5 Critical Mistakes Business Owners Make and How to Avoid Them

Building a business is like a roller coaster with so much to learn, many highs and I’ve yet to meet someone who doesn’t talk about mistakes. Employing people brings a whole host of challenges into the mix, from understanding employment law to dealing with different personalities.

We’ve pulled together the 5 most common mistakes we’ve seen business owners make and share our tips on how to avoid them.

1. Lack of Contracts and Policies

Contracts and policies can feel like hard work when you’re busy growing the business and the day to day takes over. We commonly have clients come on board telling us, “We’ve been thinking about this for a couple of years, we knew we needed it” - usually followed by a crisis, something that has really damaged their business and they can’t deal with it because nothing is in writing.

Examples are varied, including employees taking clients, setting up in competition, social media posts that harm the business, loss of tools and equipment - all potentially expensive. Whilst an employment contract and the right policies won’t guarantee employees never do something stupid, they will set expected conduct and allow the business to do something about it. When there are consequences including dismissal and deduction from wages, there is an incentive not to do those things that harm the business and if the worst happens, there is scope to dismiss and/or cover losses.

2. Dismissing without Proper Processes

As much as having the right contracts and policies in place is crucial, so is following a proper procedure to ensure a dismissal is fair. There are five fair reasons to dismiss; conduct, capability, redundancy, illegality and some other substantial reason. Dismissals for poor conduct require the employee to have been informed what the expected conduct is, hence the importance of policies. Even with the right policies, employers must follow a fair disciplinary procedure to dismiss.

A client in the construction industry joined Silk Helix in 2020 after dismissing an employee for not only setting up in competition but using my clients time and facilities to create his business. Unfortunately, the client hadn’t taken advice before so didn’t have any contracts or policies in place. They then dismissed instantly without an investigation, notice of a disciplinary hearing or the right to be accompanied. The client had to pay compensation to the employee through the ACAS Early Conciliation process to avoid an employment tribunal. The correct process wouldn’t have taken long, the evidence was strong and had Silk Helix been onboard sooner, they would have conducted the investigation, followed a fair procedure and dismissed for gross misconduct.

Another client in the beauty industry took advice after having to pay £4,000 to an ex-employee because they didn’t include the right to appeal in the dismissal letter. A simple but costly mistake that would not have happened if Silk Helix had written the letter for them.

3. Not Tackling Harassment and Discrimination

You might be thinking ‘this isn’t happening in my business’, but always have a process for your team to report discrimination, harassment or bullying. Crucially, ensure that everyone who could receive a report knows what to do with it and takes it seriously. Open communication and encouraging people to come forward is key to being able to tackle harassment and discrimination.

I worked with a client who actually contacted us for advice about an absence issue. The employee was calling in sick every Wednesday. Immediate assumptions fell to this being suspicious, assumptions the employee was lying about their sickness and was therefore a potential disciplinary situation. When the Manager spoke to the employee, they revealed that the delivery driver that was turning up each Wednesday was harassing them. The employee was scared to come to work. When the employer heard this, they instantly resolved the issue and stopped the driver attending the site. However, in the meantime, productivity has been lost through this employee’s absence and trust has been damaged within the team due to secrets being kept. A culture where the employee felt safe to come forward would have prevented the employee reaching the stage of calling in sick.

4. Not Documenting Sickness Absence

The start to managing sickness absence is quite simply to record it. Absence is disruptive and whilst we know everyone will get sick at some point, keeping absence to a minimum is crucial.

We were called in to help a multi-site organisation in Essex, whose absence records showed absence had reduced significantly whilst at the same time area managers were reporting they were spending hours every day managing absences. Their time was largely spent taking the calls, reporting the absence and arranging cover. Speaking with the area managers it quickly became apparent that by the time they had managed the urgency of arranging cover, they were moving onto other work and not recording the absences or following up with people who had returned. As a result, sickness absence when unchallenged. People could be absent as often as they wished, no record meant no impact on pay and no questions asked. This resulted in further absences from others either as a result of stress from colleague absences or simply because they could see absence went unchallenged. The costs were spiralling, not least from the wages paid both to the person absent and wages for the cover. The area managers were burning out from fire fighting and not achieving other activities to develop the business.

Simply recording absence correctly does two things. Firstly, it provides a record you can look back on if someone is sick excessively, which will be vital if any disciplinary action is taken or there is a need to dismiss. Secondly, the simple act of recording the absence and asking questions about the reason for absence will help to reduce absence as people will think twice about taking unnecessary absence.

5. No Clear Performance Outcomes

So many business owners tell us, “I keep telling them, it doesn’t improve” or, “it improves for a while, then drops off”. This is exactly what happens when you don’t keep monitoring performance.

It’s your business, you know where it’s going and what you’re trying to achieve. Your team needs to know this as well. They need to know how their role fits with the overall organisation and that their actions make a difference. Unless the goals and expected performance is communicated, they can’t achieve it. Once they know what is expected, regular measurement, appreciation and support is needed to ensure they keep achieving. Exactly what that looks like will depend on the individual business.

Wages are one of, if not the biggest cost in most businesses - they need to be an investment. All wages should result in a contribution to the goals of the business, whether that’s directly in revenue generation or in support roles. Monitoring and measuring performance is essential to ensure a return on investment. If performance expectations are not clearly specified and outcomes not measured, a fair dismissal for poor performance will be extremely time consuming.

HR Support for your Business

The right support for your business will prevent you making these mistakes as well as keeping you compliant with employment law. Crucially, compliance shouldn’t prevent you running your business how you need to. Working with an HR Consultant is about your business and finding the solutions that protect and enhance your business.

Article last updated: 26 May 2021