EP 98: Why HR Is Failing Small Businesses (And How to Fix It in 90 Days)
When You Say “We Don’t Need HR,” Here’s What You’re Really Saying
If you’re a small business owner who thinks, “We’re too small for HR,” I want you to hear this with all the kindness in the world:
You’re probably losing money and people without even realizing it.
Turnover isn’t a mysterious “people problem.” On average, it’s 19–40% of base pay walking out the door every time someone leaves. That’s before you factor in lost sales, manager time, or the emotional toll on the team.
Engagement isn’t soft stuff, either. When managers are disengaged, teams follow their lead—and productivity follows right behind.
And compliance? It’s a tax you either pay up front with good processes or you pay later in back wages and settlements. One feels annoying. The other can put you out of business.
This post will walk you through:
5 ways HR is quietly failing your small business, and
A practical 90-day plan to turn HR from “cost center” into a profit and culture lever.
All in plain language, with moves you can actually make.
The Real Cost of Having No HR Strategy
Most small to mid-size businesses treat HR as:
Hiring when someone quits
Firing when something goes very wrong
A little payroll and forms on the side
The problem is that your P&L tells a different story. Here’s where “no HR strategy” shows up in dollars:
Turnover: Every exit costs you roughly 19–40% of base pay once you add recruiting, ramp-up time, and lost productivity.
Engagement drag: Disengaged managers → disengaged teams → lower productivity, more mistakes, more drama.
Compliance exposure: Back wages, misclassification, discrimination claims—these are real, growing enforcement areas, and small employers are absolutely in scope.
If HR feels optional, the data is gently—but firmly—telling you otherwise.
5 Ways HR Is Failing Small Businesses (And How It Shows Up on Your P&L)
Let’s name what’s actually happening so you can fix it.
1. Reactive Hiring & Zero Workforce Planning
If “workforce planning” sounds like a big-company luxury, this might sound familiar:
Symptoms:
Rushed backfills when someone quits
Inflated offers made in panic
No compensation benchmarks or data
“Warm body” hires you regret within months
What it costs you:
Higher mis-hire risk + the 19–40% of base pay cost every time you have to replace someone because you rushed.
If people are leaving in under 90 days (or under 6 months), that’s almost always a recruitment and onboarding issue, not “they just weren’t a fit.”
2. Treating Onboarding Like a To-Do List, Not a Ramp-Up Plan
On paper, you “onboard.” In reality, day one looks like:
No computer ready
No email set up
No clear plan for week one, much less the first 90 days
Someone scrambling to “figure it out”
You can tell yourself, “Well, we’re a small business, they should expect some scrappiness.” But here’s the message you’re actually sending:
“We’re not all that professional, proactive, or organized.”
That’s not the standard you want your team modeling for your clients.
What the research shows:
Effective onboarding is linked to 52% higher retention
And 60% faster time to productivity
Onboarding isn’t paperwork; it’s how fast someone can actually contribute.
3. No Manager System (Conversations ≠ Strategy)
Conversations are great. But “I talk to my people all the time” is not a manager system.
Symptoms:
Sporadic feedback, if any
Goals that drift or don’t really exist
Managers who avoid conflict instead of addressing issues
Why it matters:
Strong engagement is tied to higher productivity, profitability, and sales—and lower turnover and safety incidents. When manager engagement drops, team engagement drops. It’s that simple.
Manager consistency is the number-one multiplier for engagement. Not perks. Not swag. Consistency.
4. Compensation Chaos & Legacy Pay Decisions
Most small businesses have a “strategy” for pay that sounds like this:
“We really like him; he’s been around forever.”
“Her grandpa was friends with our dad.”
“We got a great deal on that A-player.”
That’s not a strategy. That’s how you end up with:
Symptoms:
Internal distrust around pay
Constant fear of poaching
A-players asking, “Why is this underperformer making what I’m making?”
And that last piece is crucial: When your top performers notice inequity, they don’t just shrug. They lose trust in your leadership and start looking for a place that runs on all cylinders.
5. No Retention Math & No Voice-of-the-Employee Loop
Many leaders simply don’t know why people leave. They’re surprised by resignations and then surprised when the same problems repeat.
Symptoms:
No exit data being collected in a structured way
No stay interviews
No turnover dashboard
Leaders relying on “gut feel”
If you’re not tracking when people leave (0–90 days, under a year, 2–5 years, 5+ years) and why, you’re flying blind.
You don’t need zero turnover. Some turnover is healthy. But “we have no idea why they’re leaving” is not a strategy.
The 90-Day Small Business HR Fix
Let’s talk about what you can do—without becoming “corporate” or drowning in complexity.
Think in phases, not perfection. You don’t need to do everything at once.
Phase 1 (Weeks 1–3): Baseline Risk & Retention Math
Start with a quick risk analysis and simple math.
Compliance sweep (FLSA & contractors)
Review exempt vs. non-exempt classifications.
Review contractor vs. employee status under current DOL rules.
Tighten up timekeeping and overtime practices.
