Today’s 10 Most Common Human Resource Challenges faced by Start Ups & Small Businesses

Issues such as cash flow, competition, and revenue growth are top of mind for small business owners and their teams. Along with these challenges comes another area many companies struggle with: human resource management.

Human resource management (HRM) includes:

  • Job design and analysis
  • Workforce planning
  • Training and development
  • Performance management
  • Compensation and benefits
  • Legal issues

HRM can be a challenge for small businesses especially, which typically don’t have an HR department to rely on. They may be limited to one HR person, or this responsibility may still belong to the CEO. Regardless, small business owners need to understand the challenges facing them so they’re prepared to tackle HR issues as their company, and workforce, grows.

Here are 10 of today’s most common human resource challenges along with solutions you can quickly implement in your business.

#1 Compliance with Laws and Regulation

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Keeping up with changing employment laws is a struggle for business owners. Many choose to ignore employment laws, believing they don’t apply to their business. But doing so could mean audits, lawsuits, and possibly even the demise of your company.

Solution:

No matter how large or small your business, it’s important to make sure you’re in compliance with local, state, and federal labor laws. There are regulations on everything from hiring practices, to wage payment, to workplace safety.

#2 Management Changes

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As a business grows, its strategies, structure, and internal processes grow with it. Some employees have a hard time coping with these changes. A lot of companies experience decreased productivity and morale during periods of change.

Solution:

Business owners should focus on communicating the benefits of the change for everyone. Regular staff meetings are a good place to start. When your team understands the why, how, and when of the change, they’ll be more likely to get on board.

#3 Leadership Development

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A recent study showed more than a third of companies are doing an average job, at best, at implementing leadership development programs. Thirty-six percent of companies surveyed in Brandon Hall Group’s State of Leadership Development Study admitted that their leadership development practices are below average.

Solution:

Leadership development is critical in keeping your management team engaged and motivated, and prepares them to take on more responsibilities in the future. Make it part of the culture. Create opportunities for them to use their strengths every day. Accomplishing goals will motivate them and give them a chance to develop their skills.

#4 Workforce Training and Development

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Investing in the training and development of lower-level employees is another common HR problem. Some businesses have trouble finding the resources to do so. Employees on the front lines are some of your hardest workers, and may not have the time to take a training course.

Solution:

Training and development doesn’t have to take a lot of time or money. Recruit managers and senior leadership in mentoring their subordinate employees. You could also provide online training courses so people can go at their own pace. Invest in your workforce and you will have a loyal, productive team.

#5 Adapting to Innovation

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Technology is constantly changing. Businesses must be quick to adapt, or risk being left in the dust by their competitors. The challenge for small business owners is getting employees to embrace innovation and learn new technology.

Solution:

Communication is critical. With any change, make sure your team understands the why, when, and how. Set clear goals for the adoption of initiatives, and provide employees with the training they need to get comfortable with it.

#6 Compensation

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Many companies are struggling with how best to structure employee compensation. Small businesses have to compete not only with businesses of a similar size, but also with corporations with big payroll budgets. Plus, you have to factor in the cost of benefits, training, taxes, and other expenses, which can range from 1.5 to 3 times the employee’s salary.

Solution:

Even though salary is important, it isn’t always the most important factor for job candidates. Creating a system to reward employees for excellent performance is one way to make up for a lower salary. In addition, consider offering incentive programs such as profit sharing or bonuses, which can be a win-win for the employee and the company.

#7 Understanding Benefits Packages

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The Affordable Care Act has been a pain point for many small businesses in the past few years. Rising healthcare costs mean companies must either pass these costs on to employees, or take a hit to their bottom line. Since good benefits packages can be a deciding factor for potential hires, understanding them is key.

Solution:

For small business with fewer than 50 employees, there are many options for offering healthcare benefits. One option is purchasing a plan through the Small Business Health Options Program (SHOP) marketplace. Doing this gives you the opportunity to take a tax credit, which can help offset costs.

And don’t forget about benefits such as:

  • Unlimited vacation time
  • Flex time
  • Free snacks
  • Wellness programs
  • Commuter benefits

These benefits are affordable ways to offer extra perks—and they’re extremely popular with today’s workforce!

#8 Recruiting Talented Employees

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Attracting talent is a huge investment of time and money. It’s difficult for entrepreneurs to balance between keeping a business running, and hiring the right people at the right time. In addition, it’s impossible to know whether a candidate will actually be a good fit until they’ve worked for you for a period of time.

Solution:

One of the best ways to find the right people for your business is to use a staffing company. They provide temp-to-hire solutions that allow you to try out new employees with little to no risk. You’ll save time, money, and frustration, and maybe even find a future executive or business partner.

#9 Retaining Talented Employees

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Competition for talented employees is fierce. Startups and small companies don’t have big budgets for retirement plans, expensive insurance plans, and other costly items that their larger competitors do—at least, not yet. Employee turnover is expensive and can negatively impact business growth.

Solution:

Onboarding is highly effective for employee. Research shows having a structured onboarding process means employees are 58 percent more likely to stay with a company for three years or more.

#10 Workplace Diversity

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Multiple generations. Ethnic and cultural differences. These are just a few of the many factors that make workplace diversity a continual challenge for small businesses. The risk of lawsuits for failing to protect employees from harassment is real.

Solution:

Creating a culture of teamwork and respect will keep the work environment positive and productive. In addition, implementing a diversity training program is a must. Employers are responsible for setting standards of behavior in the workplace. Standards and a system of accountability should be set up early on.

Why Effective HR Management is Necessary

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Employees are a company’s best asset. Small businesses that invest in their teams will enjoy faster growth and outpace their competition.

Here are just a few more reasons to focus on effective HRM:

  • Creates a unique workplace culture
  • Emphasizes the rules, expectations, and standards for the workplace
  • Helps everyone understand workplace diversity
  • Facilitates communication between HR and employees
  • Strengthens the importance of training and development
  • Eliminates employee uncertainty

It’s important to know common HR issues so you can put the right policies and procedures in place now. Understanding the complexities of employee benefits, employment laws, leadership development, and other areas will help you stay ahead of the competition and meet your business goals this year, and in the years to come.

Many businesses struggle with human resource challenges, but Excelerate coaching  services is here to help. We coach and consult with business owners, C-suite teams, leadership staff and HR managers of small to medium-sized businesses seeking to reach their highest potential. If you’re ready to take your business and leadership team to the next level, contact us today.

Resources

http://www.villanovau.com/resources/hr/human-resource-management-challenges/
https://www.shrm.org/hr-today/news/hr-magazine/0316/pages/the-big-issues-facing-hr.aspx
http://www.managers.org.uk/insights/opinion/2013/april/the-most-common-issues-faced-by-human-resource-managers
http://www.eremedia.com/tlnt/new-study-the-top-10-best-practices-of-high-impact-hr-organizations/

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