5 HR Mistakes and How Your New Business Can Avoid Them

Whether you provide material goods or a valuable service, you know your work. But there’s more to running your own company than what you sell. If you don’t cover your bases when it comes to human resources policy and proper procedures, your business could fail no matter how well you perform your work.

We’ve seen our share of well-meaning business owners who run into difficulties with personnel, compliance and other areas due to simple HR mistakes. Sometimes they simply weren’t aware of the groundwork companies need to thrive and plan for the future. Others felt that formal policies would be too impersonal; small businesses often take pride in an “everyone is family” workplace. Either way, they’ve paid a price.

Here are five of the most common HR mistakes we see new or small companies make… and how you can avoid them.

HR Mistake #1: A Flawed Recruiting and Hiring Process

You need help, so you place an ad with two or three job duties. Sounds easy, right?

Wrong. Hiring the right people requires more than just a general idea of what the newly hired employee will be doing. You should also have a solid idea of all or most duties the position performs on a daily basis, the skills a person needs to perform these duties and the physical demands of the job. So, start with a job description that helps to paint the full picture of the newly created position.

And don’t forget about the soft skills you want your new employee to have. Do you need someone who works well independently? Mention that you’d like a self-starter who requires minimal supervision. Will this person talk much with the general public? If so, emphasize your need for someone with good communication skills who is enthusiastic about talking to people.

During the interview process, look not only for job skills but also cultural fit. If your employees enjoy an occasional friendly chat in the office or attend social events together, for example, watch for similar enthusiasm when speaking with candidates. (Need more help? Check out our article on recruitment marketing.)

HR Mistake #2: Improper Employee Documentation and Classification

Nobody likes paperwork, especially when it takes you away from your business. But there are labor laws and tax requirements that need to be followed—and the penalties for violations can be steep. So take the time necessary to accurately complete your employees’ documentation and place them within your company’s structure. Areas of special concern include:

• Work eligibility in the United States
• Tax forms
• Social security information
• Job classification (know the difference between employees and independent contractors)

If you don’t have time to complete and check this information yourself, have a staff member or HR consultant do it for you. The cost involved is well worth the extra protection for yourself and your employees.

HR Mistake #3: Ignorance of Human Resources Laws and Regulations

HR regulations are vast and always changing, which creates a challenge for employers to keep up. However, a lack of understanding isn’t a valid defense if you find yourself in violation of the law. If your business isn’t up to date on its HR knowledge and responsibilities—something that happens to employers with the best of intentions—you’re risking everything you’ve worked so hard to achieve. Even if your company has fewer than 50 employees, it’s critical to be aware of the guidelines that apply to you now. This is regardless of whether you have one employee, ten employees, 20 or more; there are requirements that have to be met, and as you grow the list gets longer.

HR Mistake #4: Forgoing Formal Performance Reviews

With a new or small business, you might think that regular informal conversations with employees provide sufficient feedback for them and for you. But having a formal process serves a number of important purposes:

1. It documents an employee’s performance so that you can benchmark for employee satisfaction and improvement. Among other reasons, this is important if he or she doesn’t fill your expectations and you need to consider parting ways.
2. It allows you to look at the overall satisfaction of each employee and how he or she fits with the company’s mission and goals. Does this person need to be challenged more? Should the position’s responsibilities change to better utilize his or her talents or serve your company?
3. It lays the groundwork for performance reviews as your company grows. Waiting until you have 40 or 50 employees before implementing a formal review process is a significant and time-consuming challenge. By starting when your business is small, you can fine-tune this process as time goes by with far less effort.

HR Mistake #5: Dismissing the Need for an Employee Handbook

We often hear from business owners who feel that an employee handbook is too formal and not necessary (again, the family atmosphere). While the sentiment is understandable, it’s also risky; by not having your company’s policies clearly and officially stated, you open them up to interpretation and inconsistent enforcement. This in turn can result in personnel conflict, management issues or even lawsuits.

A good employee handbook covers topics such as workplace conduct, time off, benefits, disciplinary processes, and equal opportunity/non-discrimination policies. This handbook must be updated as your company evolves and reviewed regularly by a human resources expert. Finally, have your staff members sign a form acknowledging that they have read and understand the employee handbook.

It’s easy to understand why a small or new business owner might prefer a casual human resources approach. When you think about the long-term picture, however, the need for solid policies and procedures becomes clear.

Talking with a knowledgeable HR professional is a key step in developing policies that protect your employees, your business and yourself. If you don’t have a human resources department (or if its capacity is limited), the HR consultants at James Moore can help you with these and many other aspects of human resources policy.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.