A common small business “kindness” is to make everyone salaried so they don’t have to clock in and out. In reality, you may be blocking them from overtime pay and exposing yourself to back wage claims.
Do it right, do it light. Do it wrong, do it long.
Disclaimer: This post is for education, not legal advice. Consult employment counsel or a qualified HR professional for your specific situation.
Build a simple turnover dashboard
Track, at minimum:Voluntary vs. involuntary exits
Tenure at exit (0–90 days, < 1 year, 1–2 years, 2–5 years, 5+)
Estimated cost per exit using that 19–40% of base pay range
Then identify your hotspot teams and commit to stay interviews there first.
Quick napkin math example:
30 employees
6 left last year
Average base pay: $55,000
Using 30% as a midpoint estimate
That’s $99,000 in turnover drag—before lost sales and manager time.
Phase 2 (Weeks 2–6): Turn Your Managers into an Engagement Engine
Your next big lever is your managers.
Monthly 30-minute one-on-ones (non-negotiable)
Require every manager with direct reports to schedule a recurring 30-minute monthly 1:1 with each team member. No “do you have anything for me?” and then canceling if they say no.Why? Because when employees think you’re too busy, they will:
Give you your time back
Minimize their needs
Quietly start job hunting or flying under the radar
Quarterly development check-ins
Once a quarter, extend one of those 1:1s to focus entirely on growth, goals, and development—not just tasks.Standardize 30/60/90 plans for every new hire
Use the job description or posting as a base.
Use AI as a helper: feed the role and ask for a draft 30/60/90-day plan. Then edit.
Manager consistency around these rhythms is one of the fastest, cheapest ways to boost engagement and performance.
Phase 3 (Weeks 3–8): Build an Onboarding Process That Pays for Itself
Now, let’s clean up onboarding.
Day-one-ready checklist
For every new hire:Hardware ready
Accounts and access set up
Clear agenda for day one and week one
Role-specific 90-day ramp plan
Focus on what “good” looks like at 30, 60, and 90 days.
Pair them with a buddy or mentor where possible.
Early-tenure pulses
Schedule quick check-ins or surveys at:Day 14
Day 45
Day 90
Ask about training, tools, team fit, and where they feel stuck. Then actually act on the data.
When onboarding is intentional, the research backs it up: stronger retention and faster productivity.
Phase 4 (Weeks 4–10): Bring Compensation into the Light
You don’t need a 50-page comp philosophy. You need clarity and fairness.
Run a compensation data study
For each employee, gather:Name
Job title
Tenure
Current pay
Date of last pay change
Benchmark roles to the market (by industry, geography, org size) and see where people actually fall in the range.
Define salary bands and career tiers
Set realistic ranges (10th–90th percentile).
Avoid having a $40k-wide range that hides five different levels inside one title.
Add tiers where needed and tie them to responsibilities and competencies.
Publish ranges internally and in job postings
When you have a why, you’re more comfortable talking about pay. Clarity reduces distrust and helps you keep the trust of your A-players.
Phase 5 (Weeks 6–12): Create a Voice-of-the-Employee & Action Loop
Finally, close the feedback loop.
Implement stay interviews (start with critical roles)
Ask questions like:What keeps you here?
What might cause you to consider leaving?
What one thing would improve your day-to-day work?
Share “you said, we did” updates
Whether it’s from:Stay interviews
Exit interviews
New-hire surveys
Engagement surveys
Share themes and actions:
“You told us X. Here’s what we’re trying to do about it.”
Set improvement targets
A simple starting point:Target a 15% year-over-year improvement in turnover toward your industry benchmark.
Use those metrics to evaluate managers, not just gut feel.
When you measure what matters—and act on what you hear—employees notice.
Three Moves to Start This Quarter
If you’re feeling overwhelmed, don’t try to do all of this at once. Start with these three:
Run a mini retention audit.
How many left last year?
What was their average salary?
What’s your estimated cost per exit?
Roll out a simple 30/60/90 onboarding template to every manager.
Make it the new standard. No exceptions.Publish salary ranges for one job family.
Define the range.
Clarify how someone can progress within it.
Use it as a model to expand to other teams.
These three moves alone will reduce distrust, increase clarity, and start turning HR from chaos into a real lever for growth.
Want the HR Easy Button?
If you’re a small business owner with roughly 5–50 employees and you’re thinking, “I want to do this, I just don’t know where to start,” here are two next steps:
Get a free mini HR audit
Head to www.saltadvisors.com/hraudit to walk through a quick assessment of where your biggest risks and opportunities are.Join the HR in a Box program
If you’re a DIY small business owner, a green HR pro, or an office manager who “does HR on the side,” this is built for you. You’ll get live monthly teaching, practical templates, and email access for quick questions—without having to hire a full-time HR leader.
And if you want to go deeper on this topic, listen to the full episode of Don’t Waste the Chaos where I break all of this down step by step. Link it up on your site like:
You don’t have to love HR. You don’t have to want to think about it every day.
But if you’re willing to tackle the chaos with a plan, HR can become one of the most powerful levers you have—for profit and for culture.
Don’t waste the chaos. Use it.
