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Six Big HR Mistakes that Small Businesses Make

Small business owners tend to wear many hats and manage multiple roles in their business, and often human resources falls by the wayside or isn’t a priority. But even if your small business is thriving, you can’t afford to ignore the importance of HR in maintaining that success.

While very small businesses probably can’t support — and likely don’t need — someone devoted to HR full-time, a little goes a long way when it comes to investing in HR. Not paying enough attention to this area can result in productivity loss and turnover — or even a lawsuit.

Small business owners and managers need to be sure to avoid these big HR mistakes:

1. Not having updated job descriptions

Job descriptions are an inexpensive and quick way to help everyone in the organization understand their roles. I know what you’re going to say — in your small business, everyone needs to pitch in, so you can’t limit people with a detailed job description. I’ve worked with Mr. “That’s Not in My Job Description” too, and I understand this concern; however, it’s outweighed by the bigger issue of having employees who don’t have well-defined roles. Job descriptions are the backbone of HR.

How can we recruit, hire, and train if we don’t have a good sense of the tasks involved in each job? More importantly, how can we measure the performance of our employees if we don’t have a written description of what they do? In a prior post, I wrote about how a lack of job descriptions led an experienced worker to such high levels of burnout that she was on the verge of quitting. It would have been a huge loss to the company if that valuable employee had left.

2. Not having a staffing plan

The number of people hired each year in a small business is usually low, so it’s no surprise that many small organizations don’t think much about hiring until they actually have to. But it can be problematic when there’s little time — and consequently not much thought — devoted to each hire.

In a company lacking job descriptions, set requirements for a job, and a set protocol for interviews, the accuracy of hiring decisions is quite low. Formalizing hiring policies by having updated job descriptions (see #1), using quality recruitment outlets, and creating a set of established interview questions can greatly improve hiring accuracy. This is even truer for promotions. If your company doesn’t have a succession plan in place for higher level positions, an unexpected quit may create a lot of chaos.

3. Not having formal performance appraisals

Giving performance feedback to employees can be difficult even in the best of situations. For the manager of a small business, where employees are often a tight-knit group and have worked together for years, it can be downright daunting. But not documenting performance problems through regular performance appraisal can lead to a host of problems.

If you’re not identifying and correcting employee missteps, your customers suffer, and the employees who have to pick up the slack for underperformers are likely to get disgruntled and perhaps leave. You also can’t overlook the importance of letting solid performers know that you recognize their efforts and that you’ve documented that recognition. What better way to truly plan for high-quality promotions (see #2)?

Proper documentation also protects you. In the rare event that an employee you’ve discharged wants to argue illegal discrimination when you know that person’s dismissal was truly due to poor performance, the paper trail from annual performance appraisals provides evidence and support for your case.

4. Not following compensation laws

Speaking of lawsuits, one area in which many small businesses struggle is understanding and keeping up with employment legislation. While some businesses are too small to be covered by many of the equal employment laws, compensation legislation applies to nearly every business. Employers, whether knowingly or not, may violate the Fair Labor Standards Act rules on overtime, standards set for Workers Compensation, and IRS rules on employee classification. These violations can leave an organization highly vulnerable to penalties under the law.

5. Not having written policies

Communication can seem like a no-brainer in a small business because the owner and managers can easily and regularly talk face-to-face with every employee. Yet if you ask most small business employees about company communication, you’ll quickly see that just because it happens, that doesn’t mean it happens the way it should.

A lack of appropriate and formal communication can really begin to hurt employee morale and engagement, particularly when decisions are made differently across employees. If rules for sick leave, vacation time, discipline, and workplace conduct aren’t formalized, this can lead to employees feeling unfairly treated. Written policies, like job descriptions, give your employees a sense of security in knowing what you expect of them.

6. Not having a go-to person for HR concerns

No matter the size of your firm, someone should be designated to handle personnel issues. At a certain point, you’ll need someone in an HR role full-time; the Society for Human Resource Management suggests this for organizations with 25 employees or more. Even if you’re not there yet, having one person who is designated as the HR contact provides employees a go-to person for their questions.

If a trained HR manager can address employee needs in a skilled way, this can benefit the company in terms of productivity, employee retention, and avoidance of legal problems. Imagine a scenario in which new employees are being sexually harassed, but the company has no investigation policy and no HR representative. In this case, unless the employees feel immense trust with a manager, this situation is likely to cause turnover of good employees and retention of the person doing the sexual harassment.

So what’s a small business to do if they don’t have the HR skills that they need? First, if my HR consulting services can help, give me a call. Second, sign up for HR Boot Camp—sessions are open for both July 12 and August 27. You can read more about Boot Camp here. Finally, check back tomorrow for my next post on ways to improve your small business HR practices.

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