4 Things Every Entrepreneur Must Consider Before Hiring Their First, or Next, Employee.
In the earliest stages of growth, the right hire can be rocket fuel. The wrong hire can be a disaster.
Entrepreneurship can be a lonely business.
According to the Organization for Economic Co-operation and Development (OECD), the worldwide average shows that there are twice as many entrepreneurs with no employees as entrepreneurs who do have employees. However, the most recent data from the SBA maintains that US-based small businesses continue to add more new jobs annually than large companies.
So, even if you don't have hired help now, a new employee( or two, or possibly a few more) could be in your future. There are several questions that every entrepreneur has to ask when considering adding that first employee.
- Should they hire a family member?
- Should the person be brought on as a contractor, or as a part-time or full-time employee?
- Should they work onsite or remotely?
- Should they be US-based or ex-US?
While those considerations are important there are other hiring aspects that need to be accounted for as well. I recently had the chance to speak with Manny Coats, host of a top-ranked podcast as well as founder and CEO of an ecommerce software company that's been in business for less than two years.
His business has successfully navigated the risky start-up phase and is on target to gross more than $4 million by the end of this year. He's already made more than two dozen part-time and full-time hires as his business continues to grow. He offers these four factors to consider when you're ready to hire your first employee.
Team chemistry is key.
Coats says that within small organizations there's little room to hide and every person's role is vital. As such it's important to make sure you're not injecting a toxic personality within the delicate ecosystem of the team.
"The first consideration for us when it comes to a prospective new hire is their 'fit' within our culture. We're a high-energy team. We work hard and we play hard. If you hire an individual who is good at what they do, but they don't gel with the others on the team it easily breaks the positive group dynamic, which disrupts the team's efficiency and function," said Coats.
Obviously a good hire must be able to do the job, but how they execute within the broader context of the team is equally important yet it's an often undervalued hiring criterion.
Skills must be additive.
If the prospect can't do the job better or faster than you, don't hire them.
"We make sure that whomever we hire, whether in-house or remotely, they're better and smarter than anyone else in the company regarding their particular skill set. I tend to do a lot of things, and one of my core areas of expertise is marketing. So if I'm hiring a marketing manager, they need to be better at marketing than I am, otherwise I don't need them."
Coats said that while skills can be learned and developed, “…hustle and drive are inherent and can’t be taught.” The prospect’s work tempo has to be synced with the broader team as well as your own.
Don't be afraid to hire the best.
There are plenty of talented, capable individuals out there who can do the job you need right now. Due to this abundance of available candidates, Coats said entrepreneurs can afford to skip sub-par talent.
"Strive to hire the best person, the first time. A lot of people will try to hire somebody and say, 'Well they're not exactly perfect but I can get them there or I can move them over to this other position.' Unfortunately I've done that myself, and I can tell you it's not efficient at all," said Coats.
One of the main reasons for that inefficiency is because it's a drain on time and attention that eats into the productive of both the hiree and entrepreneur.
Try split-test hiring.
Perhaps the most provocative hiring practice that Coats has adopted with great success is that he "hires" three potential employees jockeying for the same job for a one-week trial period. He assigns each of them the same projects and tasks, evaluating them on the timeliness and quality of their results. Even though he's paying a triple rate for that week, it's worth it because it creates invaluable performance context for all three candidates.
"If one prospect completes the project in eight hours, the next does it in four hours and the other finishes in one hour, with comparable quality across the board, we have a contextualized assessment of their productivity and quality outputs. We've found this modest upfront investment saves resources and time in the long run," said Coats.
Even if the most productive candidate is twice the cost of the others, the net cost is lower due to overall speed of project deliverables and reduced need for re-work. Coats said companies routinely test new products, advertising campaigns or potential markets to enter, so it makes perfect sense to split-test prospective employees, especially for small businesses.
So when you're ready to hire a part-time virtual assistant or full-time office employee be sure to consider these factors. Your business depends on it.
Entrepreneur Leadership Network Contributor