22 Common Hiring Mistakes Small Businesses Make, and How to Avoid Them

Most current estimates say that hiring the wrong person can cost a business at least $25,000 per year.  That kind of loss could devastate any business, but especially small business and start-ups.  Bad hires cost the business lost productivity, often employee morale, added managing, client relationships, lost revenue, the salary/benefits/training given to the hire, and additional recruitment and hire costs to fill the position again.

Although these are very common mistakes, they can be avoided, building your business a loyal and passionate team!

  1. Having too many steps in the recruitment or hiring process, often in search of the “perfect” candidate.
    1. Candidates can get frustrated if the process seems too invasive or drawn out.
    2. Simplify – a short (15-30 min) initial phone screen, two interviews (one being with their prospective peers), a work related assessment, and background assessment is typically expected of management levels, one less interview for support levels like receptionists.  Keep the process uncomplicated and timely – don’t have lengthy delays between steps.
    3. Turning down great prospects in search of unobtainable quality or trait combinations that might not actually exist in one person – in other words, the search is too specific.
    4. Hiring too fast or taking too long can easily cause impulsive decisions.  It’s better to limp along a little while longer instead of going with someone from the first few interviews; likewise, don’t take months to make decisions.  It’s a job seeker’s market, and your candidate will have moved on without you.
    5. The “perfect” candidate crafted in a job description likely doesn’t actually exist, so don’t keep dragging out the process in hopes they will show themselves.  Refer to the few key points your business needs, as well as cultural fit, and you’ll likely have an awesome new hire.
  2. Hesitating on hiring decisions out of fear, either for the chance of a bad hire, or of potential business’ culture changes.
    1. Same as the previous point, if you have a great option in a new hire, pull the trigger – finding the “perfect” employee typically doesn’t exist.  If there is worry they won’t fit within the business’ culture, pull in 2-3 of the candidate’s future coworkers – they will quickly tell you if they will.  If this is one of your first hires, pull in a friend you trust who knows the industry or position (if you are hiring a bookkeeper, for instance, bring in an accountant friend to observe and potentially ask a few position-specific questions you may not know how to ask).
  3. Reposting the same failed job posting, or not even writing one.
    1. It’s incredibly important to write a job posting, and an accurate one.  Think of it as the opportunity to brainstorm what your business really needs from this future person – focus on a handful of must-haves to perform the job.  Take the opportunity to clearly define the main duties and skills needed, and the rest of the process will be so much easier.  Creating a vague posting in hopes to gain a larger candidate pool to choose from will create a long-term problem.
    2. Revisit and revise job postings regularly – as businesses shift and grow, what is expected from a job often also changes over time.  Keep them accurate, create some room for flexibility to avoid needing the “perfect” candidate, and don’t pack unnecessary details in the posting.
    3. This is the most expensive hiring mistake.  Starting the process off incorrectly will always create issues further down the line.
  4. Ignoring mistakes made with your last employee.
    1. Figure out why the last employee left, or why the business had to let them go, and don’t ignore those red flags.  If they left because they felt overworked, perhaps the business grew and it’s time to hire an additional part time position to assist.  If they were let go because they came from a corporation and couldn’t understand the fast growth a small business relies on, it might be time to write in the job’s notes that a small to mid-sized business manager is needed next time for a better fit.
  5. Not knowing the market compensation for the position within the business’ industry.
    1. Check salary surveys and similarly advertised positions on jobs boards to see if your budget will meet candidate’s expectations of the position, and scale accordingly.  Under-budgeting won’t get your business to the next level, and you get what you pay for.  Stay within the market median, low-balling won’t do anyone any favors, especially your business in the long run.
  6. Failing to sell other advantages outside of wage.
    1. This is a big one I see in small businesses – you have plenty to offer that big corporations can’t!  When I worked for a temporary office company years ago, I had been in downtown Saint Paul paying for off-site parking for months.  I was asked to help a small church who couldn’t pay me as well as the corporate bank I had been working, but I found out there was free on-site parking and didn’t hesitate to run over there when I was offered.  Soft benefits like flex hours or friendly environments can go a long way.  For ideas, I wrote this guide.
  7. Sugarcoating or inflating job challenges, or glazing over them.
    1. This will not do you, or the candidate any favors.  If the business is hiring a manager to oversee a team of people lacking direction, tell the candidate that you’re looking for someone who can manage a team and keep them on task.  By telling the candidate that the team works great together and is excited to meet their new manager, everyone’s morale will tank on their first day, when it’s realized the work cut out for them was embellished.  Since it wasn’t brought up in the hiring process, the new hire might not even know how to spearhead such a team.  Better to be straightforward and transparent from the beginning.
  8. Not considering internal candidates, which can cause morale to dive cause or turnover elsewhere in the business.
    1. If there is someone who could move from within the company already, move them.  They know the culture and expectations, and they can help hire their replacement more accurately.  If it’s a must, be sure to explain why the hire has to be found externally.
  9. Not casting a wide-enough net.
    1. There are so many ways to find a candidate pool today!  Between social media, local Chamber of Commerce, LinkedIn, and a mass of job boards, make sure you’re reaching as far as you can to find your ideal new employee.
  10. Overlooking employee referrals.
    1. If you don’t already have a referral bonus program in place, I suggest you start one.  This could be a couple hundred dollars given to the referring employee upon who they referred staying for a probationary period, often 90 days.  Employees don’t typically stake their own reputation on questionable work ethics and the referral likely got a crash course in company culture and policies, plus you’re skipping recruitment costs.  Pass on the appreciation by sending your referring employee a little slice of the money they helped you save.
  11. Hiring unqualified relatives or friends, especially for critical roles.
    1. Convenience hires may sound like a great idea, since you’re cutting recruitment costs, but bringing your nephew on for a sales position to honor a favor when he’s an introvert is going to cost a lot in training and management, while he will likely never feel confident in his position.  It’s better to have people you know follow the same process as other referrals to greatly minimize risk.
