Small businesses tend to manage their people in an informal way. Business owners are able to rely on the “personal touch” as they usually know every employee. However, as businesses expand and employee numbers grow, it becomes more difficult to manage human resources in this way.
When businesses reach this tipping point, they typically begin to think about investing in human resources (HR) expertise. Establishing an internal team to deliver on all aspects of HR can come with a hefty price tag – this is where external HR expertise can really make sense.
Making the decision on the best HR consultant for your business comes down to the right fit. Look for a HR consultant who has experience in the area you want to focus on. For example, is compliance a concern – do you worry if you have the right employment contracts in place for staff or the right policies? (Let’s face it, navigating the ever-changing landscape of employment legislation is no walk in the park). Or are you looking for expertise in leadership development, managing under-performing staff, employee engagement – you may be looking for support in all aspects of human resource management. In our experience, it’s a good idea to start with a comprehensive HR audit which looks at all aspects of HR health, including compliance, best practice and areas to improve efficiency in the business. Once you have this information, you can prioritise effort and investment in the areas that present the biggest risk to your business either from a compliance perspective, or a growth perspective.
Look also for an individual or a team who have actually worked as HR professionals, and have been on a management team advising business owners or leaders across all aspects of human resources management. Their longevity in the profession demonstrates that they have the skills, knowledge and experience to advise you successfully.
Here are some common HR management pitfalls that we see when we begin to work with our clients:
- Hasty hiring – from poor job descriptions that attract the wrong candidates to a hurried interview process that results in hiring “warm bodies”. Estimates on the cost of a bad hire vary, but it is commonly accepted to be in the range of 80% to 150% of annual salary when you factor in additional recruitment cost, time to recruit, training costs, missed or delayed business deliverables, impact on the rest of the team and impact on client delivery.
- Incorrectly classified employees – this is a very risky area for businesses and stiff penalties can be imposed for getting it wrong. In addition to penalties, companies can be up for back-dated employment entitlements such as superannuation and entitlements.
- Outdated (or non existent) employee documentation – To reduce employee claims, employers should have in place employment contracts that are compliant with the Fair Work Act, as well as work-related policies. Businesses of all sizes should have an employee handbook outlining expectations. Having a handbook isn’t enough however. Policies need to be kept up to date and employees re-oriented at least annually on any changes.
- Training takes a backseat – New hires need the tools to hit the ground running, current employees need development to support the business today and into the future, and leadership skills become more important as managing employees is delegated beyond the business owner. Strong leadership leads to strong businesses – hands down. Productivity, communication and relationships hinge on good leadership skills, and research shows that you can gauge overall business performance pretty well based on employees’ view of management.
- The HR agent is not data driven. Often business owners or leaders think they know how staff are feeling about the business or what’s important to their teams. However, without asking staff, you may risk investing in the wrong areas. There are always hidden surprises (including positive ones) that come out of a staff feedback process.
- Performance issues aren’t dealt with adequately – Messy firing can lead to unwanted legal claims. While no termination is a positive one, it can be easier when properly prepared for. If feedback doesn’t solve the problem, then terminating employment may be unavoidable – going about that the right way is critical to avoiding unfair dismissal or adverse action claims.
Owners of medium-sized businesses have survived the life and death struggles of a small company and can begin to see the promise of realising the dream that led them to start their business in the first place. However, celebration can be cut short by unexpected human resource problems that either post a financial risk to the business or can impede continued growth. The right HR consultant can both mitigate compliance risk and maximise sustainability and improvement in a flexible and cost effective way.