How Your SMB Can Manage the 6 Fatal HR Inefficiencies That Are Stunting Your Scaling Process

All businesses are reliant on an efficient human resources department to support their scaling efforts, but in many cases, HR inefficiencies can cost your SMB dearly when left unaided.

The costs associated with shoddy HR practices are high. With the price of replacing a single employee estimated to range between six and nine months’ worth of salary, mistakes in the hiring or management process can severely eat into your growth prospects.

In addition to this, disengaged employees through poor HR responsiveness can cost businesses up to 34% of their salary in lost productivity.

These inefficiencies can cause a ripple effect throughout your organization, increasing the risk of missed deadlines, weaker communication, and poor performance that may leave your scaling ambitions in tatters before they have a chance to manifest.

With this in mind, let’s explore the six fatal HR inefficiencies that can impact your growth and identify ways to manage these shortcomings accordingly:

1. Employee Retention

One of HR’s biggest challenges revolves around employee retention. High instances of employee turnover carry a hefty financial cost, while the loss of institutional knowledge and expertise can adversely affect the performance and morale of teams.

Adopting a solution that can appropriately recognize workplace excellence and reward high-performing staff can be a great means of maintaining a higher level of employee motivation.

Additionally, incorporating competitive compensation and benefits packages can be key in attracting the best talent to your SMB.

Your HR department should seek to nurture a company culture that prioritizes value-adding practices such as open communication, operational transparency, and workplace inclusivity to help avoid instances of disengagement among employees.

2. Payroll Challenges

Payroll inefficiencies can be a significant challenge for SMB to maintain accurate payments, taxation requirements, and compliance throughout their operations.

Because payroll responsibilities can be split between your HR and accounting departments, data errors and communication shortfalls can make inaccuracies in the distribution of bonuses, tax payable, and overtime payouts more difficult.

To counter this, your business should seek to incorporate standardized payroll solutions to offer a point of access for all relevant departments as well as an employee portal. It’s also possible to generate an employee pay stub using automation software that accurately extracts relevant data for added accuracy and compliance.

3. Nurturing Internal Talent

One of the biggest measures of HR success can be found in the department’s ability to match talent to appropriate roles within your business.

For large and small businesses alike, matching talent to roles or projects can be a damaging HR inefficiency if left unchecked. However, technology can help to actively track and evaluate internal talent in a way that can matchmake existing employees with prospective roles that they may excel in.

Artificial intelligence can even evaluate employee soft skills, such as their potential and career aspirations, to accurately align talent and identify opportunities for progression without harming productivity.

4. Recruitment Accuracy

Another inefficiency that would require immediate attention revolves around shortfalls in talent acquisition.

The challenge of hiring the perfect candidate in terms of credentials and culture fit for your business can make or break successful HR teams, but these processes are riddled with human error and unconscious bias.

With the help of automation technology, AI tools can actively screen candidates for job roles and even redact identifying information to ensure that new hires are selected purely on their suitability for a position and for no other unconscious reason.

5. Data-Driven Decisions

Whether it’s through an inability to access relevant insights or an unwillingness to sacrifice their own intuition, HR teams can struggle significantly with actioning analytical insights.

This can lead to gaping oversights when it comes to analyzing employee performance, engagement, and retention metrics while fostering a more reactive decision-making policy rather than proactive planning.

Welcoming HR analytics tools into the mix can be a far more effective means of leveraging data-driven decisions surrounding key employee insights and can even help to anticipate changes in turnover and engagement gaps to refine workplace satisfaction strategies.

6. Maintaining Compliance

Instances of noncompliance are one of the most costly challenges that SMB face. Regulations surrounding relevant HR matters are constantly changing, and areas such as pay, employment hours, contracts, health and safety, and data protection can weigh heavily on industry professionals.

Ensuring compliance calls for comprehensive attention to detail, and failure to maintain a strong level of adherence to regulations can incur hefty fines that can inhibit an SMB’s ability to grow sustainably.

HR professionals should counter these threats by continually auditing their commitments to identify potential risks while ensuring all policies are relevant and up-to-date. While these audits don’t have to take place too frequently, monthly updates can significantly help to reduce your risk of getting fined by regulators.

Leveling Up Your HR

Inefficiency within your HR processes can be a dangerous way to operate a small business. But incorporating a level of automation and commitment to utilizing data more effectively can make a significant difference in supporting your scaling ambitions.

No SMB should lose out on its growth opportunities due to preventable HR mistakes, and overcoming these fatal inefficiencies can form the cornerstone to a sustainable level of productivity long into the future.