Top 5 HR Mistakes That Small Businesses Make

I am giving a presentation today to a small business association. As all of you know, HR mistakes for any company can be disruptive or even destructive, regardless of the size of the company. For small companies HR mistakes can be amplified and have a significant effect on the potential survival of the company. As I was preparing for the presentation I thought this would make a good blog post as well. So here goes.
  1. Not Hiring the Right Person. Many small business owners hire someone just because they know them, they are a family member or they feel sorry for them. They do not have a clear definition of the job skills needed for the job or if the individual possess those skills. And because they often know the person, or think they know them, they do not conduct a background check on them. Often them may miss a “skeleton in the closet(click the phrase to see a meaning.)
  2. Ignoring Government Regulations. Many small companies are mostly or totally unfamiliar with the majority of laws that govern the workplace. Given that most federal laws cover companies as small as 15 employees there are very few things that do not apply to them. They need knowledge, but they don’t know it. (Which is why I am in the HR consulting business, btw.) Some choose to ignore regulations because they have had no trouble up to now. Well as the old AAMCO commercials used to say “You can pay me now or you can pay me later.”
  3. Misclassifying Employees. One of those laws that applies to almost all companies, regardless of size, is the Fair Labor Standards Act. Small business SCREWS THIS UP ALL THE TIME. I spend ALOT of time explaining that Salary does not equal Exempt and just because you call someone an independent contractor does not make them so.
  4. Poor Documentation. Documentation in many companies is an afterthought. In many small businesses it is non-existant. The hiring process does not get documented correctly, as in incomplete I-9s. And discipline records are almost never there or are done after the fact. Terminations are generally not supported and often result in unemployment cases being lost or discrimination suits either lost or settled.
  5. Not Rewarding Employees. Rewards are not always measured in $$$$. A good evaluation, training and communication are also rewards. In these recessionary times many small companies have taken the tack that since they cannot afford to give any raises there is no need to do a performance evaluation. In reality now is the most important time to do them. People who are afraid that they might lose their job at any time would like to know from their boss that they are doing a good job. Employees are feeling under-appreciated these days and as a result you read figures as high as 1 in every 2 employees is considering changing jobs in the next recovery. In a small company that kind of loss would be devastating.

Those are the Top 5 Mistakes that I will talk about. But there is one other thing I will tell my audience. They need to be vigilent. There are 14 or more pieces of legislation on the federal level, and who knows what is happening on the state level, that will affect business, small and large, in the employment and labor arena. All of them could have a potentially detrimental effect. To avoid this, and to have input in the legislative process, active involvement is needed.

So there you go. I would like your feedback so I can fine tune this presentation for future opportunities. Tell me what you think.

4 thoughts on “Top 5 HR Mistakes That Small Businesses Make”

  1. Great post! As I am beginning my career as an Org. Consultant with my first client this week, this is INVALUABLE information.

    The problem is, obviously, that SMB owners typically don't have the HR knowledge required to understand these regulations. Worse, some SMB owners see HR as a wasted investment and ultimately cramping their desire to get things going and the money machine churning.

    How do you recommend explaining the value of bringing in HR-thought as part of starting a small business?

  2. Jonathan, sorry for the delayed response to your question. Unfortunatly with some small business owners they will never understand the value of HR until it hits them in the wallet. So for them the best sell is fear of being sued.

    For the more progressive owners you can sell them on having the proper policies, procedures, methods, etc. to improve selection and retention of the best talent available to them

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