There are countless stressors for small and mid-sized business owners, but a few key issues are creating the most pressure. In many cases, it’s the people-related decisions that can have an outsized impact on employee morale, retention, compliance, revenue, and growth. With so many competing priorities, it can be difficult to know which issues require immediate attention and where to invest first.
We asked Jenny Morehead, CEO of Flex HR, to share the concerns she hears most often from business owners, the warning signs leaders shouldn’t ignore, and the practical steps growing companies can take to build stronger teams and reduce risk.
What HR Issues are Demanding the Most Attention?
When you speak with small and mid-sized business owners, what concerns do you hear most often, and which ones are keeping them up at night?
Most of the business owners I speak with are self-funded and lead organizations with fewer than 100 employees. In companies of this size, there is usually an “all hands on deck” mentality. People jump in wherever they’re needed, and every person is essential.
These leaders are often making difficult choices about where to invest limited resources. They may not have the budget they would like for culture development, employee training, or the best technology. Yet delaying those investments can have lasting effects.
That’s what keeps many business owners up at night: knowing they have to make the best possible decisions with limited funds and incomplete information, and that a wrong decision could have real consequences. There are countless ways to spend money, but the challenge is identifying the investments that will make the greatest difference while remaining authentic to the organization.
When a business is growing quickly, what warning signs indicate that its HR infrastructure is not keeping pace?
Oftentimes, as a business grows quickly, the leader still tries to do it all. But when a business owner struggles to delegate, it can become detrimental to the organization.
One of the hardest responsibilities to hand off is HR. The business owner often becomes the default person responsible for handling every employee concern and answering every workplace question. This is rarely the best use of the owner’s time. It can leave them burned out while employees are left waiting for answers to important questions.
In addition, when HR is treated as a secondary priority, the people working for the organization can begin to feel secondary, too. Investing in HR is ultimately an investment in employee retention and overall revenue because the business experiences fewer costly interruptions from turnover.
At what point does managing HR internally begin to take too much time, or create too much risk, for a business owner?
There are HR requirements for an organization with even one employee, and those requirements continue to grow as the business reaches 11, 15, 20 employees, and beyond. When HR is consistently treated as a secondary task, employee morale can decline and the organization can quickly fall behind on compliance.
It’s similar to putting off an oil change. You may be able to keep driving for a while without taking your car to the shop, but the longer you wait, the greater the risk, and the more costly the repairs may be. Staying on top of HR from the beginning helps prevent much larger and more complicated problems down the road.
Beyond compliance mistakes, what HR risks do business owners most commonly overlook?
More than anything, business owners tend to overlook the importance of making HR strategy part of their overall business strategy. The strongest organizations operate with a trusted HR partner advising leadership, along with engaged leaders who listen, take ownership, and follow through on meaningful change.
Addressing Employee Issues Before They Escalate
How can business owners tell whether a people-related challenge is an isolated issue or a sign of a larger organizational problem?
It’s a best practice to conduct regular employee engagement surveys, monitor turnover, and review trends from exit interviews. Recruiting and training an employee is a significant investment for any organization, which makes it critical to understand what may be affecting engagement and retention before valued employees decide to leave.
Leaders should maintain open communication with employees, not only about the quality of their work, but also about the quality of their experience within the organization. Of course, sending out a survey is one thing; listening to the feedback and using it to make meaningful, organization-wide change is another. Employees need to see that their input leads to action.
What should business owners do when they believe an employee is not the right fit but are hesitant to address the situation?
Business owners should clearly state in both the offer letter and employee handbook that employment with the organization is at will, meaning either party may end the employment relationship. At-will employment is the norm in 49 of the 50 states, with Montana as the exception.
Even in an at-will relationship, it’s important to identify specific performance or behavior concerns early, communicate them clearly, and give the employee a reasonable opportunity to improve. Leadership and the employee’s manager should not allow the situation to fester. When improvement does not occur, they need to address the issue in a timely and thoughtful manner, which may mean ending the employment relationship and making way for someone who is a better fit for the role and the organization.
Hiring (and Retaining!) the Right People
How can a business owner determine whether it is truly time to hire—or whether responsibilities and processes should be reorganized first?
