January 7, 2025
15 minutes read
Top 10 mistakes
1. Neglecting Compliance with Employment Legislation
2. Relying on Informal Hiring Practices
3. Overwhelmed Recruiters
4. Ignoring the Importance of Onboarding
5. Failing to Address Employee Performance Issues
6. Overlooking Employee Development and Retention
7. Head of People Is Overstretched
8. Skipping Exit Interviews
9. Focusing on Reactive HR Instead of Strategic HR
10. Lack of a Defined Culture
For many small and medium-sized businesses (SMBs), managing people is an afterthought—until something goes wrong. But neglecting the People (HR) function can lead to costly mistakes, reduced productivity, and employee dissatisfaction, all of which hinder your company’s growth.
The good news? These pitfalls are avoidable. Below, we’ll outline the top 10 mistakes SMBs make and how proactive strategies can save you money, improve employee satisfaction, and set the foundation for long-term success.
1. Neglecting Compliance with Employment Legislation
The Problem:
Many SMBs assume that employment legislation doesn’t apply to them, or they rely on outdated information. Noncompliance with regulations such as overtime pay, employee classification, and anti-discrimination policies can result in expensive penalties and lawsuits.
The Outcome:
By ensuring compliance, you mitigate legal risks, build trust with employees, and protect your business from costly lawsuits.
Solution:
- Perform annual People (HR) audits to identify and fix compliance gaps.
- Use automated HR systems to keep accurate records of employee hours and classifications.
- Partner with a People (HR) consultant or fractional HR service to stay ahead of regulatory changes.
2. Relying on Informal Hiring Practices
The Problem:
Small businesses often skip structured hiring processes, relying on personal connections or gut feelings. This leads to hiring people who may not fit the role or the company culture.
The Outcome:
A structured hiring process ensures you attract the right talent, reducing turnover and increasing productivity.
Solution:
- Develop clear job descriptions and establish objective criteria for evaluating candidates.
- Standardize interviews to reduce bias and ensure fair evaluation.
- Use applicant tracking systems (ATS) to manage hiring efficiently and keep the process organized.
- Hire Talent Acquisition Lead on Fractional base.
3. Overwhelmed Recruiters
The Problem:
Instead of hiring experienced People (HR) teams, many SMBs hire recruiters to handle all People (HR) responsibilities. However, recruitment alone doesn’t equip them to manage compliance, performance issues, or employee engagement effectively.
The Outcome:
Delegating all People (HR) functions to a recruiter stretches their expertise thin, leading to inconsistent People (HR) practices and neglected areas.
Solution:
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Hire fractional HR professionals or consultants to handle specific areas like compliance or employee relations.
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Use HR software to streamline repetitive tasks, freeing up recruiters to focus on hiring.
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Invest in cross-training to broaden your recruiters’ skill sets.
4. Ignoring the Importance of Onboarding
The Problem:
The Outcome:
A strong onboarding program boosts productivity, reduces turnover, and ensures new hires integrate smoothly into the company.
Solution:
- Create a step-by-step onboarding program that covers role expectations, company culture, and goals.
- Pair new hires with mentors to ease their transition.
- Use digital tools to track onboarding progress and automate routine tasks.
5. Failing to Address Employee Performance Issues
The Problem:
Many SMBs delay addressing underperformance, fearing conflict or lacking the tools to do so effectively. This impacts team morale and productivity.
The Outcome:
Proactively addressing performance issues fosters accountability and creates a high-performing team culture.
Solution:
- Embracing a continuous approach to Performance Management that keeps your organization agile and adaptable to the evolving business landscape.
- Build a Culture of Instant Feedback.
6. Overlooking Employee Development and Retention
The Problem:
Without growth opportunities, employees feel undervalued and are more likely to leave. High turnover disrupts operations and increases hiring costs.
The Outcome:
Investing in employee development builds loyalty, enhances skills, and reduces turnover, saving time and money in the long run.
Solution:
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Offer training programs, certifications, and internal growth opportunities.
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Recognize and reward employees for their contributions to boost morale.
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Work with an Academy to design a tailored employee development plan.
7. Head of People Is Overstretched
The Problem:
Relying on a single Head of People to manage recruitment, compliance, employee relations, and strategy leads to burnout and strategic stagnation.
The Outcome:
Supporting your People (HR) leader with additional resources allows them to focus on forward-looking initiatives like improving culture and aligning People function with business goals.
Solution:
- Hire fractional support to lighten the load and enhance efficiency.
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Hire consultants for project-based support.Â
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Introduce tools that automate repetitive processes, such as benefits administration or tracking employee attendance.
8. Skipping Exit Interviews
The Problem:
Without exit interviews, you miss crucial feedback on what’s driving employees to leave, making it harder to address systemic issues.
The Outcome:
Exit interviews uncover actionable insights that help you improve retention and refine workplace policies.
Solution:
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Standardize exit interviews for all departing employees.
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Use a neutral third party to conduct the interviews for honest feedback.
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Regularly analyze exit interview data to identify trends and take corrective action.
9. Focusing on Reactive HR Instead of Strategic HR
The Problem:
Many SMBs handle People (HR) reactively, addressing issues only when they escalate. This leads to inefficient processes and missed opportunities for growth.
The Outcome:
A strategic People (HR) approach aligns with business goals, improves decision-making, and fosters a proactive workplace culture.
Solution:
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Develop a proactive People (HR) strategy that includes people planning, training, and retention initiatives.
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Conduct regular employee surveys to identify and resolve potential problems early.
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Engage People experts to align your processes with long-term business objectives.
10. Lack of a Defined Culture
The Problem:
Failing to define and nurture your company culture leads to employee disengagement and difficulty attracting top talent.
The Outcome:
A strong culture promotes employee loyalty, productivity, and alignment with company goals.
Solution:
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Articulate your core values and communicate them clearly to your team.
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Recognize employees who embody your company’s culture to reinforce those values.
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Foster an inclusive and collaborative environment through transparent communication.
How We Can Help
At People Success Team, we understand the unique challenges SMBs face in managing people. Our Fractional HR, Consulting, Coaching, and Academy services are tailored to help you avoid costly mistakes, improve employee satisfaction, and build a foundation for sustainable growth.
Why Partner With Us?
- We are a one-stop-shop for People Expertise.
- Scalable, cost-effective solutions for growing businesses
- A track record of transforming SMBs into thriving workplaces.
Let us be part of your success story
We invite you to get in touch with us and let us be your partners in achieving your business goals. Your success story is waiting to be written, and we’re here to help you craft it.
