With a little digression into vaccines, which relate to this personnel blog, which will be about what people you need going forward, and some (we hope) good tips on how to find and recruit good people.
If you are growing (and you might decide you want a lifestyle job, so you make enough money to support the lifestyle you want), you will need to hire people.
These people might not do the jobs you formerly did as well as you did them, but having them on board frees you to do other things that are seemingly more important. If you’re doing a lifestyle business, then you might continue doing what you’re doing and be perfectly content.
A convenient way to look at what employees you might have to add is what they’re going do do, how much revenue they can generate (not just in sales, but in even allowing you to do things that are more meaningful to the firm, versus how much the employee is going to cost in terms of pay and benefits. The revenue/cost figure is presumably positive, otherwise, why hire the person?
To give you an example, a client we have decided recently to hire a new person. Their financial calculus was that the person would cost about $50,000 per year in pay and benefits, but the two founders could, through more sales and higher end sales, create another $90,000 in revenue. So, the revenue/cost calculus is $40,000. Now, nine months later, they are about to add another laser cutter and hire another production operator. The calculus is a little different, because the total expenses are $82,000, so the short term benefit is only $8,000, but there is the future benefit of another $40,000. At some point, demand might slow down or the people might be more expensive, but as long as their is a positive profit generator, employees should be added.
It should be noted that, at some point, the $40,000 calculus per employee might be reduced somewhat because a supervisory person has to be hired to look after the operation. This should have a positive return too, because he/she further frees the owners to make more revenue.
We are presuming that you have the financing to hire more people and buy/lease more equipment, but if you don’t you’ll have to subtract financing from your overall cash positive.
And you do a Solutions Forum meeting, either face to face or via Zoom every two months or so to iron out any problems that have arisen, such as maybe not making the best hire and whether to cut said underperformer loose. (The answer is that as long as his/her cash contribution is positive, you keep him her around and look for another, better person and refine your hiring parameters.
When you make the decision to hire, don’t expect to put the ad in indeed.com on Thursday and have someone report bright and bushy tailed for interviews on Friday and work on Monday.
When they show up, you first put them through a DISC test (available on the internet) to find out if they have the ability mentally and emotionally. You might also run them through practical tests, such as running the laser cutter, to see how they do, while making allowances that they should get better by ‘x’ after they start.
All told, if you fire any employee, it will cost you about $15,000 to hire a new person, in terms of training, possibility of firing and management time in getting the person up to speed.
In the present high demand labor conditions, your positive revenue contribution of a new employee might be reduced from where you would like it, but it should still be positive. Don’t be hiring just to be hiring unless you have a burning desire to walk around your plant and see a bunch of smiling (you hope) faces.
Somewhere around five employees, with one or two people in every job function, you can develop KPI’s, or ‘Key Process Indicators’ of what a good employee is and does. Things like attitude, dependability, independent working, creativity and the like could be measured. KPI’s might be different for each positions. You can weight each of the KPI’s in terms of traits you’d most like to see.
And yes, in the current climate, you should use diversity as one of your KPIs. How much weight you give it is up to you, but it does need to be explicitly incorporated.
ARE THE PEOPLE IN THE RIGHT SEATS ON THE BUS?
Again, as you grow, you might find that various people want to do different things from what they were hired for. That’s fine, because personnel satisfaction is key to your success, and not only because personnel might be 30-70% of your total costs.
You have to interview the person and find out why they want to do the new job, and what positive contribution they can make financially that they’re not now making. Yes, you have to be fairly ruthless about it, unless you’ve decided that you’re really running a social welfare agency. You have to make the employee realize that the new job they want may or may not work out, and what the financial consequences of each alternative on their future might be. No sugar coating.
You might also find that a person wants to ‘downshift’ in their corporate career, and take on a job that’s more personally meaningful to them at the time in their life where they are or expect to be going. For example, one of my clients sold his highly successful business because he wanted to focus more on his world class photography, after doing his business for some 30 years. So, he sold a majority of his business to his two sons, who are running it quite well, and he’s photographing things all over the world. One of your employees might want to work less hours for you and more hours for his/her favorite non-profit. That’s fine, too….a greater social good has been achieved.
OK, no one likes to do or keep them, but it’s a fact of life these days that you’ve got to record all interactions with your people, because there might be controversy brewing somewhere down the road.
There might be trips to the labor commission to resolve fired personnel grievances, or there might be disputes among people or yourself as to who said and did what to whom. ALL interactions involving personnel should be documented, and the person should sign off on the documentation so they can’t later come back and deny they said or did what they did.
Or, you and a person might come to a parting of the ways. We advocate trying to work things out, but sometimes things don’t work out, and a termination is best for all. Acknowlege the mistake, learn from it and move on. But document that the person is being terminated and why, and have the person sign it, so there’s no misunderstanding.
No one much liikes performance reviews, but, in our experience, if they’re handled with sensitivity and objectively (no harsh words), they can actually be enhancing. People find out what they’re doing right, and what they could be doing better, especially in relation to the job they were hired to do.
Everyone deserves to know how they’re doing, and as objectively evaluated as possible. If you’re using KPI’s, as we recommend, the performance review becomes somewhat more routine and more objective, because you’re rating your people against the ideal, whatever that is.
How frequent should personnel be evaluated? It depends on a variety of factors: complexity of job, time on the job, and time to do a review (there are times you just can’t do a review when one is due, but don’t defer it forever) Point out to the employee that you can’t do it right now, and you’ll reschedule it for next Thursday. Reviewer and reviewee should both be comfortable and relaxed when the review is done.
We think quarterly reviews are about right.
Again, employee and employer should both sign the review. If one of your supervisors is doing the review, they sign it. After all, your supervisor is evaluated by his/her superior, and so it goes up the line.
The CEO, by the way, gets evaluated by his Board of Directors, in case some of your more inquiring personnel want to know. Partners should evaluate each other, too, again in a friendly setting, such as and offsite lunch or dinner. Coupling the evaluations with goals for the next reporting period is a good practice that we’ve used and coached.
That some of your employees will leave is a fact of life. More money, better job, downsizing, the reasons are diverse. Don’t be shocked, but do interview the ones who left to let them know that you valued their contribution (assuming that you did) and wishing them well. Sometimes they will come back after the new opportunity didn’t work out, and all should be forgiven and a personal growth moment should ensue.
There is no ‘right’ turnover number. For stable organizations, it’s probably about 10%.
In high growth situations, it can be higher, because of the demands that will be placed on people; but then again, if you did your initial hiring ratings correctly, there shouldn’t be many surprises. One of my clients just had about 8% of his workforce quit in one week, all of whom are going to a competitor, and all for financial reasons, so he’s got some rethinking of his compensation plans to do.
When I took over my family business, my first year turnover was about 75%, but it was mostly because of moving from a relatively slow growth, almost paternalistic culture to a high perforumance culture. We tried to forster a sense of family, but we didn’t let family get in the way of hitting the numbers. We could do both, because by the end of the first year of my seven as President, we had most of the right people on the bus.
And, having the right people on the bus makes your job a lot easier.