s and early 2000s, are viewed by venture capitalists not merely as employees but as key assets for emerging companies. This digitally native group values independence and creative freedom in the workplace, attributes that have seen their wages increase by more than 13% annually. Their quick adoption of new technologies and innovative work methods is essential for startups aiming to lead in rapidly changing markets.
The engagement of Gen Z can be unpredictable as they often challenge traditional authority and prefer learning via platforms such as TikTok and YouTube. This necessitates a re-evaluation of conventional management and learning strategies, which can become a competitive advantage if utilised effectively.
For emerging businesses, understanding and harnessing Gen Z’s soft skills is crucial. A recent Paychex study suggests that people leaders can meet their demands by promoting work-life balance, competitive pay, and remote work options, initiatives that help attract and retain this vital talent. Companies that adapt to these preferences are viewed favourably by investors for their potential to be resilient, adaptive, and innovative – traits of future market leaders.
HR strategies evolution from traditional to predictive platforms
The landscape of human resources is evolving rapidly, driven by changes in the workplace and technological advancements. Initially, HR resembled an old-fashioned bank or car dealership, where candidates interacted with them much like customers at a service provider. This traditional method, largely based on instinct, has evolved significantly.
Subsequent people management practices took cues from marketing agencies, pitching their value propositions to prospective candidates. Though this approach branded HR departments more dynamically, it still generally applied a one-size-fits-all strategy, not fully meeting the diverse needs of all employees.
Today, HR is undergoing a fundamental shift, transforming into a digital, predictive platform that leverages data and AI to customise the employee experience. This modern approach mirrors the targeted personalisation of digital marketing, adapting to the unique preferences and behaviours of each individual.
HR as empowerment tools for talent
Furthermore, HR is increasingly being viewed not just as a function but as a suite of tools designed to enhance the lives and productivity of employees. These tools promote continuous learning, innovation, teamwork and a sense of purpose within the workplace. By fostering an environment where employees are encouraged to develop their skills continually, organisations can maintain a competitive edge in the ever-accelerating war for top talent.
Adapting to new labour market dynamics
The labour market is rapidly evolving with hybrid and remote work setups becoming standard, enabling professionals to work from anywhere and increasingly choose freelancing for its flexibility. This shift allows them to pursue various projects and maintain a work-life balance. While a survey shows that 67% of recent graduates are confident in their skill set for the workforce, many of these young professionals are favouring roles in academia and research over traditional entry-level positions. This is fuelled by a desire for intellectual stimulation and the opportunity to make significant contributions early in their careers.
In response, HR departments are refining their recruitment strategies, becoming more selective for roles requiring less specialisation. Advanced AI technologies are replacing junior to mid-level positions, directing HR efforts towards securing top-tier talent essential for innovation and strategic advancement.
Don’t skimp on the people function
Incorporating innovative people strategies into a company is crucial to meeting the constantly changing demands of the modern workforce. HR decision makers play a key role in driving a company’s innovation. Research from McKinsey shows that companies prioritising people development initiatives at the core of their strategy see higher total shareholder returns than their competitors. As a venture capitalist, I see strong HR strategy not only as a marker of a well-run company but also as a significant predictor of its long-term success and scalability.
With constant advancements in technology, the future of HR holds many exciting opportunities. I predict that decision makers will not only leverage AI for recruitment and utilise virtual reality for training development but will also pioneer new forms of workforce engagement and performance management, integrating advanced analytics and behavioural data to refine these strategies.
This proactive adaptation to technological changes is crucial for startups aiming to stay competitive and attract top-tier talent and investment. Given the rapid rate of technological advancement, the possibilities for transforming HR into a strategic asset rather than just a support function are truly vast.
Victor Orlovski is Managing Partner at R136 Ventures
