6 People Strategies for Startups in India

Thousands of new companies are launched in India every year, making it the third-largest hub of startups in the world, according to the National Association of Software and Service Companies in New Delhi.

But amid planning for the new company's growth and business success, founders don't always consider their people strategy in the early years. This could be a mistake, experts say, as having a people plan helps avoid hiring mistakes and creates a positive culture for the company as it grows.

Successful company founders say there are six strategies that entrepreneurs should embrace to develop an effective people management plan for a new company's initial years.

1. Hiring: Freelance Recruiters Can Help

Founders typically rely on personal references and connections to make their first few hires. However, as the business expands and the company needs the next group of employees, founders may not have the time or ability to scan jobs sites or use other tools to find people.

At this stage, consider contracting with a freelance recruiter, said Gaurav Agarwal, co-founder of 1mg Technologies Pvt., a digital health care platform with headquarters in Gurgaon. A freelance recruiter should be someone not attached to an agency who can understand the company's requirements to help find the right talent.

Why a freelance recruiter and not a staffing agency? Candidates being recommended by staffing firms typically are actively looking for jobs, so their acceptance rate usually isn't high, Agarwal said.

Once your company requires multiple new hires, he added, that's when you should consider hiring either a full-time or part-time internal recruiter.

2. Ideal Initial Team: Look for Risk-Takers

Companies that are just starting out may not be able to hire people who graduated from the best schools or who have a ton of experience or skills. But that's OK, company founders say.

"You'll have better luck finding highly motivated employees who weren't from the best of colleges and have limited experience but are willing to work really hard to prove their mettle," said Swati Bhargava, co-founder of CashKaro.com, a coupons and cashback site with headquarters in Gurgaon.

Look for candidates who have the right attitude to build something, who are self-starters, and who can work well in chaos or an unstructured environment, she said.

Bhanu Chopra, founder of RateGain, a software applications maker in Noida, added that "If you are working for a startup that is trying to change the world, you need people who have that risk-taking drive."

3. Retaining Staff: Make Them Mini CEOs

All companies, big and small, struggle with getting good talent to stick around for the long term. There are no hard and fast rules that work every time.

In the initial years, startups don't have a lot of money to motivate employees to stay. The next best tool for founders is to give employees a sense of ownership. Let them know how they are helping build the company so they become invested in the company's growth.

"Give them a work culture that encourages innovation and disruption," said Adhil Shetty, Chennai-based co-founder of BankBazaar.com, an online marketplace for loans and credit cards.

As the company grows, founders should be delegating power and decision-making among staff.

Another tip to avoid employee churn: Coach managers to be clear about what they're hiring someone to do. This helps avoid dissatisfaction later with an employee's performance as well as disenchantment by the employee with the company. Also, steer clear of candidates who have switched jobs frequently in the past.

4. Values: Begin on Day One

Big companies are always talking about values that define what they stand for. This is equally important for companies that are just starting out, as it encourages founders to look for new hires who fit the company's values and culture.

When there is confusion over what the company stands for, it leads to disagreement and founders end up "fighting among themselves," said Gaurav Malhotra, an investor in Delhi who works with health care startups. He advised founders to seek help from consultants or investors when writing these values.

5. After Funding: Go Easy on Compensation

Once startups receive funding from venture or private-equity investors, some use that money to hire candidates from top colleges or those who are highly coveted and thus demand high salaries. In recent years, this has driven compensation out of whack. So now, while a company is in its infancy as well as during times of economic or investment slowdown, investors often request justification for the high salaries. Be prudent before agreeing to a salary that's higher than the rest of the team members'.

[SHRM members-only toolkit: Introduction to the Global Human Resources Discipline]

6. On Firing: Be Quick and Respectful

Chopra is a big believer in the wisdom of American management guru Jim Collins, who said that to get somewhere, it's important to get the right people on your bus and the wrong people off it. For young companies, an employee who isn't performing well or who doesn't fit the company's culture is the wrong person on the bus and should be taken off as soon as possible.

"I would encourage people to act quickly, but it's very important to manage your steps on how you do it," Chopra said. While it isn't easy to fire someone and it's usually costly to refill that position, it's imperative to follow through. "You have to do things that are in the long-term best interest of the company," he said.

Once the company reaches a certain scale—at least 50 employees—it makes sense to hire professionals to fulfill the human resources functions. "As the business grows, it is extremely important to bring in the experts and focus on building the right talent through a professionally managed and robust HR organization," said Ritesh Agarwal, Gurgaon-based founder of Oyo Hotels & Homes, a hotel chain with a presence in more than 18 countries.

Shefali Anand is a New Delhi-based journalist and former correspondent for The Wall Street Journal. You can follow her on Twitter.