Human Resource Management Transformation in The
Digital Era: Innovations and Challenges In Startups
Nursyam Anwar 1, Annisa Zhalila Razak2, A Fadel Muhammad 3, Sukiman4, Hamsyah5
1
Universitas Sulawesi Barat, 2Universitas Hasanuddin, 3Universitas Padjadjaran, Universitas
Bale Bandung4, 5Universitas Sulawesi Barat
3
[email protected] [email protected],
[email protected] Abstract
The digital disruption era has significantly impacted startups, requiring them to adopt innovative
Human Resource Management (HRM) strategies to remain competitive. This study examines HRM
technology adoption, including AI-based recruitment, cloud-based HRIS, and digital collaboration
tools, and the challenges that hinder their full implementation. Despite the benefits, budget
constraints, lack of managerial support, and low digital competencyremain major obstacles. Using
a qualitative descriptive approach, data were collected from Indonesian startups through in-depth
interviews, observations, and document analysis. Findings indicate that startups with clear digital
transformation roadmaps, strong leadership engagement, and structured employee training
programs are more successful in integrating HRM technology. However, many startups still rely
on manual HR processes, limiting efficiency and innovation. This study highlights that HRM
should be a strategic function rather than an administrative task, focusing on technology-driven
efficiency, digital upskilling, and cultural adaptation. To ensure sustainable growth, startups
must prioritize digital innovation, workforce development, and managerial commitment in their
HRM transformation.
Keywords: HRM innovation, digital transformation, startup management, AI in HR, cloud-based
HRIS, workforce development.
1. INTRODUCTION
In the era of digital disruption, business dynamics have undergone significant
changes, particularly in the startup sector. Startups are required to quickly adapt to
technological advancements, shifts in consumer preferences, and market trends to maintain
their competitiveness in an increasingly fierce business landscape. One crucial aspect that
supports this adaptation is human resource management (HRM). Innovative and responsive
Human Resource Management (HRM) plays a key role in creating a work environment
that is adaptive, creative, productive, and prepared to face challenges from various
directions.
On the other hand, digital disruption has opened vast opportunities for companies
to implement innovations in various areas, including HRM. Technologies such as big data,
artificial intelligence (AI), and cloud-based management systems have transformed how
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organizations recruit, train, evaluate, and retain employees. However, the implementation
of these innovations is not without challenges, especially for startups that are characterized
by dynamism yet constrained by limited resources. Sutrisno (2018) states that the pressure
to undergo digital transformation demands startups to accelerate the adoption of more
modern and integrated HRM systems. This transformation involves not only technological
aspects but also restructuring the work culture to foster an innovative environment. Amid
this innovation-driven environment, Rahmawati and Nugroho (2019) highlight that budget
constraints, lack of managerial support, and limited technological capabilities remain major
barriers to optimizing HRM in startups.
Previous studies, such as those conducted by Prasetyo (2020), emphasize a
significant gap between the need for innovation in HRM and its actual implementation.
This gap becomes even more evident when startups attempt to implement digital
technology in HR management but often remain trapped in conventional methods that are
less effective. For instance, in the recruitment process, many startups still use manual
systems instead of AI-based technology, which could streamline and accelerate the
selection process. Lestari (2017) also stresses that while innovation is a crucial factor in
enhancing competitiveness, many startups have not fully integrated it into their HRM
systems, resulting in little to no significant improvement in organizational performance
despite adopting new technologies.
Furthermore, Hadi (2018) argues that the paradigm shift in HRM in the digital era
requires a new approach that is more flexible, adaptive, and focused on sustainable human
resource development. This shift demands strategic thinking in designing HRM policies
and practices to align with the needs and characteristics of startups, which tend to evolve
rapidly. However, challenges arise when companies lack a clear roadmap to integrate
technology and an innovation-driven culture into their daily operations. Wulandari (2020)
adds that digital competency development among employees is a crucial aspect that is
often overlooked, even though it significantly determines the success of technology
implementation. Without adequate competency support, the technologies implemented will
not provide a substantial positive impact on productivity and efficiency.
