Cost of Small Business HR Mistakes

Do you ever get the feeling you are just fighting fires or handling the so called emergency of the day? It’s more common than you think. We see a number of things happen with our clients when they are too busy running the business and don’t have time to address people issues.

We wanted to share these top 10 oversights we see repeatedly in businesses and furnish a few tools to work around them.

1. Having a poor or inconsistent hiring/selection process

Many companies are not hiring people that are a good cultural fit or hiring according to the company’s core values. Your core values should be a guiding principal in asking questions in the selection process that correlate to the core values. You might end up hiring people who are technically qualified, but they are not culturally qualified to fit your company. Additionally, there is a formula for having productive interviews and all managers should be coached and provided the tools to interview consistently which will lower bad hires and turnover.

2. Missing, vague or outdated job descriptions A good job description clearly and concisely articulates the roles and responsibilities of the position which provides a roadmap for the job posting, hiring, the onboarding process and the accountability process.

3. Lack of training and development for people managers A classic case that we see again and again is a company may promote a high performing individual contributor into a leadership role, but then not provide with them with the tools and training they need to be an effective leader of people.

4. Not having a formal performance review process for managers to review employees 40-50% of small businesses that we have worked with did not have a formalized performance review for their employees. Having a formal process in place allows employees to know that they are going to have these conversations on a scheduled basis (we recommend quarterly) and receive feedback both positive and critical on how they are performing, hold them accountable for their job performance and discuss career development goals.

5. No employee onboarding process for new hires Small business owners are moving at a fast pace and they tend to not want to spend the time to properly onboard employees. Onboarding employees integrates them into the company culture and gives clear direction and expectations from the beginning and increases retention. It can include goals that are appropriate for the first 30, 60, and 90 days. Employees who have not been onboarded correctly are much more likely to leave the company in the first year.

6. Lacking an employee handbook that’s legally compliant and updated Handbooks are important for companies even as small as 10 employees. This gives consistent direction to all managers and employees on all the company policies. If there is no handbook or it is not updated, then you don’t have proper guidelines. Employees read, sign and acknowledge they are aware of the policies in the handbook. If the handbook is not legally compliant the company opens themselves up to legal issues.

7. Lacking a formal disciplinary process for low performing employees We recommend a 4 step process: 1) coaching the employee to improve their job performance, 2) verbal warning, 3) written warning, 4) final warning or PIP performance improvement plan. All this should be documented in writing, dated and signed.

8. No exit interview process for exiting employees If a person has been a solid employee and they have chosen to leave the company, you want to do an exit interview to find out why. They can give you information you may want to use to improve the culture of your company. Sometimes an employee may want to come back to your company in the future.

9. Inconsistent filing system for employee files In our experience, about half of businesses have their employee files set up incorrectly. All I-9 forms should be kept separately in a binder. Certain government agencies are legally only allowed to see certain documents. Medical records should also be kept separately in a confidential file.

10. Not using a consistent offer letter template for new employees Many times we see offer letters that are way too long and have unnecessary information. The offer letter is a first impression so it should be professional and include only the needed information. At a minimum the offer letter should include: salary level, the reporting manager, standard office hours, hybrid office arrangement, bonus & vacation information, and a statement regarding employment at will.

If you have challenges in any of the above areas, please take a look at our HR Starter Kit which will furnish you with the proper forms and templates to solve these issues.

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The Hidden Cost of Small Business HR Mistakes

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Small and medium-sized businesses may not have the time or expertise to implement the necessary people strategies for business success. The ideas above can be easily implemented by you to help improve the performance of your employees which leads to increased employee engagement and increasing the bottom line.

We are here to help you with the people side of your business: employee engagement, retention programs, performance management, vision, and strategic plans, leadership development, selection & onboarding, compensations programs, organizational design, employee handbooks, core values, and all things HR-related.