Top HR Mistakes Small Businesses Make & How to Avoid Them

Phil HR 20 Feb 2017


Managing or being a part of a small business can be hugely rewarding.

But when you’re focusing your efforts on transforming your business from baby to behemoth, it can be easy to overlook the minor, less glamorous details that can put giant cracks in its foundations if left unchecked.

Today on the RotaCloud blog, we’re discussing the top HR mistakes small business make, as well as offering some tips on how to avoid them.

Whether it’s hiring friends and family for important roles or forgetting to properly vet your new recruits, minor HR blunders can bring a new business to its knees quicker than you can say "startup".

Keep this list close to hand if you’re in the early stages of business, and refer back to it once you get going to avoid the HR pitfalls that claim many a small business before its time.

Not Having a Dedicated HR Manager

It’s fine for you and your team to take on different HR-related tasks during your business' formative months or years, doing them only as and when required.

But before long, the business grows, and those same tasks become far more numerous and time-consuming.

When that happens, who’s going to be keeping a record of things like staff absences and ensuring that pay goes through on time? Who’s in charge of planning your employee benefit program or disciplining staff if they put themselves or the business at risk?

These problems can escalate quickly and in some cases even threaten the future of the business itself.

If one of your employees feels that their coworker’s behaviour constitutes sexual harassment and takes the case to court, for example, could you honestly say that you did everything in your power to protect them?

Even if it’s a case of outsourcing the role until you’re big enough to make it a full-time position, having a dedicated HR manager (or at least an HR expert) is an absolute must.

Hiring People You Know

It’s common for small business owners to turn to friends and family when trying to fill roles in the company.

Regardless of her head for figures, however, employing your Auntie Susan to manage your finances could spell disaster for your business — not to mention the end of those great roast dinners she used to invite you over for.

Working with friends and family can lead to all sort of problems, ranging from tardiness (“I’m her brother — she won’t mind if I’m a little bit late!”), to sapping office morale as your other staff become paranoid that your friend or family member is getting preferential treatment.

Your friend, on the other hand, may feel that the job is their ticket to the easy life. After all, how could working for the same guy they do shots of vodka and play FIFA with on the weekend mean anything but good times?

However, there’s nothing wrong with hiring friends and family, provided that they’re genuinely right for the role and are able to keep business and personal relationships separate between the hours of 9–5.

Before making a friend a part of your business, ask yourself these questions:

  1. If their anonymous CV were dropped on my desk, would I still hire them?
  2. What would happen if, further down the line, I had to fire them?

If you’re confident that your friend or family member is right for the job — and that your relationship could withstand a heavy blow if things turned sour — then hire away. Just be sure to hold them to the same standards as the rest of your team.

Check out The Pros and Cons of Employing Family for a more detailed look at this prickly issue.

Misleading Job Descriptions

A common problem small business face is that, with fewer employees at their disposal, they need staff to occupy multiple roles.

It’s important to be honest about this when recruiting, however.

Advertising for a social media manager and then asking the successful candidate to take on data entry duties or manage your company website is both unfair and likely to result in them heading straight back to the same recruitment portal they found you through.

When this happens, you'll have to go through the entire process of advertising, interviewing and training all over again — all of which costs time and money.

Few people actively aspire to be a professional jack-of-all-trades, and will resent their expertise being wasted if asked to perform other tasks, so make sure that the role you’re hiring for is the one that you actually want to fill.

Not Asking for References

HR managers in newer or rapidly expanding businesses are often so preoccupied with asking the right questions at interview and filling roles that they forget to contact their applicants' previous employers to check up on their credentials.

It’s no fun being a Pessimistic Percy, but when the future of your business is at stake, is it really worth not dropping your selected candidate’s former boss a quick email to check that all you've been told is true?

Ask all job applicants to list at least two referees — at least one of which should be their most recent employer — and for permission to contact them. Once you've found someone you think is a good fit for the team, reach out and get that reference.

More often than not, you’ll receive glowing reports and be satisfied that you've hooked yourself a great new team member.

But that same email or phone call could also save your business months of hassle and expense caused by hiring someone whose actual experience differs vastly from what was written on their CV.

Being Ignorant of the Law

It's easy to ignore red tape and forget about fiddly little rules and regulations when you're busy trying to change the world.

The tape is coloured red for a reason, though, and being ignorant of things like employment law is a sure-fire way to end up being positively hog-tied with the stuff in the future.

It's vital that you are familiar with at least the basics of commercial law and ensure that employment standards are met — whether it's by providing health and safety training or getting every member of staff enrolled on a workplace pension scheme.

Because nothing shuts a business down faster than being in breach of the law.

Taking care of minor legal matters when you're trying to run a business can be a bit of a headache, but by doing so you could avoid a massive migraine in the future. Do your paperwork and, if need be, consult an expert for advice before it's too late.

Not Having an Employee Handbook

An employee handbook is essential, not just so that your staff know what is expected of them, but to protect the company in the event of a dismissal or disciplinary procedure.

What is your company policy on lateness? Do you use the Bradford Factor to calculate absence? At what point do you issue written warnings?

Everything from hours of work, to holiday entitlement, to policies on discrimination should be laid out in black and white and made available to every employee entering the company.

A surprising number of small businesses fail to do this, and nearly all come to regret it later when they have messy dismissals and expensive lawsuits on their hands.

Not Properly Integrating New Employees

There’s more to welcoming a new employee into your team than announcing their arrival to the whole room and showing them to their desk.

One of the nicest things about working for a smaller business is the sense of camaraderie that develops between staff.

These same close bonds can make integrating even harder for newcomers, however, especially if the team they're joining has been around since the company's inception.

Take the time to introduce your newbie to each member of the team and explain their roles so that your new recruit knows who to turn to in a given situation.

Show them where the kitchen, toilets and break room are, and arrange some kind of social gathering so that they and your team have a proper chance to get to know one another.

Finally, no matter their level of expertise, be sure to offer your new staff members adequate training — and evaluate their performance over time. This allows them time to settle in and ask questions without feeling like they're pestering people, and gives the employer an opportunity to spot any potential issues early.

For more tips on welcoming new staff into your business, check out our detailed guide to onboarding employees.

Poor Communication Between Staff and Management

It's a common misconception that smaller businesses benefit from better communication.

While having fewer employees technically makes it easier to keep everyone on the same page, in reality, smaller business owners often fall into the trap of assuming that everyone knows what they're thinking just because they themselves have lived and breathed the business for the last year or more.

As well as providing formal training for all employees, it's essential that the company's goals are clearly outlined for all, and that any developments within the business are properly logged and circulated rather than relying on word of mouth to keep the team up to speed.

Talk your new staff through how the company came into being and what motivated you to begin with. Tell them where you see the business in 12 months' time and what you expect from them.

After all, you wouldn't want someone to join your ragtag crew expecting to be fishing a few miles off the coast when you're actually planning an expedition to circumnavigate the globe...

Final Thoughts

When you're focused on driving sales or getting a product that you're passionate about off the ground, it can be easy to forget about the "simple" matter of human resources.

By not providing adequate training or failing to consider things like codes of conduct and pensions, however, then small business owners are effectively ensuring that their journey to the top will be interrupted — or scuppered entirely — by obstacles that could otherwise have been avoided.

Do the groundwork, take good care of your people, and with a little bit of passion and ingenuity, there's no reason why your business shouldn't thrive.


Looking for more tips and advice for your SME? Head back to the RotaCloud blog.