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Council of Better Business Bureaus ®
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Council of Better Business Bureaus
BBBTips™ on Hiring Staff
July 22, 2010
WHEN to Hire Employees
Small-business owners may be slow to admit that it is time to add staff. It's not always easy to decide to spend capital on a new hire, particularly if you've leading a one-person (you!) operation. Considering the following issues may help you reach a conclusion on whether to increase the size of your staff.

Overworked. If you find that you are constantly juggling too many tasks, are consumed with handling crises as they erupt instead of focusing on daily operations, cannot find time to attract potential clients or market to new customers, or lack the opportunity to keep your business on track to achieve its full potential, it is time to call for reinforcements. There are only 24 hours in a day, no matter how hard you work.

The same is true for your employees. Employees who are overworked, overstressed and overloaded are going to be under-productive. Burgeoning overtime may be another indication that you need to hire more staff. Excess overtime can be inefficient from a financial standpoint and it may lead to worker burnout. Hiring additional staff could eliminate those concerns.

Need for Specific Skills or Expertise. Many small business owners mistakenly assume they can do it all. Eventually, they reach the point where they must acknowledge they lack the time or expertise to perform a function critical to the success of the business. Be honest. Is there an area of your business operation that is suffering because you lack an employee with the right experience and knowledge base?

Sales Backlogs. Order backlogs may indicate the need for extra help. It may be worth your while to add an employee now to take advantage of a surge in demand for your product or service, even if you cannot yet determine whether the surge is temporary.

Spotty Customer Service. Take an honest look at how well and how quickly you are serving your customers? Are you exceeding or even meeting your customers' expectations? Satisfied customers are repeat customers and will often refer others to businesses that do a good job. Hiring extra staff could boost your ability to be responsive to your customers and market to new customers.

HOW much will it Cost?
Before finalizing your decision to add an employee(s), you should identify all the costs involved in hiring personnel, to make certain that you can truly afford the expense. In addition to the cost of the actual salary, which should be competitive, accountants generally recommend budgeting an additional 15-20% to cover workers' compensation insurance, payroll taxes, payroll-tax deductions and benefits (if you are able to provide them). You will also want to consider the cost of help-wanted advertising, as well as any equipment (telephone, computer, Internet access) and office furniture or supplies that the employee will need to do their job.

One you arrive at the total cost, determine whether you have the cash flow to cover that expense. If not, you may want to rethink your decision to hire someone new, or brainstorm whether it might make sense to contact a temp agency to secure short-term help. Some experts suggest you ought to have in reserve at least a year's worth of expenses and overhead before you expand staff; otherwise it may be difficult to support your business through any lean stretches.

BEFORE You Start the Search
Define the Job. Don't place an ad or start the search until you have developed a job description that defines what your business needs. Be specific about the job duties, the skills set that will be needed, personality attributes that would be helpful to the position, years of required experience or education, and any other information that would identity the ideal candidate. Next, determine the number of hours that will be required to perform the job duties.

Full-time, temp or outsource? Once you know the hours and set of skills that will be required, you can decide whether it makes sense to hire a full-time employee, use a temp or find an independent contractor to perform the required duties. Generally, it makes sense to hire a full-time employee if the work contributes to the core product or service of your business. If the job you are attempting to fill is secondary or not a particularly key one, you might consider hiring a temp or contracting the work to an outside firm. Outsourcing various job projects (Web site design, marketing materials, payroll services, etc.) is one way to obtain professional help without committing to a long-term partnership. If you are seeking lower-level support staff or are attempting to fill a short-term need, perhaps it would make sense to use a temp agency.

Set a Competitive Salary. If you cut corners on salary and benefits, you will short-change yourself. Your goal should be to attract and retain the best-qualified employee for the job. Small business owners can rarely afford the expense and disruption of constant employee turnover. There are a number of salary-related Web sites that can assist you in researching the annual salary range (for your geographic area), that you can expect to pay for a specific job category.

HOW to Recruit Staff
There are several ways to find a pool of qualified applicants. If you're not in a hurry, one "low cost" way to spread the word about your job opening is to "cast a net" among your circle of friends, family members and business colleagues. Circulate at local business or industry get-togethers and mention that you are looking for somebody who would be interested in working for a small business or start-up venture. Let them know you have an opening, in case they are interested or can pass the word along to someone who may want to consider a job switch.

If you decide to place an ad, write enticing copy that will attract the type of candidate you are seeking. Describe the position, key qualifications and any other relevant information that would attract qualified candidates. Place it in a local newspaper or trade publication or list your opening on a job posting Web site (there are local and national job databases) that is likely to be frequented by target candidates. If you are a start-up venture, mention that in the ad, to attract the type of person who is comfortable with the risks associated with launching a new business.

HOW to Conduct Interviews
Lots of people look good on paper. Lots of resumes include exaggerations. It is always best to interview several candidates. If you have a lot of candidates to weed through, it may be more efficient to conduct brief phone interviews first to screen out unqualified candidates, quickly identity those applicants that appear suitably qualified, and then schedule follow-up in person interviews. Whether interviewing by phone or in person, the following suggestions will help to ensure a smooth and productive interview process.

