Yes, mmWaves are made to be used with small cells and short distances. There's a lot of hype around how short or long the maximum distance. I've heard very bullish estimates of up to 1 km, and more conservative one of ~150m. The truth seem to be closer to the low end, but that depends on a lot of fine details.

The base station / small cell can have antennas with a large number of patches (32 to 256), so very narrow beams and high gain. This is used to compensate in part the very high attenuation at those frequencies. The device will have less antennas, so less gain.

Ideally, both device and cell will point their beams at each others, for maximum gain. There's a beam searching process as part of the 5G/mmWaves synchronization, and then beam tracking. All this is much easier when the device is static, for fiwed wireless access (FWA). When handling a mobile it gets trickier.

It's best to have a line of sight between the close small cell and the device, but it's also possible to have an indirect line with a bounce for example. There will be an impact on signal level, so if there's such a bounce you'll want to be closer.

For mobility, tracking a device is hard. Just turning a street corner or moving behind any object in the beam path can drop the mmWaves link. But today mmWaves for smartphones are deployed in NSA mode (non-stand alone), where it's always used in parallel with LTE in real time (dual connectivity or DC). Actually, all those device antennas consume so much that it's common to only use 5G/mmWaves in the downlink (cell to device) and stick to LTE in the uplink (device to cell). Reception is easier on the device as there's no power amplification as in the uplink. So when you drop the 5G connectivity, the LTE link is already there.

If mm-waves can't penetrate skin, wouldn't even holding the phone by the wrong part be enough to make 5g useless?

Yes, your hand can mask an antenna module (made of several basic antennas, or patches, for beam forming) and make it useless. This is why 5G phone designs have several such antenna modules spread around so that at least one of them should be usable, most of the time. IIRC it's 3 modules for current gen 5G phones. Of course in some cases it will be your body shadowing the lone 5G cell around, and in this case the phone will fall back to 4G (or 5G in lower bands, so not mmWaves).

All those additional antenna modules explain why 5G phones are on the big side.