10 most common HR challenges for small businesses

Along with cash flow, generating new business and marketing, we know that HR can present a raft of challenges for small business owners. Working with small businesses for the past 18 years, we have put together the top 10 most HR common challenges for small businesses, and what you can do to overcome them.

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1. Performance management and personal development

At the top of our list of the top 10 most common challenges for small businesses are performance and development. It can be hard to understand how and when to measure performance and develop staff. Start off by creating personal development plans, in consultation with your team members. Set objectives, goals and a realistic timescale. Read more about annual appraisals and how to conduct them.

2. Line Managers assuming role of the HR with limited HR knowledge and training

This means ‘doubling up’ job roles to cover HR. If your business is growing and you have no qualified HR professional in the company, then you should consider appointing one or outsourcing to a consultancy. As your employee numbers grow, you won’t be able to cover HR in other roles and you will need proper support. We’ve got a free e-book available on how to outsource your HR and tips on what to look for.

3. Lack of resources/time to deal with any real staff issues or put effective policies in place

Another common issue within the top 10 HR challenges for small businesses is simply a lack of time from owners / founders. This could mean your HR practices are not up to scratch, and you could be exposing yourself to potential issues. Review your policies and ask for expert help if necessary to get your ducks in a row.

4. Training and retention

In order to keep the best people, you need to provide the right support and training. Often staff are left to investigate training courses themselves, with resistance from the employer. Training should form part of the personal development plan which is set out for each member of staff. We’ve got a free guide to setting up a training scheme with a downloadable checklist here.

5. Recruitment

Finding the time and mechanisms to vet candidates and attract the right people. If you recruit through agencies you are facing cost implications, but if you recruit in-house you will have to set aside your time to vet applications. Employee referral schemes work well, where they can recommend suitable candidates in exchange for a reward, or outsource to a specialist HR consultancy who will also manage the interview process with you. If you do choose to work with an agency we’ve put together these tips for getting the most from the partnership.

6. Reward and recognition of staff

Understanding best practice initiatives. Making a bonus or incentive scheme that is relevant, achievable, accessible and motivational. Read our post about rewarding staff with non-financial incentives.

7. Owners/management not acknowledging the need for HR

Often business owners may leave these tasks to other members of the team. With legislation being so tight on employment law leaving HR to an untrained team member is a high-risk strategy and could end up being very costly.

8. Long-term sickness

Knowing how to deal with this and the legal standpoint. Sickness costs the company money and causes delays and inefficiencies. Companies often leave employees when they are off sick – out of sight out of mind – this is the wrong strategy, and the issue needs to be dealt with in a timely fashion in line with best practice and sympathetically.

9. Resolving conflict

Where do you start whilst legally protecting the business? Robust systems, the right people, and the right culture all build toward protecting the business. However, if a conflict arises, it is essential to seek professional advice immediately. We’ve put together a free e-book on managing difficult conversations.

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10. Meeting employment law regulations with handbooks, contracts, policies and procedures, and job descriptions

Regulations, policies and handbooks can become out of date very quickly. These are all legally binding documents, so they must be relevant, current and useful in order to add value to the business. These should form part of any HR strategy.

If you’re worried about your company’s HR policies, take our HR Diagnostic Test to see how it fares. This will give you suggestions on where you need to improve, and what you can do next. Alternatively, get in touch if you would like HR support.