Running a small business means taking on multiple roles. However, having to handle so many jobs, from marketing to managing employees, can lead to costly mistakes. It’s not uncommon for a small-business owners to neglect the human-resources side of the business when things are going smoothly, but not staying on top of employee management can lead to high turnover and possible litigation. With human-resource errors being one of the main reasons most small business fail in less than five years, employee management must be one of your top priorities.
To up your odds of survival, below are a few small business HR tips.
1. Don’t Put Off Hiring Talent
According to Kim Shepherd, CEO of recruitment company Decision Toolbox in Irvine, California, many small-business owners interview the wrong way. Interviewing one candidate on Monday, Wednesday and Friday, waiting to review resumes the following week and then not make a hiring decision until the third week puts small-business owners behind the hiring-process curve. With more jobs becoming available as the economy recovers, top candidates will be hired out from under a company that doesn’t move fast enough. Shepherd says smaller businesses should use the advantage they have over larger companies by operating like a “speedboat” to outmaneuver the typically slower moving large businesses during the hiring process.
2. Hiring Too Hastily
On the flip side of the coin, many small-business owners go through the hiring process too quickly, and end up just filling their vacancies with warm bodies. A 2013 CareerBuilder survey showed that over 1,500 HR managers reported just one bad hire could cost a business over $50,000, typically as a result of a hasty decision. The solution is to create, and stick to, a consistent hiring process. Write clear and accurate job descriptions to attract top talent and then get those candidates interviewed ASAP!
3. Failure to Document Performance Issues
A bad termination can lead to litigation. No fire can truly be a positive one, but it can be made easier if properly prepared for. Preparing to terminate an employee should begin by documenting poor performance issues. This is best done during regular performance reviews where you clearly address any performance problems, giving your employee a chance to correct the issue. If the feedback doesn’t correct the problem you will have documented evidence that you gave the employee the chance to fix the problem, should it become necessary to initiate termination.
4. Misclassified Employees
The IRS has been known, on occasion, to target small businesses to look for employers who intentionally misclassify employees as independent contractors to avoid having to pay payroll taxes. In general, independent contractors control their own schedule, whereas an employee must dance to your tune. Penalties for misclassifying employees for tax purposes can be harsh, and this can be a fairly complicate area, so it is best to seek the advice of an accountant or attorney.
5. Ditch the Paper
Too many small businesses rely too heavily on paper-based systems to track employee-related activities. In today’s technology-driven world, an HR software program can help small business owners streamline the process of tracking responsibilities.
6. Failure to Evaluate Employees
Employee evaluations are not just to protect yourself in case you need to give a slacker the boot. Ontario, Canada-based management consultant Shawn Casemore specializes in helping businesses improve efficiency. Casemore believes far too many small business make hiring and firing decisions based on a gut feelings, and often live to regret it. Aside from the legal issues, keeping an evaluation record on all your employees will help you to see discrepancies in your own performance when it comes to hiring, managing and firing employees.
As a small business, don’t neglect your employees and work to build trust, engagement and ultimately retention with sound HR tactics.