In the context of digital innovation, Firmansyah (2019) finds that although
technology adoption has been widely implemented across various sectors, its application in
HRM within startups remains minimal. Most companies focus solely on using technology
for operational purposes without considering its integration into HR management
strategies. This indicates an imbalance between technological utilization in production or
marketing functions and in human resource management. Dewi (2018) highlights a
significant gap between theory and practice in the implementation of HRM within startups.
This gap is particularly evident in the adaptation process to technology-based HR
management systems, which are often perceived as an additional burden rather than a long-
term investment that could be beneficial.
The complexity of these issues is further reinforced by the findings of Sari and
Putra (2021), who identify that HR transformation in the digital disruption era faces not
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only technological challenges but also structural and cultural obstacles within
organizations. They discover that the lack of strategic support from top management and
the incomplete integration of technology with managerial practices are major barriers to
establishing an effective HRM system. Many startups struggle to optimize human
resources as their primary assets because they still perceive HRM as a purely
administrative function rather than an integral part of business strategy.
Observing this phenomenon, Mahendra (2022) states that innovative strategies in
HRM implementation must be tailored to the unique characteristics of startups. Startups
with lean structures and dynamic work cultures require a flexible HRM approach while
maintaining a clear direction toward long-term business goals. This study reveals the
urgent need to develop an HRM framework capable of addressing digital disruption
challenges holistically, emphasizing not only technological adoption but also skill
development, mindset shifts, and the formation of an organizational culture that is adaptive
to change.
Although some studies have addressed this topic, there is still a lack of literature
that comprehensively examines how innovation and challenges in HRM implementation
can be effectively integrated within the startup context. Existing research generally focuses
on one aspect, such as technology or competency development, without thoroughly
analyzing the interrelation between these elements. Therefore, this study aims to delve
deeper into the dynamics of innovative HRM implementation, the challenges faced, and
the strategies that can be applied to bridge the existing gap. With a comprehensive
understanding, startups are expected to optimize their HR management to face competition
in the digital disruption era more effectively, efficiently, and competitively.
2. IMPLEMENTATION METHOD
This study was conducted in several startup companies in Indonesia that have been
operating for at least three years, employ at least 20 personnel, and have adopted
technology in human resource management (HRM). The selection of subjects was carried
out using purposive sampling to ensure data relevance to the research focus. The study
applied a qualitative descriptive approach, utilizing primary data from in-depth interviews
with HR managers, company executives, and employees, as well as secondary data from
company documents and reports. Additionally, participatory observation was conducted to
directly examine HRM dynamics and employee interactions in the workplace.
The collected data were analyzed using thematic analysis techniques, involving
steps such as data transcription, initial coding, theme identification, theme review, and
theme naming. This structured approach allowed for the systematic organization of data
and the extraction of meaningful conclusions. To ensure research accuracy and reliability,
source and method triangulation were applied by cross-verifying information from
different informants and comparing data obtained through interviews, observations, and
document analysis. This step was taken to improve the credibility and validity of the
findings.
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By implementing this methodological approach, the study aims to provide
significant insights into the application of innovative HRM practices in startups within the
digital disruption era. Furthermore, it seeks to offer practical recommendations to help
startups develop adaptive and effective HRM strategies, ensuring they remain competitive
and responsive to the rapidly evolving business landscape.
3. RESULTS AND DISCUSSION
Result
This study reveals various findings related to the implementation of innovative Human
Resource Management (HRM) in startup companies during the digital disruption era. The
data were collected through in-depth interviews, participatory observations, and document
studies conducted on five startup companies in Indonesia that met the research criteria.
