It happens every day; many small and medium-sized businesses make potentially serious but easily avoidable mistakes regarding their human resources (HR) management. Often, these errors occur during a company’s initial growth phase, after it has survived the numerous perils of the start-up period. Consequently, they can short-circuit a promising expansion and even, in the worst cases, threaten an organization’s existence. Below are six missteps that growing businesses should avoid.

Shortchanging the Due Diligence of Hiring

When rapid growth occurs and the need for additional help becomes intense, the temptation may arise to cut corners in the hiring process, which can result in many debilitating problems. The people you bring aboard to help accommodate and manage growth can make or break the process.

Therefore, take the time to ensure that serious job candidates are interviewed more than once and by other members of senior management, check references thoroughly, and verify key background facts, such as experience and education. Proper due diligence is critical when an expanding organization is hiring.

Falling Into the Independent Contractor Trap

Growth is an expensive undertaking, so it isn’t surprising that entrepreneurs look for ways to hold down costs in the process. One possible way to save money is to hire workers who can function legitimately as independent contractors rather than actual employees, and who do not receive benefits or engender payroll taxes.

The problem, however – and it’s a big problem – is that the federal and state labor and tax regulations that define which workers can legally be classified as independent contractors are highly complex, and the penalties for misclassifying an employee can be severe—sometimes even ruinous. Make sure you have sound legal counseling before hiring independent contractors.

Conducting Poorly Planned Annual Performance Reviews

Many surveys have shown that supervisors, as a rule, dislike conducting annual performance reviews. That may explain why reviews are often handled poorly and without sufficient preparation. Many annual reviews are scheduled at the last minute, which does not allow sufficient time for thoroughness and comments from the employee who is being reviewed.

Annual reviews should be thoughtfully planned in advance, comprehensive, allow for respectful give and take, and represent the culmination of feedback throughout the year. They should not be unduly influenced by the most recent successful or unsuccessful project. Annual reviews are also important to efficient operations and employee growth and job satisfaction, and should be given the time they require.

Failing to Cultivate High-Potential Employees

Workers who are self-motivated, goal-oriented and recognize what needs to be done to meet objectives often play a vital role in improving a company’s bottom line. Many of them become part of the next generation of workplace leaders. Unwilling to rest on their laurels, high-potential employees seek ways to improve and are unafraid of making mistakes from which they can learn valuable lessons. They also tend to be strong communicators who collaborate well with others.

But many business enterprises overlook the importance of cultivating and retaining them with special training and coaching opportunities. It’s important for top management to participate in developing a career road map for these individuals. If high-potential employees are confident that the company is invested in their future, there is likely to be a strong inclination to remain there to help the organization grow.

Failing to Reward Employees When Appropriate

Overextended and preoccupied with critical planning and oversight, entrepreneurs sometimes forget the importance of making sure that every employee knows the value of his or her contribution to the organization. Sometimes a verbal compliment is not enough.

To retain top performers and highly engaged employees, companies must recognize and motivate them. A good way to do that is by setting up an effective performance management system that stimulates retention by providing employees with incentives to achieve written goals. It’s a way to boost employee morale and motivation, and to reduce the headaches that result when an employee leaves for better opportunities.

Overlooking the Need for an Employee Handbook

The workplace problems that can ensue in the absence of written policies and procedures made accessible to all employees are numerous. Unnecessary stress and tensions arise when employees do not know what is expected of them, often leading to conflict. Regardless of size, every organization should have an employee handbook that clearly states the company’s expectations and provides clarification on important business operations. All employees should be given a copy and asked to sign an acknowledgement upon receiving it. Without a handbook, a business may be setting the stage for employee relations disasters and potential employment litigation.

Many companies proudly declare that their employees are their greatest asset. If that’s the case, let’s be sure to give HR the proper attention it deserves.



Eric Cormier is a human resource specialist for the Boston offices of Insperity (NYSE: NSP), a trusted advisor and provider of HR and business solutions to America’s best businesses for more than 29 years.


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