  12. Thinking a manager can train anyone.
    1. Going along with number 11, although you might be able to save money in the beginning on an inexperienced person’s paycheck, the business will end up spending much more in training and extra management costs to compensate for that hire’s learning curve.  Look for a long-term fit that can adapt as the business grows for some time, not someone who will need time and money constantly invested in them so they can slowly find the bar.
  13. Free-styling interviews.
    1. Have an actual, consistent process.  Determine the whole experience – will a tour be given, is an assessment necessary, how many are interviewing candidates and in what order, which questions are being asked…these are common things to consider.
    2. Be consistent, so you can compare candidates point for point.
  14. Interviewer is doing all of the talking, especially when trying to fill awkward silences.
    1. You need to get the interviewee talking, in order to get glimpses into their character and personality.  Especially in awkward silences, when an interviewee is forced to fill it, it can be very telling.  I’ve interviewed many people who either talk in circles or hang themselves when I don’t interject with the next question right away.  Start them off with a conversation starter from their resume.  I often start by saying “while I get myself organized, do you mind telling me a little about your time at ______ (their last company)”.  How they answer this usually gives me great clues about how the rest of our interview will go.
    2. Ask the candidate how they would perform in a certain, real world situation, instead of asking “tell me about yourself” questions.  Ask them to use past experiences to draw on.  Keep it current and real-world, to avoid hypotheticals that anyone can make up a great story for.
  15. Trusting gut reaction too much or too little right away.
    1. Experienced interviewees know how to come across fearless and talented, when they may not actually be.  In addition, “perfect” on paper can often mask undesirable qualities.  Ask non-typical questions to throw interviewees off any established answers they may have.  Asking negative questions (like “can you tell me about a time where a project you managed failed?”) is a great way to do this, and their reaction will be telling.
  16. Not involving the team.
    1. If this person is going to be part of an established team or department, you may want to pull their peers in for some interview time, or even to just be present.  With the team involved, the hiring manager will have greater impression on the candidate; they’ll likely see things the hiring manager missed, and the new hire will be much better integrated into your business when their team is excited and invested in their new team member.
  17. Not actually checking background, references, and/or social media.
    1. Actually call the references you had the candidate furnish, and ask about the candidate’s work ethic, accomplishments, duties, and reasons for leaving.  Although many will be professional, you might find a candid reference, which can be very forthcoming in information.  Don’t ignore red flags just because the person has a great personality.  If something comes up, always seek explanations from the candidate on negative findings.
  18. Going with how a candidate looks on paper, holding stock in credentials only.
    1. You are hiring the person, not the resume, and just because they look amazing doesn’t mean they will fit within your business’ culture.  If someone has fabulous big-corp credentials, they often crumble when in the always changing and unstructured smaller business environment.  Their personality and character has to match at least as much as their resume does.  You can always ask for another interview if you are unsure of their fit.  Pull in a couple of the candidate’s future coworkers – these people always look at how they will fit among the existing team.
    2. Another thing to consider is that you are hiring for current needs, not 3-5 years in the future.  Right now, your business might not need massive credentials, but you might need evidence of growing a business and not maintaining or managing to avoid dips in business.  Hire for the current skill set needed, so your business can see a large amount of growth.  Later, you can always hire someone with a fantastic wrap sheet.
  19. Hiring an unenthusiastic person, or someone seeking options.
    1. When you’re in the final stages of the process, pointedly ask the two or three candidates you’re considering if this is a job they really want.  You are looking for someone passionate, not someone who is looking for the highest bidder.  Chances are, that person will be continuously looking for the next best thing.
  20. Not issuing a job offer in writing.
    1. Avoid misunderstandings or lawsuits by restating their discussed compensation plans, start date, and expectations in a formal offer letter.  Have an in-state attorney check it over, and have the new hire sign one copy and give them another for their personal record.  State any contingencies, like their hire being contingent upon a satisfactory background check, references, or drug testing.
  21. Having a weak onboarding process, using company jargon, or overwhelming with HR paperwork on their first day.
    1. Have coworkers break the ice by showing the new hire around the ropes and being happily accessible to questions and helping give snapshots of the business’ culture.
    2. Proper onboarding and integration into team is crucial to both the team and the new hire’s success.
  22. Not communicating enough, thinking that because they came from a similar position the new hire has it under control.
    1. Businesses and jobs vary, don’t assume everything is the same and hang the employee out to dry on your expectations and their goals within their new company.

See also: How to Know a Great Interview & Quick Guide to Hiring Your First Employee

There you have it, 22 hiring mistakes small businesses make, and how to avoid them!  Although this list probably seems daunting, you can focus on them one at a time.  For instance, if you take the time to focus on the planning stage, really dialing in on what your business needs from a position, several of the other points will guide themselves.  Pull in the correct people from the get go and be honest to them, and your candidate pool will be specifically tailored to your business.

Sometimes, you only need help in one area, or to get started.  If that’s the case, you could hire outside help.  Contractors will work part time on your behalf, coming to the job knowing exactly what to do.  No training or recruitment needed on your end, they can screen applicants for you and send only the great matches, write you a hiring plan, figure out where applicants in your industry are hiding, or even do the whole process for you.  Third party businesses like Pivot are a great option to either get fast help or receive guidance through a process.  They are great objective resources to your small business.

I hope this helps create a starting point to either start recruiting your first employees, or revamping your current efforts.  A business’ products and services are only as great as the employees who are the movement behind them, and your business is looking ahead to some great things.  I would love to know your experiences finding great talent for your small business in the comment section!

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