How to Avoid Costly HR Mistakes
People are often a company’s greatest asset. This is especially true for small businesses that count on employees to pull their own weight (and then some). Yet managing human resources can be a challenge, especially for entrepreneurs who have little or no experience supervising others.
Here are some tips for handling this critical task and avoiding costly HR mistakes.
1. Don’t rely on an “open door.” Many managers say they have an open-door policy that empowers employees to report workplace issues to them. But open-door policies don’t really work, says Phillip Wilson, author of The Next 52 Weeks: One Year to Transform Your Workplace. "If you want to know about the problems in your office, you have to go find them. By the time they come through your open door, it’s usually way too late. Manage by walking around. Provide skip-step opportunities (where you go and talk directly and privately with workers a layer or two below you),” says Wilson.
2. Leave a paper trail. Document, document, document. It is probably more important for a small company to do a great job of documenting investigations and complaints than it is for a big company, because one lawsuit can destroy a small business, Wilson says. “Make sure that you document any disciplinary issues, safety inspections, performance discussions, and the like. These records can save you if done right — or kill you if done poorly or not at all.”
3. Establish policies and procedures. As a company grows, there is a need for more structure. Many small businesses fail to put this structure in place, asserting that it flies in the face of their “entrepreneurial spirit” or family-oriented principles. But even small companies need basic policies and procedures. Create an employee manual or handbook. Require employees to sign a document acknowledging that they’ve read and understood the policies, advises Diane Rodgers, senior human resources operations manager at CBIZ Human Capital Services.
When appropriate, these policies (such as anti-harassment or anti-discrimination) should be supplemented with training, Rodgers says. There are template policies, handbooks, and online training available that are cost-effective for small businesses. “These steps take time and money, but will go a long way in mitigating risk for small employers,” she notes. “They will also prove invaluable down the road if you’re faced with a discrimination or harassment lawsuit.”
4. Stay abreast of changing laws. Compliance can be a big headache for small businesses: There are a multitude of regulations, and these laws continue to change rapidly. It’s essential to monitor any updates that may affect your business. Rodgers says common pitfalls include issues related to the Fair Labor Standards Act, the misclassification of workers, and failing to prove eligibility to work in the U.S.
“Compliance requirements can be easily missed, and they can quickly add up to big penalty dollars that can prove very costly for small employers,” she says. Make sure you have advisers like an employment lawyer and accountant to help keep you up-to-date.
5. Hire and fire carefully. Without a human resources professional, your newly hired talent may go without the appropriate information, tools, and training required to do their jobs. To avoid poorly trained and performing workers, consider focusing on developing employee onboarding materials and paying careful attention to training your employees, says Heather Huhman, president of Come Recommended, a content marketing and digital PR consultancy.
When you fire someone, fully understand the implications such as final pay, documentation, protected classes, and unemployment, says Nancy Mobley, founder and CEO of human resources consulting firm Insight Performance.
6. Develop and reward employees. Because small companies are so lean, it is important to cross-train employees and stay on the lookout for potential talent who can step in if a key person is absent or leaves. “You need to always have a plan B ready for every key position,” Wilson says.
You also want to reward your employees. Recognition of good performance is essential to a healthy workplace; without it, your business could face retention issues. “Employee turnover can be costly; avoid this issue by providing a unique system of rewards for your best employees,” Huhman says. Rewards don’t always have to be expensive. It can be simple recognition: a thank-you note, an email, a public acknowledgment, a day off, or a gift certificate to a restaurant, etc.
Everyone wants to know how they are doing. Even if you don’t give your employees formal reviews, a regularly scheduled conversation that has an easy agenda of goal status, current hurdles, and open communication about how things are going work well, too, says Bruce Clarke, president and CEO of Capital Associated Industries, a human resources management firm.
Finally, says David Lewis, president and CEO of OperationsInc, a human resources outsourcing and consulting firm, “Realize that once you hire someone, you have to give them a reason to stay.”
Sheryl Nance-Nash is a business writer for Intuit and is passionate about solving small business problems.