5 Common Small Business HR Mistakes—and How to Avoid Them

Small business owners have a passion for their products and the customers who buy them. Sometimes, back-of-the-house functions, like human resource management, take a back seat to the daily operation of the shop. That's a mistake because a solid HR strategy is vital to the growth of your business.

Just ask Lawrence Duthler, co-owner of Sun Title Agency in Grand Rapids, Michigan. In 2015, Sun Title was named one of West Michigan's "Best and Brightest Companies to Work For" based on its positive human resources practices. The company has grown from a single office to a regional facility with six locations and nearly 50 employees. Duthler says that serving both clients and employees is the key to success. "If you don't focus on servant leadership [with your team] and only focus on ‘making money,' then success rarely follows," he explains.

Read on to learn about five common HR mistakes and how you can avoid making them in your shop.

1. No hiring strategy

When your business launched, your hiring strategy was probably, I need help—NOW! You mostly likely turned to people you knew and trusted: friends and family. That's fine for the first few employees, but as your business grows, you'll need to cast a wider hiring net. Robin Schooling, a vice president of human resources based in Baton Rouge, Louisiana, finds that small business owners who plan their future staffing needs can stay in front of their company's growth curve. Schooling suggests first identifying an ideal candidate persona, or the characteristics, behavioral tendencies and motivations of your preferred employee. This gives you an idea of who you need to hire. Then, you can determine where to look to reach your ideal job candidate.

2. Failure to maintain professionalism as the boss

When you work in a small shop with only a handful of people, things are pretty informal. A relaxed work atmosphere is fine—until you need to play the "boss" card. If you're always chummy with your employees, they might have a problem taking direction from you. This is a challenge that trips up many small business owners, says Victorio Milian, an independent HR consultant based in New York City. One of the biggest HR problems Milian encounters is that small business owners don't create the right amount of "professional distance" in the role of supervisor. Employers who take a casual approach to a serious situation create employee confusion. "This masks the seriousness of the discussion, which leads to the employee believing that the situation isn't as serious as what the [business owner] believes," says Milian. Does creating distance sound cold? Think of yourself as a leader of your team. The best leaders make tough decisions but are still personable and approachable.

3. Not providing proper training

You might think you don't have time to train employees, but consider this: It's expensive to hire a replacement. Replacing an employee earning $10 an hour will cost you 16% of their annual salary, according to one study. In addition, investing in your employees' development upfront reduces your turnover and improves morale.

All newly hired employees need orientation to their surroundings. Even if you're bringing on someone who's experienced, every shop does things a little differently, so it pays to give new employees a lay of the land. Most customers are understanding when they find out someone's in training. Many companies have employees wear a badge that reads "Trainee" or "Please be patient, I'm in training." If you take this approach, pair the new employee up with a mentor who stays close at hand. It's unfair to label someone as a "trainee" and leave them without a safety net.

4. Lack of knowledge about federal laws

One of the more challenging HR aspects of running a small business is keeping up with government regulations. One law in particular catches many business owners unaware: the Fair Labor Standards Act (FLSA). This law establishes minimum wage, overtime requirements, record keeping and youth employment standards. Business owners must exercise diligence when determining the correct classification (non- exempt versus exempt) status for employees. Milian notes that the errors are rarely intentional. "I don't get the impression that small business owners are intentionally misclassifying employees," he says. "Most times, the desire to pay someone a flat salary, or make them exempt when they should be non-exempt, comes from ignorance of the law." Labor law is an area best left to the professionals. If you're unsure about the correct course of action, don't rely on Google. There are many organizations that help small businesses with their HR questions. Check out your local chamber of commerce or Small Business Administration.

5. Under-communicating

Whether you have five or 500 employees, clear and consistent communication should be an important part of your HR plan. As Schooling notes, it's easy for small business owners to think, "We're a small company; everyone knows what's going on." Remember, just because you understand the plan doesn't mean your employees do. When in doubt, over-communicate your company's goals and plans. After you deliver an important message, ask employees to summarize your comments to ensure they truly did understand what you conveyed.

Having a human resource management strategy is as important to your business as the products and services your company offers. Steer clear of these five HR mistakes, and you'll set your company on the right course for business success.