We all have heard horror stories about how expensive hiring the wrong employee can be. My good friend with a very niche recruiting agency told me that the cost of hiring the wrong employee for his clients can be between 3 and 4 times the employee’s annual salary. For the roles he fills, this comes out to between $400,000 – $500,000 for a wrong mistake. Ouch! That is an expensive mistake!
Want to avoid an expensive mistake of your own? Here are the 6 Critical Rules to Avoid a Hiring Debacle:
Don’t find a great potential employee (especially a friend or family member) and try to make a position for them. This typically only works for big companies with big budgets, but I’ve seen, time after time, this backfire. After you’ve identified a business need, it’s important to create a Position Guide. The Position Guide should include, among many other details, how the person’s time will be tracked and how productivity will be measured. If you haven’t thought about tracking their time, you aren’t ready to hire.
Don’t hire someone (or anyone for that matter) until you have a time tracking system. How will you know what they did all day or all week? Thinking about paying them a salary? This could be even worse because the employee might become entitled to a weekly check without the responsibility of productivity and results.
Don’t be too optimistic about the efficiency of your new hire. If it takes you 2 hours (if you’re tracking your own time) to do a project, don’t think you can hire someone else and they can do it in the same or less time. Maybe they can improve their efficiency over time. My experience working with small business owners is that their efficiency and their employees’ efficiency are rarely similar.
Don’t over analyze to the point of paralysis. If you’ve been considering hiring an employee for the past year or more, make a list of the pros and cons and map out the plan. You can only grow your company so far and so fast by yourself; eventually you will need help. Business stagnation can happen to the best of us, just remember that even Mark Zuckerberg and Richard Branson needed to hire other people to help them.
Don’t promise things you can’t guarantee. This will only cause frustration and disappointment in the future. The best rule of thumb is to be honest and transparent, specifically about what you can promise and what you’d like to have happen. There’s no issue in telling others your goals for them, but don’t use the word “promise” unless you can do just that.
Don’t forget to talk to your consultant or CPA. They might give you valuable insight you hadn’t considered relating to your finances or strategy. It also never hurts to get more insight into a very important decision.
It should come as no surprise that hiring an employee is a very complex and delicate situation for any business owner. This is why I am constantly telling clients that business decisions, specifically hiring, can’t be made in a vacuum. You see, hiring employees (the right ones, at the right time, with the right compensation and expectations) is a winning formula.