Top 5 HR Mistakes Growing Businesses Make—and How to Avoid Them

As your business grows, your workforce expands—and with that comes greater responsibility in managing people effectively. Unfortunately, many small and midsize companies overlook key human resources practices, leading to costly and avoidable mistakes.

Here are the five most common HR missteps growing companies make—and what you can do to steer clear of them:

1. Misclassifying Employees

The Mistake:
Many businesses mistakenly classify employees as independent contractors or exempt when they should be non-exempt. This often stems from a desire to reduce payroll taxes or overtime obligations, but the consequences can be severe.

Why It Matters:
Misclassification can result in lawsuits, back pay, penalties, and IRS scrutiny. According to the U.S. Department of Labor, employee misclassification is one of the most common labor law violations, and enforcement has ramped up in recent years.

How to Avoid It:

• Understand the difference between independent contractors and employees (refer to IRS guidelines).

• Use the Department of Labor’s Fair Labor Standards Act (FLSA) to determine exempt vs. non-exempt status.

• When in doubt, consult an HR professional to audit your classifications.

2. Inadequate Onboarding

The Mistake:
Rushing through onboarding—or skipping it entirely—sets new hires up for confusion, disengagement, and early turnover. Many growing companies treat onboarding as paperwork and a quick tour, then leave employees to figure things out on their own.

Why It Matters:
According to SHRM, structured onboarding improves new hire retention by 82% and productivity by over 70%. A lack of onboarding contributes to a high turnover rate and a longer ramp-up period for new employees.

How to Avoid It:

• Create a 30/60/90-day onboarding plan.

• Assign mentors or buddies to new hires.

• Include company values, role clarity, tools training, and regular check-ins.

3. Neglecting Employee Development and Engagement

The Mistake:
In the rush of daily operations, growing companies often forget to invest in their people. There's no training, feedback, or path for growth—which causes even great employees to disengage or leave.

Why It Matters:
Gallup reports that only 23% of employees feel engaged at work globally. Disengaged employees are less productive and more likely to leave—especially when growth opportunities are unclear.

How to Avoid It:

• Conduct regular one-on-ones to offer feedback and career conversations.

• Provide skill development resources, mentorship, or access to online courses.

• Recognize employee achievements and tie individual goals to company success.

4. Outdated or Missing Policies and Procedures

The Mistake:
Too many businesses operate without an up-to-date employee handbook or consistent HR policies. Others “borrow” templates online that don’t align with their state laws or business needs.

Why It Matters:
Without formal policies, you risk inconsistency, legal trouble, and employee confusion. For example, unclear PTO policies or improper leave administration can lead to disputes or compliance issues.

How to Avoid It:

• Develop or update your employee handbook annually.

• Include clear policies on conduct, benefits, PTO, performance reviews, and grievance procedures.

• Ensure compliance with state and federal regulations (e.g., FMLA, ADA, OSHA).

5. Hiring Without a Clear Process

The Mistake:
As businesses scale, hiring becomes reactive rather than strategic. Job descriptions are vague, interviews are unstructured, and decisions are rushed—all of which increase the chance of a bad hire.

Why It Matters:
The U.S. Department of Labor estimates the cost of a bad hire can be up to 30% of that employee’s first-year salary. Beyond the financial cost, bad hires impact morale and productivity.

How to Avoid It:

• Write clear, compelling job descriptions with defined qualifications.

• Standardize interview questions and scoring rubrics.

• Involve key stakeholders in the hiring process and prioritize cultural fit.

HR mistakes are rarely made out of malice—they’re often the result of growing pains. But if ignored, these missteps can become liabilities that stunt your company’s growth and erode employee trust.

At Efficient Enterprise Solutions, we help businesses build solid HR foundations—from onboarding plans and policy creation to performance management and employee development.

Let’s talk about how we can support your HR function while you focus on growing your business.