hr problemsA wise old entrepreneur once told us, “The second person you hire will be your HR Director!” When we said, “Why is that?” he said, “By that time, the first one will have personnel problems!” Although he was being facetious, his point was well taken. The company culture itself can cause personnel problems that can be avoided if startup entrepreneurs knew how to hire and had the right attitude, practices, and compensation systems in place.

Should Startups Hire a Human Resource Manager?

We had a client who had a great idea for a new software application. It was going to revolutionize the industry. He hired a new CEO from a big company hoping to impress his investors. But even before they had established a positive cash flow, the CEO thought the first order of business was to set up personnel policies and procedures, and a retirement plan. Shortly thereafter, their two employees lost their jobs …due to lack of sales!

There’s no question that your business is dependent on human resources. After all, you’re hiring humans as your primary source to get the job done. They represent your company and solve your growing list of challenges. They have to be encouraged, inspired, empowered and engaged. But we think many startups put too much faith in the HR department to deliver on those requirements.

When your business is new, and you can hardly pay your bills, the last thing you need is more overhead. In those fragile early days, your success is based on having the fewest number of employees required to get the job done. And that job is sales. Everything else, except for accounting and quality control, can be and should be outsourced.

We have seen startups who prematurely hired an HR Director for their first few people to talk to when they had personnel problems. Guess what? The staff spent too much time discussing their problems! And the HR people they hired were able to justify their jobs with something they thought was more important than sales. It wasn’t. They folded! It was sales that paid their check and the checks of the employee with the problems. Sometimes it is better to let folks work out their difficulties on their own.

Outsourcing the HR Department

There’s a time and a place to have an HR department and it’s no sooner than you can afford to pay for professional people to manage your human resources and compliance. Meanwhile, we advise our startup clients to consider HR outsourcing. Most big legal firms have a lawyer who specializes in such matters. Know the rules and hire the experts when you need them. Then, focus on sales!

When you make sales the backbone of your entrepreneurial culture, you use the best hiring practices to look for and hire people who have the attributes that will increase sales and reduce personnel problems. Of course, you have to walk the talk and provide the work environment that will allow that culture to thrive. We believe all companies only have two divisions: Sales and Sales Support. If you’re not in Sales, your job is to support sales no matter what your specialty.

Starting the Entrepreneurial Culture

Most large companies have stifled creativity by enforcing unnecessary levels of CYA compliance. This can actually create personnel problems and HR can become a self-fulfilling prophecy. Make sure your startup has the entrepreneurial culture. That culture starts with you as the owner, not with your HR people.

There’s no question that HR can be a big help in a big company, but in a small company, especially in a startup, it can take your eye off the ball, which is Sales! HR is not some magical pill you can take to solve your personnel ills. Take with caution. And use only as directed!


Who We Are

Michael Houlihan and Bonnie Harvey Barefoot Wine Founders

Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.

Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.

They offer their Guiding Principles for Success (GPS) & Shelf Smarts courses to help consumer product brand builders achieve success. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.

Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular business site at

To make inquiries for keynote speaking, trainings or consulting, please contact