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Five Common and Costly Mistakes Made By Small/Medium Sized Businesses

Employees are the most unique and expensive components of any size business. Dealing with employee related issues, such as recruitment, employee relations, and compensation are time consuming and costly. In many small to medium sized businesses, these tasks are delegated to administrative or finance resources. Sometimes this works, other times it results in costly mistakes, inefficient procedures, and possibly legal consequences.

How can the business owner reduce HR related activities, optimize processes and improve the bottom line? They must understand HR costs for their business, including time spent by internal resources, or costs associated with external service providers. Once there is a clear understanding of the time and effort spent on HR activities, they can determine the value being received. Here are the five common and costly mistakes companies make.

1) Recruitment Practices

A bad hire takes up time, affects employee morale, costs money, and irritates customers. There are particular tools which increase the potential for a good hire. These include a robust pre-screening process, skills and behaviour based assessments, and proper reference and background checks.

2) Retention Strategies

A good hire just arrived, now you have to keep them. The valuable assets employees possess must be recognized and utilized to maintain their level of motivation. The estimated cost of losing a position to a turnover range from 30 per cent of annual salary for hourly employees up to 150% for more senior positions. It’s not only about money – well designed performance management systems will recognize achievement and bolster retention.

3) Employee Performance

Failure to address employee performance issues has a negative effect on the good performers. It impacts productivity and ultimately drives them away. A well -designed, compassionately administered employee performance system helps bring an employee’s performance up to expectations. It also enhances company credibility, reflects its values and demonstrates its integrity. An efficient performance management system supports low risk terminations.

4) HR Documentation And Policy Documentation

Accuracy in both types is critical. HR documentation is mandated by legislation and includes payroll, overtime and vacation records. Inaccuracy can lead to over and underpayments to employees, noncompliance with legislation and ultimately, fines and/or lawsuits. Equally vital are policies and procedures, usually in the form of employee handbooks or policy manuals. These documents outline acceptable and expected behaviour for employees. Well written guidelines help avoid problems with employee performance and costly terminations.

5) Legislative Compliance

Legislative Compliance is not an issue companies can afford to ignore. Ignorance is not an acceptable defence with the federal and provincial authorities. Companies must keep up their legislative accountabilities, such as PIPEDA, WSIB, OHSA, ESA, AODA and Bill C-168. Many resources are available to business owners to help them stay informed.

Human Resources plays an integral role in any size company. Taking a proactive approach in addressing HR issues, recognizing and resolving them before they become problems can save money and avoid some major headaches.

Frances Mote has over 20 years experience in organizations with preeminent people practices and has a reputation for effective problem solving and getting things done. For more information, please contact Frances at

Published in the October 2011 Mississauga Board of Trade Magazine