Solid HR Strategy is Key to Small Business Success

The first year or two after a business opens its doors can be an extremely challenging time. Securing financing, establishing a clientele and spreading the word about the new venture present plenty of obstacles to overcome.

But one of the most risky and least-planned-for challenges involves a business’ most important asset: its employees. Bad human resources (HR) practices can have a negative impact on a company’s bottom line. Neglecting important areas like recruitment, employee relations and government compliance can be damaging to even the most promising small businesses. 

Here are some of the top mistakes small businesses make when it comes to HR, and how to avoid them:

Hiring the wrong person

More than 30 percent of all business failures can be linked to bad hiring practices, according to the U.S. Department of Commerce. Businesses are most vulnerable to making bad hires when a position needs to be filled quickly, and once a bad hire is made, trying to terminate the employee can be a difficult process. With about 450 employment lawsuits filed every day, the process of firing someone should be taken seriously. When handled improperly, frivolous lawsuits can tie up business owners for long periods of time.

It is crucial for a small business to devote enough time to hire the most qualified candidate. Employees are the core of an organization, and careful consideration should be given before selecting just anyone who walks through the door.

Ignoring government regulations

Staying on top of the growing number of ever-changing government regulations is always time consuming and often overwhelming. But companies, particularly small businesses, cannot afford to look past them. Research has shown that businesses with fewer than 20 employees end up paying more per employee to comply with regulations than a company with 500 or more employees.

So it is no surprise that dealing with increasing regulatory burdens can put a major strain on smaller companies. But the alternative – ignoring the rules – can be devastating. Staggering fines and penalties for non-compliance can easily cost tens of thousands of dollars, and sometimes the business itself.

That is why it is imperative to keep up with local, state and federal regulations. Resources are available to help business owners stay informed and compliant. Many local and national organizations, including small business assistance providers such as your local Small Business Development Center (SBDC), have information and support available on the Internet.

Not having an employee handbook

Problems can unfold in the workplace when a company does not have written policies and procedures that are accessible to all employees. Stress and tensions arise when employees do not know what is expected of them, which oftentimes leads to conflict.

Regardless of size, a company needs an employee handbook.  It should clearly state the company’s expectations of each employee and provide clarification on important business operations. All employees should be given a copy and sign an acknowledgement upon receiving it. It cannot be stressed enough – the lack of an employee handbook can set the stage for employee relations’ disasters and potential employment litigation.

Overlooking the importance of training

Providing employees with opportunities to hone their skills through additional training and education improves productivity and job satisfaction. What’s more, employees who are knowledgeable about changes and improvements in their job field also are more likely to keep the company ahead of the competition.

Regardless of budget constraints, businesses need to find ways to invest and support training and development efforts.  Whether through continuing education, leadership or skills-based training, it is important for employees to bring fresh ideas and new approaches to performing their jobs. Successful business executives understand that time and money invested in training and education will help bolster employee retention and the bottom line in the long run.

Failing to reward employees

Whether a company has one or 50 workers, it is imperative that all employees know their value to the organization. Many businesses forget this important component of employee relations. Verbal compliments are not always enough. In order to retain good employees, companies must reward and motivate them.

A solid performance-management system that provides employees with incentives to achieve written goals can help improve retention. The accompanying boost in morale also helps to avoid the headaches that come when an employee leaves for better opportunities.

PEOs can help prevent mistakes

To help avoid many of these costly blunders, more and more companies are turning to a professional employer organization (PEO).

A full-service PEO can provide administrative relief in areas such as employee recruiting and selection, payroll management, employer-liability management, training and development, benefits management, government compliance and more.  In addition, a PEO shares many of the employer liabilities that come with owning a business.

With the help of a PEO, small and medium-sized companies can avoid costly mistakes and improve their chances for success. 

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