1.1. Application of Technology in HRM
Currently, most companies have adopted technology to support human resource
management (HRM). One of the widely used technologies is the cloud-based Human
Resource Information System (HRIS). This system facilitates the management of various
administrative processes, such as attendance recording, salary calculation, and employee
leave management, in an efficient and integrated manner. For instance, PT Innovatech has
successfully implemented an AI-based recruitment system that has proven to accelerate the
employee selection process. This technological implementation enables the company to
expedite recruitment by up to 40% faster compared to conventional methods that require a
longer time for candidate screening and evaluation (Firmansyah, 2019). However, not all
companies have transitioned to technology-based systems. Two companies still rely on
manual methods for their HR management, which can lead to several issues, such as
slower processes, higher error rates, and reduced efficiency in employee data processing.
This situation highlights the importance of digital transformation in HR management to
improve operational effectiveness and accuracy.
1.2. Implementation Challenges
In the process of implementing technology in human resource management, companies
face several challenges. Research by Rahmawati & Nugroho (2019) revealed that the three
main challenges often encountered are limited budgets, insufficient managerial support,
and low digital competence among employees. Small companies, particularly those with
limited funding, often postpone technological investments due to the perceived high costs.
This budget constraint becomes a significant barrier to digital transformation, even though
technology can enhance operational efficiency in the long run. In addition to financial
constraints, inadequate managerial support also hampers the implementation of new
systems. When management does not fully support or understand the benefits of the
technology to be implemented, the adaptation process becomes slower and more prone to
failure. Another factor is the low digital competence among employees; many do not
possess the necessary skills to operate technology-based systems, thereby requiring
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additional training that demands time and financial investment. On the other hand, the shift
towards a more flexible work culture also presents its own challenges. Wulandari (2020)
noted that the transition from a traditional hierarchical work system to a more flexible
system often causes confusion among employees, especially those accustomed to
conventional work structures. Adapting to this change requires effective communication
and ongoing support to help employees adjust to the new work environment. Overall, these
challenges underscore the importance of meticulous planning, full managerial support, and
the enhancement of digital competencies to ensure the successful implementation of
technology in HR management.
1.3. Employee Competency Development
The development of employee competencies, especially in the digital domain, is a critical
factor in supporting technological transformation in the workplace. However, this study
indicates that only three out of the five companies actively conduct digital training for their
employees. For example, PT StartUpPro has implemented a competency development
program by holding monthly workshops focused on enhancing technological skills. This
initiative has positively impacted employee productivity, making them more proficient in
utilizing technology to support their daily tasks (Hadi, 2018). Conversely, the other two
companies experience stagnation in competency development due to a lack of training
programs. This inactivity risks reducing the company's competitiveness, hindering
adaptation to technological changes, and causing a skills gap among employees. These
conditions affirm that investment in digital training and skill development is crucial to
ensure that employees can adapt to evolving technologies, thereby keeping the company's
operations efficient and competitive.
1.4. Changes in Work Culture and Mindset
A shift towards a more flexible and innovative work culture is an essential component of
modern organizational transformation. Based on the study’s findings, 60% of respondents
stated that their companies have experienced a transition towards a work culture that is
more adaptive to technological developments. However, the process of adapting to these
changes does not always proceed smoothly. For example, PT TechUp implemented a
remote work system to enhance flexibility, but in its early stages, the company experienced
a decline in performance due to a lack of effective communication among teams.
Employees encountered difficulties in coordinating, which affected operational efficiency.
Recognizing these issues, PT TechUp conducted regular evaluations and decided to adopt
various digital collaboration tools, such as Slack for instant communication and Trello for
project management. The use of these tools has proven to improve inter-employee
coordination, accelerate workflow, and help teams better adapt to remote work systems
(Mahendra, 2022). These findings confirm that changes in work culture require appropriate
technological support, effective communication, and commitment from all parties within
the company to create a productive and collaborative work environment. Adapting
employee mindsets is also key to ensuring a smooth transition to the new work culture and
achieving optimal outcomes.
