EP 119: 5 Signs Your HR Is Already Broken (And You Don't Know It Yet)
Most business owners don't realize their HR is broken until someone quits, someone sues, or the Department of Labor sends them a very unfriendly letter in the mail. Here's a statistic that should stop you in your tracks: 60% of businesses that experience an employee-focused lawsuit never financially recover. Not "struggle for a while." Never recover. That's how high the stakes are when your HR foundation is wobbly, and most owners I talk to have no idea where they actually stand. So today I want to walk you through the five most common signs I see that an organization's HR is broken, what it's quietly costing you, and three things you can do this week — all for under $400 — to start fixing it.
If you'd rather watch the full conversation, the episode is up on YouTube now — and I'd love for you to subscribe while you're there. I'm doing a full series this season on the 13 foundational areas of HR every small and mid-size business needs to have in place.
The Misclassification Mistake That Cost Hundreds of Thousands
Twenty years ago, I had my first real run-in with what broken HR actually costs. I was at an online company — we were ahead of the curve on ecommerce — and we had all of our software developers classified as exempt employees. Salary, no overtime. One employee reported it. We got audited. And the auditors came back with the verdict I was dreading: we had them classified wrong. They should have been non-exempt. Here's what that meant in practice. There's a look-back period on these audits, so we had to go back years. The employees still with us got to self-report how many hours of overtime they thought they'd worked — no audit trail, no way for us to push back. Every one of them got back pay for all of it. Plus a hefty fine. Plus we had to track down the employees who had already left and compensate them too. Hundreds of thousands of dollars. Completely unbudgeted.
And I will tell you — nearly every single client I work with now has some version of this problem. When I bring it up, they don't want to talk about it. They want to explain why they pay people salary out of the goodness of their hearts, why their employee would never report them, why this doesn't really apply to them. The Department of Labor doesn't care about any of that. When they audit you, they're not going to ask which weeks your employee worked under 40 hours. They're only going to ask which weeks they worked over. Because if the classification is wrong, you owe that money. This isn't a scare tactic. This is just what I've watched happen — to me, and to business after business.
Broken HR Isn't Just a Mom-and-Pop Problem
Before I get into the five signs, I want to push back on a myth. A lot of owners think HR is only "broken" at small, untrained, blue-collar businesses. Not true. Some of the most common offenders I see are professional services firms — engineering firms, physician practices, law firms. Smart, credentialed people who are very confident in their business acumen, and who have never built an HR foundation because they assume it'll sort itself out. It doesn't. The cost shows up as turnover, culture rot, burnout, lawsuits, and an eventual moment where you realize you've been flying blind for years. If you're picturing HR as paperwork, please let me shift your mindset right now. HR is risk management. It's your leadership infrastructure. It's the operating system your entire business runs on top of. When it's wobbly, everything feels harder than it should.
The 5 Signs Your HR Is Broken
Sign #1: You Are the HR Department (And You Didn't Sign Up For It)
Whether you're the business owner, a senior leader, or the office manager who "just kind of handles it," if you're the HR department by default — and there's no documentation, no processes, and nobody really owning people decisions — that's broken. You can't do your actual job and be the HR department and do it well. Something is getting dropped. Usually the HR part.
Sign #2: Your Employee Handbook Was Written in 2017 (Or Doesn't Exist)
I had a client tell me last week, "We have a handbook. Everyone's signed it." I wasn't trying to be a jerk, but I had to say: congratulations, you've met the minimum qualification for being a subpar employer. A handbook isn't a CYA document you get signed and forget about. It's the operating instructions for being an employee at your company. How do people use their benefits? How do they succeed? How do they fail? Why does this person get PTO for that when I don't? Where do I park? What do I wear? If your handbook doesn't answer those questions — or if it was written under policies you no longer follow — it's not protecting you. It's just paper.
Sign #3: You've Never Had a Real Performance Conversation
"But we give real-time feedback." Okay, maybe you do. But I've heard this line a hundred times, and when I dig in, it almost always falls apart. Just yesterday I asked a client about their progressive discipline process. They had one. Good. I asked if they had performance issues right now. They did. I asked if they were using the process. They said yes. Then I asked if anything was actually getting corrected. Silence.
When we dug further, the conversations weren't happening consistently, they weren't clear, they weren't documented, and no one was being held accountable. There are usually five reasons this happens:
The process itself isn't clear.
Leadership hasn't bought in.
Expectations were never clearly set with the employee in the first place.
The leader isn't holding themselves accountable, so they don't feel confident holding the team accountable.
They're afraid of losing the person because hiring is hard.
Here's the math on #5. A $20/hour employee already costs you about $26/hour once you add benefits — a roughly 30% load. If that employee is ineffective, the real cost of keeping them is closer to $30+ per hour because you're still paying for benefits, PTO, and rewards on top of work that isn't getting done. If you think it's not worth having the hard conversation, the numbers say you're wrong. And honestly? You're being a weak leader. I'm not sugarcoating that, because if you want it to go better, something has to change.
Sign #4: Your Best People Are Leaving and You Don't Know Why
No exit interviews. No retention data. No pattern analysis. Just good people walking out the door and a vague sense that something's off. Or — offers going out to solid candidates and getting declined before the start date, and you can't figure out why. If you can't answer "why are people leaving us?" with data, you can't fix it.
Sign #5: You Hired Someone and Skipped Onboarding Because You Were Too Busy
This is so common. You hire someone with experience specifically so they can "figure it out," because you're too slammed to onboard them properly. Here's the problem: they will never really understand the job or the culture. Not fully. And one of my favorite things to point out to owners is this — if you don't onboard someone with clarity, with a thoughtful process, using your technology well, and then six months later you're frustrated that they're not being professional, not being thoughtful, and not using your technology well…
How did we get here? You showed them that's how your company operates. You set the tone.
Fix It This Week for Under $400
I'm not going to pretend the only answer is to hire a consultant. There are plenty of reasons a fractional HR partner makes sense, but if you're not ready for that investment yet, here are three resources you can tap today:
1. The free DIY HR Audit. A structured self-assessment that walks you through the key areas of HR and asks you pointed questions. If you can't answer them, you know where to start. Grab it at saltandlightadvisors.com/hraudit.
2. The HR Foundations course. Under $400. Four modules covering HR baseline and audit, hiring, law and compliance, and onboarding. More than 12 downloadable tools and templates. You don't have to take it yourself — delegate it to your office manager or an emerging leader and have them report back on what they're implementing. Find it at saltandlightadvisors.com/hrfoundations.
3. The HR Easy Button — my book. About $20 on Amazon or on my site. It walks through the foundational employer responsibilities in detail — hiring, compliance, onboarding — for owners who want to DIY it with a roadmap in hand.
Where to Actually Start
If you said yes to three or more of those five signs, you've got a mess — but it's a very cleanable mess. Three to six months of focused work and you'll have a foundation your business can run on for years. Pick one area. Don't try to fix all five at once. Do the free audit, identify your highest-risk gap, and go. And if you want someone to come alongside you — whether that's a full HR audit with recommendations, fractional HR support, or a strategic partner for your new HR hire — that's exactly what we do at Salt & Light Advisors. Book a conversation here and let's look at your foundation together.
HR isn't paperwork. It isn't just culture and leadership development. It's the foundation your business operates on top of. When it's solid, everything gets easier. When it's wobbly, everything feels harder than it should. Don't waste the chaos, friends. Embrace it.
Watch the full episode on YouTube.
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