Friday January 30, 2009
HIRING TALENTED PEOPLE THAT FIT YOUR LONG-TERM PLANS
Once you have your strategic plan it's time to get the resources in place to implement those plans. One of the most important resources a company employs is “human capital.” Many owners and presidents perform way too many functions in their company at the cost of not doing many things they should be doing. Over the years they have found that nobody can do things as well as they can, and it is easier to complete tasks themselves. Some of this behavior is self-fulfilling as these owners either don’t hire the right people, or they hire the right people but don’t provide them with the training they need to be successful.
If every person you hire enables you to grow the business, then recruiting the right talent to your company is a way to leverage your knowledge and get a higher return from your company. I'm borrowing a main principle in real estate--leverage--or the concept of using other peoples’ money. Basically, if real estate prices are going up 10% each year and you can borrow money at a 7% rate, then the more you borrow the more money you make. The opposite is also true. If you are highly leveraged and real estate prices are declining, then you are losing a great deal of money.
The same concept applies to people, if you can pay someone $20 per hour to generate $40 in revenue, then the more you hire those people the more money you make. Likewise, inefficient employees cost more money than they produce and should be let go. Jack Welch, legendary CEO of General Electric, had a policy that he would rate every person in his company and he would work hard to get rid of the C, D, and F employees. He would even get rid of the B employees. Currently, many companies are cutting people. Why do companies only reduce their workforce when tough economic times hit?
The key to helping employees succeed is having a good performance management system with the proper tools and training. Communicate your company's vision, educate your employees on the key points of your strategic plan, and involve them in setting their own goals. Have a system that measures your employees' success and provides feedback to your employees and you. For example, you can set a goal for your salesperson to visit 5 new customers and take 5 existing customers to lunch each week, then discuss their progress at the same time every week. First, success is defined as building customer relationships. Next, you are investing your time and knowledge in that salesperson so that they have the tools and training they need to succeed.
Owners, presidents, here is a version of the 80-20 rule. So many times I see managers spending very little time with their high functioning employees and a lot of time with their employees who need training or correction. This should be reversed, as you should be spending 80% of your time with your top 20% of employees.
As an owner there is something that you do better than others in your field. Imagine if you could have one or two more people like you in the company. How much more money would you make if there were two or three of you? Many owners and presidents don’t want to teach others all of their secrets. They fear that these employees will learn too much and leave to become competitors. What if those individuals were stakeholders in the company? Bonuses can be structured to retain the best employees, to make it worth their while to remain.
I could go on with all the fears and excuses why you can’t hire any good people. Running your business out of fear can make it very hard for you to grow the business. If you create a dynamic environment by surrounding yourself with a bright and energetic management team, your competition will not be able to keep up. I am not saying that no one will ever jump ship. But if you create a cohesive team, good luck to the person who tries to take what you have and implement it elsewhere. By the time that person gets set up your company will have already gone to the next level.
Bottom-line: figure out what is best for your company by creating a strategic plan, then come up with a creative way to obtain what you need. If you can’t afford a sales person, pay a higher incentive or contingent pay. (Remember to be fair if you hire a sales person on a contingent basis. They need to be highly rewarded for not taking a salary and remember those customers are yours.)
If you can’t hire full-time, hire part-time. Many businesses that can’t afford a full-time CFO should invest in a part-time CFO. No matter how small or simple you think your business is, having professional financial advice can make your strategic plan more effective and help grow your company.
"Copyright ©, January 30, 2009, by David Wandrey"
Written by: David Wandrey, CPA, and Part-Time CFO for medium and small businesses. David has consulted or been employed with companies that had sales ranging between $2 million dollars and $500 million dollars annually. David has over 20 years of financial management and consulting experience in a variety of industries including, publishing, internet, manufacturing, medical, construction, defense, computers, retail, real estate, financial services, cable television, and newspaper.
