Truth 30. Recruiting and hiring employees
New businesses vary in terms of how quickly they need to recruit and hire employees. In some instances, the founder or founders work alone until the business generates enough sales to justify hiring the first hourly or salaried employees. In other instances, employees are hired immediately.
Founders differ in their approach to the task of recruiting and selecting employees. Some founders draw on their network of contacts to identify candidates. Others advertise their openings through traditional media such as classified ads and employment Web sites like Monster.com. One thing that surprises many first-time business owners is that finding good employees is not an easy task. In fact, several studies have shown that a difficulty in finding qualified employees is a barrier to growth for many new businesses.[1] As a result, you need to develop a deliberate and determined approach to recruiting and hiring and realize that finding good people takes time and effort.
One thing that surprises many first-time business owners is that finding good employees is not an easy task.
Hiring your first employee
For many business owners, hiring the first employee is a milestone event. If the decision is prudent, it generally indicates that the business is gaining momentum. There are three rules of thumb for hiring your first employee that you should observe in most instances.
Formalize the process by preparing a job description and conducting formal interviews for the position that is open. Give the position a title, and make sure you have a clear notion of the employee’s authority and scope of responsibility.
Comply with all the legal ramifications of becoming an employer by following IRS regulations regarding income tax withholdings from employee paychecks and similar matters. Also check with your state government to determine the documents you must file and whether you are required to pay worker’s compensation insurance.
Pay a fair wage. Many small business owners are successful because they are willing to work extremely long hours for relatively low pay. The payoff comes through the increased valuation of the business. Unless you’re willing to give your first employee an ownership stake in the business, you must pay a fair wage and set a reasonable work schedule to keep the employee.
For many business owners, hiring the first employee is a milestone event.
Fortunately, there are many sources of assistance to help small business owners’ work through the process of hiring their first employee. Small Business Development Centers sponsor workshops to teach strategies for recruiting and hiring employees. In most areas, they also make available “document packets” for employers who are hiring employees. The packets contain everything from tax forms to instructions on how to conduct background checks to drug testing forms. The IRS maintains a Web site to help small businesses understand the regulations they are required to comply with. It even offers online classes to explain the rules.[2] Many state governments maintain Web sites and distribute printed publications to help employers comply with state regulations.
Hiring tips and techniques
One hiring technique that many small businesses find useful is to try people out on a part-time basis or as a freelance employee (or intern) to determine if they are a good fit before offering them a full-time job. Individuals who are willing to work on a freelance basis, some of whom are looking for full-time jobs, can normally be identified through your personal network of acquaintances or through a freelance job-search Web site such as Guru.com or Elance.com.
An important tip for hiring employees is to be cautious about offering employees ownership interest in your business. The rationale for offering employees a piece of the company is to incent them to work hard and act like an owner. It’s often not necessary to do this. If you can offer your early employees many of the same benefits you obtain from self-employment—a flexible schedule, the chance to work in an area they are passionate about, and freedom from the pressures associated with “climbing the corporate ladder”—you are in most instances already offering them a better experience than they would find through working for a midsized or large firm. If you do offer your employees an ownership interest in your business, make sure to vest theirs interests gradually. It’s fully appropriate to require your employees to “earn” their ownership interest in your business through their performance and their longevity with the company.