5 common HR mistakes most small businesses make

When you’re a small business owner, it can be tempting to handle everything yourself — after all, it’s your company.

But as any business grows and evolves, the role of HR becomes more important than ever.

So much so that the quality of your HR strategy can determine whether your business succeeds or fails.

Here are the most common mistakes that we see small businesses make when it comes to HR:

1. Not defining the HR Process and system from the beginning

You can’t manage what you can’t measure.

This is especially true in the HR world, and it’s a mistake that keeps compounding!

They don’t define their HR processes and systems from the start, leaving them with no roadmap for how to grow their team or handle new hires.

A clear process will help your company scale smoothly as you grow and avoid any unnecessary confusion down the road.

Keep in mind that a process can change over time, but it’s important to have One.

The more streamlined your processes are, the higher the clarity and easier it will be for new hires to understand their responsibilities and find where they should go for help.

2. Not having an effective Hiring Process

One of the biggest mistakes small businesses make is not having an effective hiring process. This can be one of the most important decisions you make for your business, so it’s crucial that you have a formalized process in place.

The hiring process is a long-term investment for your company and should be planned out beforehand. This will also help you in effective budgeting.

The process should also be repeatable and consistent, with defined steps that help you evaluate candidates’ skill sets and determine if they’re right for the position being filled.

Finally, this process needs to be scalable—you need to know how many people it will take to fill all of your openings in order to effectively manage workflow throughout each stage of recruitment from start to finish (and beyond).

The best way to create an effective hiring process is to start from scratch.

You should start by identifying the skills necessary for each position and which profiles are most important (for example, salespeople are most on your team).

Once you have these requirements down, create a list of questions that will help you evaluate candidates’ skill sets against them.

3. Ignorance of HR & Statutory compliance

Small businesses often don’t understand what their obligations are when it comes to managing employees and their pay, or they simply choose to ignore them.

They might think that as long as they aren’t breaking any laws, everything will be fine.

But this isn’t always the case. Ignoring these things could leave you open to fines and financial penalties that could damage your business in the long run.

4. Not defining a formal Performance Review process

Most small businesses do not have a defined formal performance review process and most of the time they struggle to evaluate the performance of the team over a period of time.

Most team members lack ownership as the expected level of performance and performance criteria are not defined and communicated with team members.

Define the roles (who is responsible for what within this process, i.e., HR, line manager). Define the criteria (what do we mean by performance?).

Specify the timing (how often should reviews take place, i.e., annually or semi-annually). Define deliverables (what are we trying to achieve here?).

A well-defined process helps to build a performance-driven culture and it helps employees to be more accountable and take ownership of what they are responsible to deliver.

5. Most MSMEs do not create HR Department

Most MSMEs do not have an HR department and this is one of the biggest mistakes they make. The fact is if you want to be able to run your company efficiently and in a way that maximizes profitability, you must have an HR department.

This department is responsible for ensuring that every employee is properly trained and performing at an optimum level.

It also ensures that each employee has the right tools needed to perform their job effectively; plus it ensures that all employees have basic rights and are protected from harassment or discrimination at work.

The benefits of having an HR Department are many. You can improve the staff’s productivity, save money on training and recruitment, reduce turnover rates and increase employee morale.


A lot of small businesses do not invest in an HR department because they think it will cost them too much.

However, when you look at the difference between people who have invested in HR and those who haven’t, you can see that those with a dedicated HR team are more profitable and productive than their competitors.

If you still do not have an HR department and do not know how to build one, set up a call with our team of HR experts today.



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