Avoid asking any questions that would be considered illegal or inappropriate (such as your potential employee's race, sexual orientation, marital status, religion or child-bearing plans). Confine your questions to topics that relate to the job. [For additional information regarding questions that employment experts regard as "off-limits" for discussion in an interview, visit the Small Business Administration Web site at www.sba.gov/managing/growth/interview.html.

Be organized and consistent. In fact, it's best to have a list of 10-12 questions that you use with each interviewee. The questions should elicit information concerning the candidate's skills, abilities, and past work experiences. Jot down detailed notes as the interview proceeds. The notes will make it easier for you to remember individual candidates when it's time to make your decision.

Act professional and be forthright. The interview should have a businesslike atmosphere and you should conduct yourself accordingly. Interviews are not the time to be vague or distracted. Be upfront about the nature of your business, the job duties, the workplace atmosphere, your management style and any other factors that will help you and the candidate decide if they would be a good fit.

Remember, an interview is a two-way street. Don't do all the talking. You should spend the majority of the interview listening. After you ask a question, look at the applicant and really listen to how she or he responds and what they have to say. Observe their non-verbal behavior and choice of words. You should be striving to get a feel for their personality and work attitude, in addition to their skills set. Be sure to ask if he or she has any questions before you end the interview.

When you meet in person, ask the applicant to "show" as well as "tell." Ask them to show you how they would handle specific work situations. If you are hiring an administrative assistant, ask the candidate to turn on the computer and compose a letter. If you are hiring a marketing person, ask them to role-play being a sales person for one of your competitors.

COMMON Hiring Mistakes
Not checking references. With the applicant's permission, contact their list of references to find out if he or she has the proper skills and attitude for the job. Sometimes employers will not discuss the job performance or attributes of ex-employees, but they should be willing to confirm the employee's name, date of employment, title and salary. It is always helpful to ask whether the employer would consider rehiring that person. They can give a straight "yes" or "no" answer, without elaborating.

Not consulting the right people in-house. If the new hire will be working closely with other employees, you may want to solicit their input before making a hiring decision. When current employees have the chance to meet with a prospective candidate, they may have an easier time developing a productive rapport with "the new person."

Not treating candidates with respect. Be courteous and respectful to each person that you interview. Remember, even if you don't end of hiring that person, they may be a future customer and will definitely tell others about their perceptions of your business. Or, you may have need of that person's skill set in the future so it's good to leave them with a positive impression. Always thank the candidate for his or her time and interest. Finally, explain the selection process and offer a realistic timeframe for when a decision will be made.

Failing to put everything in writing. Once you've made an job offer and it's been accepted, put everything that you negotiate with your new hire (salary, job description, the parameters for bonuses and performance evaluation criteria, start date, non-compete clauses, etc.) in writing.

Picking the wrong temp agency (or independent contractor), if you go that route. You should carefully check the reputation of several temp agencies (or independent contractors), before selecting one with whom to do business. Find out how long the service has been in operation and what its performance record has been. Check with other clients to see if they like the agency. Reputable agencies are happy to provide client references. Also, ask if the agency is insured – for workers' compensation and general liability. Finally, contact the BBB for a reliability report on the company or contractor.

FINALLY, Keep ‘em Happy!
You've taken the time and trouble to hire a qualified employee, one who can add value to your business and help your venture to succeed. Do not assume that your job is done! A major personnel cost for any size business is employee turnover. Your goal now should be to retain that employee. If you don't take the time to nurture a new hire and make clear your expectations, you will spend even more time, money and effort on the other end having to find a replacement.

Treating your employee fairly and with respect will help to ensure a productive working relationship that is of benefit to you and your business. Satisfied employees are usually energetic and tend to be highly motivated. In addition to paying them a competitive salary, there are other factors key to employee retention. Keep them informed and engaged; let them know you value their contributions; give acknowledgement for a job well done; clearly communicate your expectations and offer regular feedback on their job performance; and, provide the tools and training resources they may need to do the job right and to advance in their field of expertise.

FOR MORE INFORMATION on Hiring Staff
The U.S. Department of Justice (www.usdoj.gov/crt/ada/adahom1.html) offers information on hiring under the Americans with Disabilities Act.

The U.S. Equal Employment Opportunity Commission (www.eeoc.gov) offers facts and guidance on various forms of employment discrimination.

The U.S. Small Business Administration (www.sba.gov) was created specifically to assist and counsel small businesses. Its Web site offers information for small businesses on managing your business for growth, and includes tips on how to select the "right" person for your business.

ABOUT BBBTips™
BBBTips™ is a trademark of the Council of Better Business Bureaus, Inc. (CBBB) used for information provided to assist consumers and businesses in making informed and intelligent decisions. BBBTips™ are developed in partnership with the Better Business Bureau Consumer Education Foundation, Inc. and made possible, in part, through the generous financial and technical support provided by corporate sponsors that are members of the CBBB and of the Better Business Bureau where the sponsor is headquartered. As a matter of policy, the CBBB and Better Business Bureaus do not endorse any product, service or company.