It’s important to establish a clear scope of work for each person on the team and then align job descriptions with those responsibilities. The leadership team needs to remain open and flexible as business needs change while still working within the framework established by the scope of work.
Without that clarity, the organization risks undercharging for the work its people are performing, while employees can become overextended and burned out. Regular leadership huddles provide an opportunity to revisit responsibilities, monitor workloads, and address potential issues before they become larger problems.
Leadership teams can also consider a variety of workforce structures, including full-time employees, part-time employees, interns, and consultants. However, determining the right combination can quickly become complicated and potentially expensive, specially when factoring in the technology, management, and support requirements associated with each role.
What hiring mistakes tend to create the biggest long-term problems for growing businesses?
There are many workforce mistakes that can create long-term problems for an organization. When employees are overwhelmed, the solution may be to bring in another person, but that isn’t always the best approach. Sometimes the real need is to clarify responsibilities, improve processes, or delegate work more effectively.
Before making a new hire, leaders need to understand the specific business need they are trying to address. Recruiting, hiring, and training an employee – and then carrying the ongoing cost of another full-time position – is a significant investment. At the same time, failing to delegate responsibilities or expand the team when the need is real can prevent the business and its employees from growing.
David Packard, co-founder of Hewlett-Packard, is often associated with the observation that “more companies die of indigestion than starvation.” In other words, growth can create problems when a business adds people, expenses, or complexity without first ensuring it has the structure to support them.
What can small and mid-sized businesses do to compete for talent when they cannot match the salaries or benefits offered by larger companies?
There is a lot that small and mid-sized businesses can do to compete for talent. While larger companies may rely heavily on AI and automated recruiting processes that can make candidates feel like a number, smaller businesses have an opportunity to provide a more personal, human experience from start to finish.
It doesn’t take a significant amount of time or money to make people feel valued. When leaders create a top-down commitment to seeing the whole person, while offering offer flexibility, autonomy, access to leadership, and meaningful work, employees are more likely to feel supported by the culture and stay with the organization over the long term.
How should business owners respond when a key employee unexpectedly resigns?
In a smaller company, it’s a terrible feeling as a leader to lose a key employee. The loss of a key employee can be especially difficult because one departure can significantly disrupt the team and the business. Leaders need to understand why the employee is leaving so they can identify and address any underlying issues rather than risk losing others for the same reasons.
It’s also important to quickly identify the critical responsibilities, relationships, and institutional knowledge connected to that employee’s role. From there, leaders can redistribute work carefully, determine whether there is a meaningful solution within the existing team, or decide whether the role needs to be replaced.
Where Should an Overwhelmed Business Owner Begin?
What are the top 3 things business owners should know about HR?
- Your people are everything to your business. Take care of them with a true HR department!
- Offer benefits to your employees from the start and when you can afford it, increase the benefits you offer. This is a substantial but meaningful investment that will positively impact employee retention.
- Be thoughtful about how all employees view the employee experience at your company. Partner with an HR professional to ensure they feel supported, engaged, and confident in the business you are running.
If a business owner is facing multiple HR challenges at once, how can they determine what to address first?
Some HR issues require immediate attention. If a business owner is facing legal action from a current or former employee, the matter should be addressed right away. The same is true when a state agency raises concerns about unemployment insurance or improperly filed state taxes, or when an employee experiences a workplace injury. Depending on the circumstances and applicable requirements, these issues may need action within 24 hours.
Other matters, such as an employee relations concern, may need to be addressed within a few days. Longer-term priorities, including recruiting a key employee, enrolling in E-Verify, or establishing COBRA administration, may need attention within several weeks. Benefits enrollment, a new paid time off plan, or improvements to the onboarding process may be addressed over the course of a month.
The challenge for a do-it-yourself HR department is knowing which issues require immediate action, which can wait, and what steps must be taken to address them correctly. Flex HR is a valuable partner for small and mid-sized businesses – including those just getting started – providing access to experienced HR and payroll professionals at a fraction of the cost of building the same level of expertise in-house.
Connect with Jenny on LinkedIn.
Your HR challenges are unique. Your support should be, too. Talk with Flex HR today about a customized approach that addresses your priorities – and helps you stop losing sleep over HR.
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