The HR Mistakes Costing Your Business More Than You Think (And How to Fix Them)

GUEST AUTHOR: Kayla Silva, founder of The HR Collective

Running a small or medium-sized business is no easy feat. You’re wearing multiple hats—CEO, CFO, Head of Sales, and sometimes even HR. 

But here’s the reality: HR isn’t just about compliance and payroll. It’s about setting the foundation for your company’s success.

Many business owners unknowingly make critical HR mistakes that cost them top talent, productivity, and, ultimately, revenue. 

If you’re scaling your business, these missteps could hold you back. 

In this guest article by Kayla Silva, founder of The HR Collective, find out the most common HR pitfalls and how to fix them before they derail your business growth.

5 Costly HR Pitfalls Most Small Business Owners Make 

1. Hiring Too Fast (or Too Slow) 

Many founders and business owners rush the hiring process when they’re overwhelmed with work. Others delay hiring because they fear making the wrong choice. Both approaches can hurt your company.

I’ve experienced the pitfalls of both scenarios. Managers have rushed to hire because they “just need someone.” Within months, the new hire struggles to meet expectations, forcing the manager right back to square one of their search again. When running a small business it is critical that you hire the right candidate and set clear expectations in the interview process to find that person. However, you don’t want to be so overly critical that you can’t make a decision. I’ve worked with founders who have hesitated to hire, leaving the existing team overwhelmed and burned out.

The Fix: Develop a structured hiring process that prioritizes quality over speed. Define your company’s values, create clear job descriptions, and implement a hiring process that assesses both skill and cultural fit. If hiring feels overwhelming, consider fractional HR support to build out a talent strategy that scales with your business.

2. Ignoring Company Culture Until It’s a Problem

You assume culture will form naturally as your team grows, but without intention, it can become toxic or misaligned with your vision.

A small but rapidly growing tech company started noticing high turnover and low engagement. Employees felt disconnected from leadership and unsure of company expectations. By the time leadership realized the problem, it had already impacted team morale.

The Fix: Define your company’s values early and integrate them into hiring, onboarding, and performance reviews. Lead by example! Company culture starts at the top. Regular check-ins, employee feedback loops, and an intentional focus on engagement will help shape a thriving workplace.

3. Failing to Invest in Leadership Development

Your best employee is promoted into a management role, but now they are struggling to lead the team. Sound familiar? This often happens when leaders promote someone into management, but doesn’t get them the right training and development for first time leaders. Leadership isn’t innate—it’s a skill that needs to be developed.

Throughout my career, I’ve worked with highly skilled individual contributors that moved into management. It is not an easy feat! While most are technically brilliant at times they struggle with team management, leading to frustrated employees and potentially disengaged employees. If you don’t resolve it quickly, this could lead to turnover on the team and lack of trust between employees and managers. However, with proper coaching and training opportunities you can set managers up for success early on. 

The Fix: Provide leadership coaching and training for new managers. Set clear expectations for leadership roles and create a feedback-driven culture. When leaders feel supported, they drive better results, retain top talent, and create a more engaged workforce.

4. Overlooking Compliance Until It’s Too Late

Small businesses often assume HR compliance issues won’t affect them—until they do. A wrongful termination lawsuit, misclassified employees, or wage disputes can quickly become costly legal headaches.

Compliance isn’t the fun stuff, but it’s critical. Founders will view the work as slow moving and bureaucratic. HR professionals can help remove those barriers for you and set the company up to adhere to regulations that will avoid those headaches later.

The Fix: Stay ahead of compliance by proactively reviewing labor laws, implementing clear policies, and ensuring proper employee classification. Partnering with an HR expert can help you stay compliant while focusing on growing your business.

5. Thinking HR is Just an Admin Function

Many small business owners view HR as a necessary but non-strategic function—something to handle benefits and payroll but not a driver of business success.

I once worked with an Executive Team that initially resisted investing in HR beyond basic admin functions. They would only engage with HR to check their compliance boxes then be done. It wasn’t until after the business started experiencing high turnover and struggling with retention, that the leadership team realized that strong HR strategies could improve hiring, engagement, and productivity. By implementing a strategic HR support model, employee satisfaction increased, and turnover dropped significantly.

The Fix: Shift your mindset. Strategic HR drives business growth by improving retention, increasing productivity, and fostering a strong workplace culture. If your company isn’t ready for a full-time HR leader, a fractional HR consultant can provide the expertise you need without the overhead cost.

HR is a Growth Strategy for Small Business, Not a Cost Center

HR isn’t just about policies—it’s about people. 

The most successful small and medium-sized businesses understand that investing in HR early pays off in the long run. 

Whether it’s hiring smarter, building a strong culture, or developing leaders, prioritizing your people strategy will set your business up for long-term success.

If your company is growing and you’re ready to invest in a strategic HR partnership—you’ll want to talk to The HR Collective! They specialize in fractional HR support and strategic people solutions for scaling businesses. 

Start building a workplace where your team thrives—and your business does, too.

ABOUT THE AUTHOR

Kayla Silva is the Founder of The HR Collective, a people-focused consulting firm providing Fractional HR support, and strategic HR projects for growing businesses. With a focus on scaling teams and empowering leaders, The HR Collective helps businesses build strong, sustainable HR foundations.