Do Startups Need Employee Handbooks?

When you started out, you and the management team were like family. But you’re growing now and adding new people every week it seems. Naturally, you need a central document that sets out policies and procedures on how new employees should conduct themselves, right? Besides, isn’t having a handbook a legal requirement?

Though not required, every attorney (and most HR leaders) will tell you that it’s a good idea to have one anyway. Moreover, if your business is one in which employees are exposed to physical risks (like construction or chemical manufacturing), there are health and safety regulations and procedures that absolutely need to be well communicated and understood.

Many will tell you that, without an employee handbook, you have an increased chance of getting sued when an employee misbehaves and/or you have to fire one. The thinking goes, when you terminate someone (somehow, “terminate” is viewed as a nicer way of saying “fire”), you can point to a list of pre-ordained reasons for termination and the process that was followed, thereby heading off any wrongful termination or discriminatory treatment claims. However, companies don’t get sued for wrongful termination because they don’t have an employee handbook. Usually it’s because they do have one but didn’t follow the prescribed rules or applied them inconsistently across the organization.

Below are some tips that can help enable you to write a sensible employee handbook:

Don’t have your attorney write your handbook. Would you ask a lawyer to design your company’s culture or even your corporate logo? So why would you have one write your handbook, arguably the embodiment of your company’s culture? In fact, the handbook is a great place to reinforce your company’s core values. Have fun with it and let the language reflect who you are. Then, to be safe, get counsel to review it after you’ve written it the way you want.

Make it readable and human. Some handbooks are longer than War and Peace and are just as fun to read. Ford Motor Company’s Code of Conduct Handbook is 60 pages (versus seven pages for Zappos). If you need to spell out every situation and dictate how your employees should behave, you really need to think about who you are hiring. Ford’s even has an entire section dedicated to why employees should refrain from money laundering. Unless committing felonies is an essential function of the job, you can cover most situations with a general statement requiring that all employees use good judgment and treat fellow employees with respect and that failing to do so can lead to termination.

Non-Compete, Non-Disclosure and Assignment of IP agreements – gotta have them. However, these are documents that your employees can sign separately from an employee handbook.  In fact, we suggest that they are included as attachments with an offer letter along with acknowledgment of employment at-will.

Lose the “corrective action” section. This is the section in which you outline the four-step process that must be followed in order to terminate an employee. The silly truth is that “corrective action” policies are not meant to be corrective at all. They are usually followed as a formality when a manager has already decided to fire an employee. If an employee isn’t performing to the level expected, real-time feedback and coaching (read: good management practices) should be used to improve performance. And if performance doesn’t improve after a reasonable period of time, it’s not likely to be a surprise to the employee (or anyone else for that matter) when it’s time to separate. Besides, if a now-former employee is angry enough, chances are s/he will find a way to sue you regardless of what a handbook says. Better to leave this out altogether.

If you write it, live it – and apply its policies consistently in all situations, across all employees. As I mentioned earlier, companies don’t get in trouble because their policies are deficient. They get into trouble when they don’t follow their own rules. If you create a culture around a set of shared values that is reinforced daily with action, your employees won’t need a handbook to know how to act. This is a startup, after all, and everyone should act as if they are the owner (because they are!).

For more useful tips on getting your venture started the right way, check out JumpStart’s helpful Entrepreneur Toolkit. And don’t forget to sign up for JumpStart for Entrepreneurs, our monthly newsletter giving you more helpful advice along with local success stories and lists of local funding/networking opportunities.