General Human Resource Management Challenges for Small Businesses

Updated on :June 14, 2024
By :Chan Chiou Hao

No matter the company's size, a good HR team is crucial for the organization's growth and development. Small businesses and startup companies face a unique set of challenges in the HR department. Some issues are easily solvable with good HR software, and others require time, patience, and expertise.

These are the most common HR concerns for small businesses (and solutions to overcome them):

Managers assuming an HR Role without any HR Experience

More often than not, small businesses and startups face staffing issues, and one person fills two or three roles at a time. It might make sense for the Marketing Director to lead brand, SEO, PPC, and marketing simultaneously. However, it's hazardous if the same person leads HR, especially if they don't have any HR experience.

Hence, as the employee count grows, the HR responsibilities will grow as well. And it's crucial for the proper development and scaling of the business to have an HR professional in the HR role.

Solution: The best option is to hire an HR professional that will set up the proper systems. However, if that's not a possibility, you can also consider outsourcing HR or investing in a Human Resource Management software.

Lack of Performance Management & Development

lack of performance

To motivate your employees and make them more productive, and practical, your HR team and managers must put some time into assessment and development. And it's an HR's job to find the best way forward by developing procedures for the employees and the managers.  

Solution: Your HR team should come up with the most effective procedure for measuring performance. The HR team and management team should draft precise requirements and KPI's for each role. And they should also prepare professional and personal development plans with each employee in your company.

Lack of HR Policies

The lack of HR policies in a company is detrimental. It can cause severe issues along the line, creating an atmosphere of mistrust and lack of professionalism. Your HR practices should reflect your company's culture, and above all else, your employees must be familiar with them.

Solution: Don't expose yourself and your company to potential issues! Your HR team should draft clear and precise HR policies covering the most common problems and difficulties in the working process. Hence, the policies need to cover everything from sick leave to sexual harassment. Moreover, they must be following the law.

Tip: It might be prudent to have a labor law expert to review your HR policies.

Lack of Retention

Employee retention is a common issue for many small businesses and startups. And if you notice this negative trend in your company, your HR team needs to address it as fast as possible. Or you might be risking your company's reputation, which will make it even harder to find good employees.

Solution: Your HR professionals need to create a specific procedure for employees leaving the company. And they need to do thorough and honest exit interviews, where employees will feel safe to express all their concerns and issues with the businesses and management.

Lack of Training

The success of your company depends on all your employees getting proper training and onboarding. Thus, your HR professionals must work with the management team and draft procedures and training programs for every department.

Solution: It would be prudent if the HR team in your company created:

  • Training Schedules
  •  Development Plans
  • Seminars, Webinars, and Conferences

You need to train your employees adequately to do a good job. If a manager needs things done individually, the HR team needs to jump in and ensure that the employee will get the training. 

Lack of Proper Onboarding

The onboarding creates the first impression of the inner workings of your company for an employee. And it can be quite challenging to fix the first impression!

Small businesses tend to forget about documenting and creating an onboarding process. In fact, with so many responsibilities, onboarding is usually not the first thing HR focuses on as well. However, as we said above, you have to onboard and train your employees if you want them to be effective.

Solution: Work with your HR team on the onboarding procedure using onboarding software.  Document everything and create a system that works seamlessly for every department.

Managers not acknowledging the Needs of HR

HR Policy

Another widespread problem small businesses face is managers disregarding HR needs or not acknowledging their input. And this state of affairs often leads to further disagreements and a stressful environment in general.

Everyone working in the company will feel the effects. Thus, you need to avoid this conflict or deal with it as soon as possible.

Solution: Setting clear guidelines and expectations is crucial! Hence, the HR team needs to know when, where, and if they should interfere with a manager's decision. Moreover, the managers need to be open to suggestions and feedback that can benefit their employees. 

Long & Tedious Recruitment Process

One of the most important jobs an HR professional has is recruitment. And in the end, recruitment comes down to meeting the manager's expectations and finding the best candidate for the position.

Of course, this can be quite tricky, and it usually turns into a long and tedious process. This is a common pitfall for many companies, and there are ways to avoid it.   

Solution: The HR professional needs to have access to various recruitment tools like LinkedIn, job listings, and social media groups. If required, HR also needs ads on the most popular channels.

Tip: When you're hiring an HR person, you might want to access their soft skills, too, like communication and pitching.

Job Requirements/Specifications

As we said above, sometimes, in small businesses and startups, the same person is responsible for multiple positions in the company. However, as your business grows, you'll need to create specific requirements and specifications for each role. This classification will save you time and money in the future.

Solution: Work with your HR team on the classification document, and be clear and precise for every role. List all the requirements and specifications! That way, your employees will know what to expect, which will generate a more safe and secure working environment. 