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1.5. Strategies to Overcome Barriers
Companies that successfully overcome various barriers in the digital transformation
process generally have a clear roadmap to guide their implementation steps. This roadmap
includes structured strategies focused on three main aspects: the involvement of top
management, the allocation of a dedicated technology budget, and employee competency
enhancement programs. First, the involvement of top management plays a crucial role in
driving change. When company leaders are actively engaged, digital transformation
initiatives tend to gain broader support across the organization. Strong leadership helps
shape an adaptive and innovative work culture. Second, the allocation of a dedicated
technology budget is a critical step to finance various technological needs. For example,
PT Innovatech demonstrated its commitment by allocating 15% of its revenue to
technology development in HR management. This investment allows the company to adopt
modern systems, accelerate operational processes, and enhance work efficiency (Sari &
Putra, 2021). Third, employee competency enhancement programs are necessary to ensure
that the workforce can adapt to new technologies. Structured training reduces resistance to
change and strengthens employees’ abilities to use the implemented systems. Overall, the
implementation of these strategies not only enables companies to overcome barriers in
digital transformation but also creates sustainable competitive advantages in an
increasingly dynamic market.
Discussion
2.1. Integration of Technology and HRM Practices
The research findings confirm previous studies by Dewi (2018) that there is an imbalance
between the use of technology in operational lines and HR management. Successful
startups are those that not only focus on operations but also integrate HRM as an integral
part of their business strategy. This is in line with Mahendra’s (2022) assertion that
effective HR management requires a holistic approach that combines technology, skill
development, and an adaptive work culture.
2.2. The Role of Top Management in Digital Transformation
The lack of support from top management remains a significant barrier. As noted by Sari
and Putra (2021), the active involvement of company leaders is necessary to create an
environment conducive to transformation. Companies that involve management in
decision-making related to HRM are more successful in adopting technology and driving
cultural change.
2.3. The Gap Between Theory and Practice
These findings reinforce Prasetyo’s (2020) argument regarding the gap between the need
for innovation and the implementation of HRM practices. Many companies acknowledge
the importance of innovation but remain trapped in conventional practices. This is evident
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in companies that have not yet utilized AI in the recruitment process, despite its potential
to significantly reduce selection time.
2.4. Employee Competency Development as a Long-Term Investment
Lestari (2017) emphasizes the importance of competency development to support
innovation. The findings of this study show that companies investing time and resources in
employee training experience increased productivity. PT StartUpPro, which regularly
conducts training, has improved work efficiency by 25% over the past six months.
2.5. A Digital Transformation Roadmap as the Key to Success
Mahendra (2022) states that startups require a clear roadmap to integrate technology into
HRM. This study demonstrates that companies with long-term plans are better prepared to
face changes. PT Innovatech, which has a five-year strategy for technology development,
has proven to be more adaptive compared to companies lacking such plans.
4. CONCLUSION
The findings of this study emphasize the importance of technological innovation in
Human Resource Management (HRM), particularly in startup companies navigating the
challenges of digital disruption. While many startups have begun integrating cloud-based
HRIS systems, AI-driven recruitment, and digital collaboration tools, the study reveals
that not all companies have fully transitioned to technology-based HRM practices. Key
challenges such as budget constraints, lack of managerial support, and limited digital
competence among employees continue to hinder the full-scale implementation of digital
HRM. Additionally, adapting to a more flexible and innovation-driven work culture
remains a struggle for some organizations, reinforcing the need for structured change
management and digital upskilling programs.
To ensure successful digital transformation in HRM, startups must adopt a strategic
roadmap that includes strong top management involvement, dedicated investment in
technology, and continuous competency development for employees. Companies that
actively train their workforce and implement structured technology adoption plans are
more likely to remain competitive and responsive to market changes. The study concludes
that HRM should not only be viewed as an administrative function but rather as a core
component of business strategy, driving productivity, efficiency, and long-term success.
By prioritizing innovation, digital competency, and a supportive corporate culture, startups
can bridge the gap between technological adoption and effective HRM implementation,
ensuring sustainable growth in the evolving digital economy.
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