Hiring managers and executives are one of the biggest challenges small business owners face. It’s far different than hiring staff. Oftentimes, we see small business owners promoting their top staff to department heads. They do this because they think if the staff person is doing a great job they can be a great manager. There’s a huge difference between a staff person and a manager.
There is another huge difference between a manager and an executive. In many cases, the issue is that the business owner doesn’t have the experience of being the president of a growing company. Gallup is the preeminent research firm for many governments and fortune 100 companies. They did a forty-six-year study that proves everyone has innate talents. Part of the hiring process is determining the innate talents you need for the position you need to fill. Unless at some time in your career before founding your company, you were an executive, it’s not likely that you have the training necessary to determine what talents you need for a particular position. The Harvard Business School, Kaufman Foundation, and SBA have done research on what causes businesses to fail.
The Number One reason is always lack of experience.
Don’t feel bad. Be happy that you’re dealing with the same issues most small business owners are struggling with. This is a fairly normal situation… You founded your company three years ago.
It has grown to one million in annual revenue. You have a bookkeeper, a marketing person, a couple of salespeople, an assistant, and yourself. Your Cost of Goods Sold or COGS is fifty percent. Your Selling, General and Administrative or SG&A is forty-five percent. Leaving you five percent profit. You know to get to the next level you need management help. Because you are already working sixty to eighty hours a week or more.
Do you promote someone internally or do you hire a qualified manager? To achieve greater success, hire a department manager with more skills and knowledge than you have.
Here is a lesson I learned while building my companies.
People want a job. Only a very small percentage want to own a business. When someone is looking for a new job it is because the majority of the time they are done with the company where they are currently working. For many different reasons. However, there is a great deal of research that proves employees quit management, they seldom quit a company. This means you need to work on your management team’s skills to lower employee turnover. By the way, never offer any ownership in your company to a new manager. You can offer creative compensation but never ownership. Watch for a post on Good Corporate Governance where I will explain why you never offer ownership.
Another lesson I learned, whatever you do, never allow nepotism into your company. Never hire a relative or a friend and never hire a relative or friend of an employee. When things go wrong, you may lose more than one employee. Agency or Human Resources Consultant? Some options are to hire through an agency. They will help you create a formal job description and figure out exactly what you need in the person you need to hire. They are more expensive than doing it yourself but it may be the best solution for you. They generally offer a six-month guarantee on the person they hire for you. Meaning if the person doesn’t work out they get you a new person. The concern is it takes a minimum of ninety days for a new employee to get in the groove and often longer. If you are inexperienced, it will likely take you more than six months to figure out the new hire is not a good fit.
You may also hire a Humane Resources consultant to help you define the management position you need to be filled. This person may even help interview and narrow down the best candidate for the position. This is often less expensive than the agency but if the new hire doesn’t work out you may have to start over. What’s most important is that it takes months not weeks to hire a manager or executive for your company.
So plan ahead. Don’t wait until you are desperate. When working with our client companies we train them on the best practices for hiring. And our decades of lessons learned from hiring all classes of staff.
Until next time