No Rewards & Incentives for the Employees

Every employee needs to feel appreciated. Creating a happier environment makes employees work harder and be more productive.

You know that happy staff translates to more success. 

However, what happens when you have two employees in the same position, and one of them is doing a better job than the other? The obvious answer would be to reward the one doing an excellent job to motivate both to be better.

Solution: Rely on your HR team's experience and let them draft a rewards/incentives program for the employees. Everyone working in your company will be happier if they know their good work is noticed. 

Mishandling Sick Leave

Even though long-term sick leave is a challenging subject for most business owners, it still has to be addressed. Long-term sick leave costs the company money and causes delays in the working process. Moreover, when people are not working for months, usually a coworker has to pick up the slack, which can cause additional issues.

Solution: Your HR team needs to consult with your legal team and find a permanent solution to this issue. Hence, HR needs to create long-term sick leave procedures and include everything from who will cover the costs and cover the work. It would be best to hire a replacement when an employee is unhealthy for a long time.

Law Compliance

We touched upon this subject, but it's incredibly crucial for your company – every HR policy needs to be drafted according to labor laws. You're risking penalties and possible legal issues if HR is not working according to the law.

Solution: The most prudent solution would be to have a lawyer or a legal (corporate) expert examine every HR policy. Moreover, they will let you know if you need to add additional provisions or some other practice will better suit your business.

Resolving Conflict

Conflicts are a part of everyday work, and sometimes they can't be avoided. However, the way you're going to deal with disputes is more important than the fight itself. That's why your HR team needs to have policies and procedures in place before a conflict occurs.

Solution: If you have the right company culture and a good HR team, the policies are built around protecting your business. And conflict resolution comes down to protecting the company and the employees.

Hence, once your HR team creates the conflict resolution procedure, please give it to your legal counsel for a quick check.

Lack of Monitoring

You have to be able to monitor and check the work of your employees. However, what happens when there is a lack of monitoring? Some people might see that as an invitation to slack or transfer their tasks to other coworkers. This situation can easily fester and create different problems in the future.

Solution: Work with your HR on finding the most suitable tracking software, and ask your employees to clock in and clock out for each shift. Moreover, use a task manager like Asana, and ask your managers to assign tasks with strict deadlines.

Blurred Lines between Employees & Managers

Small businesses sometimes have a difficult time with blurred lines between employees and managers. When the company is just a handful of people, in the beginning, it's expected for everyone to work together and become friends. When your company starts growing and you begin hiring people, blurred lines can affect your working schedule and create employee issues. 

Solution: Your HR team needs to draw the lines between the managers and the employees, and it needs to educate everyone about proper conduct. Moreover, the HR team needs to create a safe space for everyone working in your company to express their needs and concerns.

Outdated Employee Handbook

The Employee Handbook needs to be continuously updated with new policies and kept up to date with labor law. Most companies create an Employee Handbook, and they forget about updating it, which can cause a lot of confusion if you're implementing new policies.

Solution: HR is responsible for bringing the Employee Handbook up-to-date because they draft and implement new policies. Thus, updating the Employee Handbook should be a follow-up task for HR after every labor law change or any policy/operational change in general.

Lack of Productivity & Motivation

The most important job of the HR team is to keep the employees' productivity and motivation on a high level! If your employees lack motivation, they won't be productive and efficient, and your business process will suffer as a result.

Solution: There are many ways for HR to keep employees engaged:

  • Open communication and transparency
  • Give employees purpose
  • Help employees understand the company's vision.
  • Help employees fit in with their team.
  • Say thank you often.
  • Show employees appreciation
  • Focus on team-building activities (even virtual ones)
  • Prepare some small gifts.
  • Don't forget about important dates.


Human resource management is challenging. Investing in the right HR system can ease out the friction. The HR team can follow the above-mentioned basic tips to help motivate your employees. Also, business organizations have to digitize their HR activities and work intelligently to hire the right set of talent for their company. The HR Software is a potent tool that helps companies to accomplish all these tasks along with enhancing employee satisfaction level and retention rate. If you want to know more about the software features and benefits, please go through the buyer’s guide. In addition to these, you can also explore the best free and open source Human Resource Management Software such as JustLoginICE HRM, Odoo HR, Bitrix24, and more.

Chan Chiou Hao
Chan Chiou Hao

Chan Chiou Hao is COO of JustLogin with over 20 years of Business Development experience in the internet industry. He manages the customer-facing functions of JustLogin, overseeing the Marketing, Sales, and Customer Experience organization. He also looks after the business's partnership strategy and is continuously seeking new partners to join the fold of JustLogin's evolving ecosystem.

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