Human Resource Management Mistakes Small Businesses Make

Running a small business is a little more hectic than running a big brand, for many reasons. For starters, most small business owners wear multiple hats; they are the top investors, CEOs, HR managers, line managers, and marketing team leaders- you name it! That means, as a small business owner, it is hard to specialize on one role because everyone in the organization is looking up to you for inspiration and leadership.

One department that suffers in small businesses is the human resource department. Processing paychecks in good time, addressing employees’ problems, training employees, and basically ensuring HR success becomes a huge challenge when there isn’t a well-established HR department. One way of addressing these challenges is allowing flexible working so that employees work from remote locations. That means fewer office conflicts and a smaller HR management burden for the owners. Working remotely can mean working from home or working from a coworking space.

Working from a coworking space injects greater diversity and innovation into the workplace, which benefits both the workers and the organizations they work for. Such spaces enhance smooth flow of knowledge, ideas, and experience, it allows workers to get exposure to new ideas, and allows workers to build a new, strong network of professional contacts. Moreover, working from a coworking space, such as Upsuite, allows small businesses to accommodate sudden changes in staffing levels. If you need some IT staffing services, you can check it out here! If you’re in need of a human resources software or resource, you may also consider checking out this Temporary Job Staffing Service if you need temporary manpower.

With that in mind, which HR mistakes are common for small businesses? Here are 5 of those:

1. Hiring mistakes

Hiring mistakes for small businesses are way too many. First, small business owners have too much on their plate, so they are unable to write good job descriptions when advertising for positions. Secondly, in most cases, small businesses have no interview panels because of constrained budgets and lack of management boards. That means on top of writing poor job descriptions that do not attract the right applicants, the interviews themselves are subpar, and for that reason they produce subpar recruits. Thirdly, small business owners feel obligated to hire their family members and friends as opposed to looking for the best candidates for the job.


Small businesses should focus on attracting quality talent no matter what it takes. Quality talent means that on top of having the right skills for the job, a candidate has what it takes to fit into the company’s culture and drive the company goals. Small businesses should compose strong interview panels/hiring teams, write proper job descriptions, and advertise for vacancies on all platforms via a staffing agency that potential candidates are likely to be on. The interview process needs to be well structured and should never be hurried.

2. Forgetting to be “the boss”

It is hard for small business owners to maintain professionalism as the boss especially when their employees are close friends or relatives. Besides, these executives operate with only a handful of people, probably sharing the same office in a pretty informal setting, so the “boss” gets chummy with staff members to the point of losing their respect. That makes it hard for the boss to make tough decisions and for employees to take the bosses’ commands seriously.


As much as it is okay to create a fun and relaxed environment at work, you need to keep a professional distance in order to establish yourself as the leader of your team.

3. Not keeping employee performance record

Most small businesses don’t keep employee performance record. Some have employee handbooks just for show; they don’t actually record anything on them. Failure to keep these records means that decisions concerning employees are made based on emotions and personal feelings rather than on merit- or lack of it for that matter. Sometimes employees are fired or disciplined unfairly, and that can attract unwanted lawsuits.  Without a record, it becomes hard for team leaders to keep track of employees’ adherence or violation of company policies. It becomes hard for employers to formulate or improve on their work-related policies, or to put a face behind their business growth or decline.

Solution: Never commit any work-related info to memory without documenting it first.

4. Misclassifying employees

Mostly this is for tax evasion reasons, but it never works. The Internal Revenue Service (IRS) has a way of catching up with tax offenders and that is never good for small businesses.

Conclusion: You have to learn how to differentiate between employees and independent contractors, and classify them accordingly.  

5. Failure to train new employees sufficiently

Have you heard the term Peoples Ops before? Basically, People Operations designs a workplace that fosters joy so workers actually want to do their job. It comes without saying that it is important for any business owner and manager to learn about people ops. Since employees are the foundation for every business, it makes sense to put a focus here.

However, some don’t even train new employees at all and assume that they will learn the ropes on the job, others don’t train them properly. That makes it hard to retain ambitious employees. And even if they retain employees, insufficiently trained personnel cannot be as productive as employees who go through development programs throughout employment.


As a small business owner, HR has to be part of your job description regardless of your specialization. In everything you do, you have to set expectations and properly manage your workers. You have to create a succinct job description for each employee if you are to create a productive workforce. You have to reward performance, which means you have to measure it accurately and without favoritism. 

Peter Palladino

Peter Palladino, a business development professional with 10 years of experience working in China. He constantly writes extensive articles covering topics about emerging markets, their ability to attract new business/investments from abroad. He helped many of them create branches in China, Japan, and the Philippines, and have been quite exposed to business-making in those markets. He has experience working in a range of industries and providing technical support in topics such as business growth, market expansion, and product development. Currently, he is also serving as an Expert at Globalization Pedia and provides technical advice for its China EOR solutions targeting U.S. International businesses. Peter is passionate about family, languages, traveling, and reading.