Common HR Mistakes Every Small Business Owner Needs to Avoid

Eric Mochnacz
April 25, 2022

As a small business owner, you may feel like you have responsibility for managing every aspect of your business.  As you attempt to scale, while keeping costs low, you think you can manage the different functions of your small business without extra help.  You find yourself making key business decisions while also being pulled into finance, administration and human resources initiatives and problem-solving because you don’t have members of your team who can manage those functions independently.  However, with that lack of focus comes a greater chance for mistakes.  We understand that every mistake has an impact, but HR mistakes can be costly and impact the growth, scalability, and longevity of your business.  In this blog, we will review some common HR mistakes small business owners make and how working with Red Clover as your human resources partner can help you avoid them.

Why Small Businesses Need Great HR

As a small business owner, you may think you don’t need HR just yet.  Generally speaking, unless you’re at a 50 headcount, we wouldn’t recommend hiring a full-time HR resource.  But, if you plan to grow beyond one or two employees, having devoted human resources assistance is essential to business growth.  The right HR firm helps you build a strong human resources foundation to support growth goals, create a values-driven employee lifecycle experience, and establish your company as an industry competitor and employer of choice.  They can often do this at a part-time capacity with mindfulness to budget.  Even with the cost, it’s worth it to make the early investment in good HR, rather than making a late in the game investment in employment lawyers or full-time HR because you’ve made key mistakes that are impacting your business’s viability, your reputation, and your company’s bottom line.

Top 5 HR Mistakes Small Business Owners Are Making and How to Avoid Them

1. Poor Onboarding Procedures

How an employee feels welcome and integrated into the organization on their first day and beyond is critical to their long-term success with your small business.  First impressions are everything, so if a new employee’s first day is poorly planned, you may lose them before they have the opportunity to contribute meaningfully to your small business.  Also, an effective onboarding plan spans the first 30, 60, and 90 days of an employee’s tenure – with goal-setting opportunities and devoted management and HR check-ins – to provide ongoing support.  

A common mistake small businesses make is they don’t devote time to developing a thorough onboarding plan for new team members.   A poor onboarding process is one without any organization or structure.  An employee shouldn’t show up to their first day of work without access to their emails and other tools they need for success.  An effective onboarding program includes a detailed schedule, outlining meetings with HR, the new employee’s manager, and other key stakeholders.   An effective onboarding plan outlines ongoing expectations for the new employee’s first three months.  

Avoid costly onboarding mistakes (and potential for quick employee turnover) by entrusting the development and implementation of new employee onboarding to experts at interim, outsourced HR. 

2. Failure to Have an Effective Recruiting Process

Among the “Great Resignation”, small business owners have found themselves trying to find the right talent in a competitive and complex job market.  To be successful in your recruitment efforts, you need an effective, innovative recruitment process.  Small businesses, in a rush to hire people, don’t develop a thorough vetting process to truly determine candidates’ knowledge, skills, experience, and ability to be successful in the position.  Failing to have an effective recruiting process leads to mishires, and terminating and replacing employees comes at a cost.

On the other hand, some small business owners develop recruitment processes that are too thorough.  In an attempt to be fully confident in your hiring decisions, you have candidates meet with a number of trusted individuals throughout the organization over long periods of time.  In the current fast-paced job market, recruitment processes need to be optimized to thoroughly vet candidates but also move quickly towards a hiring decision.  In this job market, you will lose candidates if you require them to sit through unending interviews without feedback or an end in sight.

Working with a firm like Red Clover, with direct experience in recruitment process outsourcing, helps your small business develop effective, scalable recruitment practices mindful of candidate experience that also result in quick hiring decisions you can be confident in as you build your team.  We also help you bring innovative, progressive approaches to your interview process by integrating DISC assessments and behavioral interviewing theory into your recruitment efforts.

3. Inadequate Training Programs in Place

One way small businesses struggle to retain talent is by not offering adequate training to their current employees.  If you have a committed workforce, one way you can keep them is by investing in their ongoing professional development. As a small business, you probably struggle with paying wages competitive with your larger competitors. Investing long-term in employee training and growth is an effective strategy to retain your skilled talent when you are unable to maintain pace with what your competitors are paying.  Employees want to be paid well, but they also want longevity at a company.  If you demonstrate that commitment to them, through an ongoing commitment to professional development, they will demonstrate commitment in return.  

Your HR partner helps you avoid this mistake by developing tailored learning solutions for your specific workforce.  Skilled HR practitioners leverage their experience in organizational design to complete a comprehensive review of your workforce, developing job descriptions and career paths to inform and guide the learning and development plan.  They complete salary benchmarking to build compensation structures connected to career development objectives.  Your HR resource also communicates the new learning opportunities to your workforce, manages the implementation, and evaluates its success with an eye on continuous improvement.

4. A Nonexistent or Outdated Employee Handbook

When a small business is trying to establish itself and build its workforce, one mistake you may make is thinking you don’t need an employee handbook for one or two employees.  However, it’s essential you establish the policies to which you will hold your workforce accountable.  Your HR consultant engages with you and other leaders in the business to understand your approach to elective benefits like PTO and remote work but also guarantees you understand and include required policies, like statutory anti-discrimination and harassment policies.  

It’s easier to have the conversations about policy in the infancy of your small business and adapt and develop the policies as you grow, rather than find yourself in a situation where you have grown quickly without the policy structure provided by an HR-created handbook.  We’ve worked with a number of small business clients who urgently partnered with us because they were attempting to add structure to a rapidly growing workforce where there hadn’t been any.  This required major adjustments and clear communication in order to communicate these policies and changes effectively.

5. Not Having a Dedicated HR Person

Again, as a small business, you may not need a dedicated, full-time HR resource, but in order to avoid common HR mistakes a business makes in its infancy, you want a dedicated human resources partner.  Red Clover has direct experience working with small businesses and startups as they grow, and we partner directly with employers to establish a strong, people-focused foundation.  Our team brings our shared years of professional experience to offer our expertise as a small business’s outsourced, fractional HR support.  Are you a small business owner in need of expert HR support?  Reach out!

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