Make the Best Hiring Decisions

Make the Best Hiring Decisions

Whether you're rewing up to open your business within the next few months or have recently opened shop, it's crucial to develop a strategy for hiring your work force. Read expert advice on staffing your operation.

By Megan Brody

For new business owners, many difficult decisions revolve around labor, which is usually the most expensive line item of any operation. Companies — especially startups — are constantly evolving, and even the most thorough business owner will have trouble anticipating it all.

"Generally, they [business owners] discover at some point when the business takes off, they can't do everything," says Bernard Lefson in Santa Ana, Calif., a counselor with Washington, D.C.-based SCORE, a national nonprofit organization providing free consulting to small business owners.

This can be one of the most challenging realizations for entrepreneurs. Relinquishing some of the control over day-to-day operations can rattle someone who has grown an enterprise from the ground up. At this juncture, however, owners need to determine what they do best and the parts of the business that bring them the most joy. Then hire someone whose skills will complement their own.

Fill Necessary, Not Imperative Roles First
Tasks that are necessary but not imperative to the core business, such as accounting, sales, payroll or IT, should be filled first. For small businesses, filling roles like these could be completed by contract workers, too, which leaves owners with more flexibility, especially if the additional help is only needed for a seasonal surge or a one-time task, like a Web site launch.

"It's understanding what is going to be most critical in growing the business in the first year and hiring for the skills you don't have," says Mary Corbitt Clark, executive director at Winning Workplaces, an Evanston, Ill.-based nonprofit organization dedicated to helping small and mid-size companies cultivate good working environments.

Focus on Revenue-producing Elements
As the business grows, it's crucial for the company to first dedicate resources to revenue-producing elements, such as sales. Generally, companies pay higher wages for a position that is directly tied to profitability, rather than overhead. Market-based data should influence any compensation plan. Entrepreneurs should also confer with colleagues and use candidate interviews as sources for determining fair pay.

Don't be afraid to experiment with creative compensation packages, including flex time, commission-pay structures, as well as bonuses, which can keep costs low while proving lucrative to new hires. The key is to understand what level of effectiveness is needed and then pay enough to attract and retain candidates who have what it takes.

Experience vs. Payroll Costs
"Sometimes people have a fear of losing money in order to hire an experienced staffer," Lefson says. "This reluctance can be a hindrance."

Entrepreneurs should also consider the amount of time they will have to spend with a less seasoned employee. Hiring someone with greater experience and shelling out a little more up front could result in overall cost savings. Of course, not every employee will grow with the business, so it is important to know where to look for a replacement.

Developing a reliable network of resources during that first year can be a lifesaver. When the receptionist up and quits or computers are on the fritz, it becomes less of a scramble to find a trustworthy solution.

"Hire the talents needed to move the business forward and outsource the rest," Clark says.

Analysis vs. Action
When it comes to hiring, small businesses often fail to find balance between analysis and action. It's instinctive to want to make the perfect decision. But often times, by the time the company is ready to hire, many of the initial candidates have moved on, or business needs have changed. Without enough research, business owners are able to make snappy decisions but might fail to understand why it's not working out. The key is striking a reasonable balance.