Hiring your first employee

Many businesses start with no employees except for the owner, often operating out of the house to minimize overhead. For the newly minted entrepreneur, especially one who came from corporate America, it is a difficult adjustment to wear all the hats with no one available for delegation.

It may be very tempting to go out and hire an employee, and there often does come a crucial decision point where the owner is overwhelmed with work, has a real need for a staff, or decides to grow the business, and determines it is time to hire the first employee.

This is a momentous time in the life of a business. Up to this point there have been minimal government forms to fill out and file, no concerns about unemployment insurance or workers compensation, and no interpersonal or management issues. But now the entrepreneur will be faced with all of these.

The sad fact is that often a sole practitioner who has had a comfortable income, starts seeing the income drop after starting to build a staff. So, here are some things to do before putting an ad in the help wanted section.

1. Write a job description for each job that you are doing. Now, review the job descriptions of each task that you least like to handle yourself, or for which you believe you are in most need of assistance.

2. Determine if some or all of these jobs can be outsourced. For example, if one of these job descriptions is for bookkeeping, you may be able to find a freelance bookkeeper whose services you can retain for a few hours a week.

3. If tasks can not be outsourced, does the amount of work justify a full time person, or could one or more part time people do the work?

4. Will the new employees actually perform revenue generating work, or free you up to generate more income? It is key that for each employee hired, there is sufficient additional revenue generated to MORE than cover the wages, taxes, and other financial benefits of the employee. If a hiring analysis fails this test, you need to tread very cautiously!

5. Create a cash flow forecast for the next year to verify that your analysis in step 4 is correct.

6. If you do decide to hire, create a detailed job description for the job you want to fill, starting with the descriptions you created in step 1. From the job description create a list of requirements for a person to fill the job. Use the description and requirements document to drive the recruiting and hiring process. Do not hire a relative, friend, or prior associate just because you like them if they don’t have the requisite abilities to fill the job you need to have performed.

In the next few posts I’ll talk more about the hiring process, and discuss the issues to be aware of in hiring full time, part time, and contract employees.

I need to add a word of caution – this post does not purport to offer legal or tax advice. When hiring the first employee, make sure to seek advice from your attorney and tax adviser.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com

The Constant Entrepreneur: Advice for Running a Productive Business

Employees

When I was running a business with about twenty employees, after one particularly frustrating day I came home and told my wife that running a business would be fun if it were not for the people! How often I have heard this echoed, in one way or another, when advising client business owners.

In analysing my own situation twenty years ago, and helping clients come to grips with their own frustrations today, I have found that problems with employees are not that difficult to resolve. A colleague, Ted Hill, remarked to me recently that no employee gets up in the morning and says “I wonder what I can screw up at work today”. Most employees want to do a good job.

Of course, it helps to have hired the right people in the first place. We’ll talk about that in another blog. So for now, let’s assume that we need to deal with the people that we have.

In the extreme case where an employee just does not fit the job and the company culture, the best that you can do for your company and the employee is to fire him/her – sooner rather than later. A poor performer who “bad mouths” the bosses just brings down morale and productivity of other employees.

In most cases, however, the key is to ensure that a) the employee’s personality and skills fit the job; b) the employee has been properly trained for the job; c) the employee has the necessary tools to do the job; c) the employee has been given clear instructions and given appropriate authority and responsibility.

The value of each of these is self-evident. But, so many managers do not properly equip employees to do their work. Even fewer employers really communicate well with their employees about job expectations.

At the first sign (and other signs) that an employee is not performing to your expectation, it is important to talk with the employee. I mean communicate – have a real conversation – understand why the employee is not performing. By communicating, and LISTENING, you can often quickly zero in on the underlying reasons for lack-luster performance. In many cases you may learn that the employee really does not understand what is expected, or that you are micro-managing, or that the employee has not been properly trained, or does not have the right equipment. It may be that the employee has a personal problem that is distracting him/her. What ever the problem might be, assure the employee of their value to you, and help them solve the problem.

I have a client who was tremendously frustrated with a key employee. The frustration had risen to a level where my client wanted to fire the employee. He felt the employee’s performance had suffered and that he was overpaying the employee. At my insistence, the client had a very open conversation with him. It turned out that the employee had recently been assigned work for which he had no experience or training. At the end of the conversation, the two had come to terms on appropriate training and processes to help to get the employee up to speed on the new work. The employee even agreed to take pay cut! Almost overnight, the frustration in both employer and employee disappeared.

Communication in every aspect of business is vital – but none more so than with employees.

Will Limkemann
Limkemann Buiness Advisors
440-871-0976
www.neobizadvisor.com