This is the second most asked question I get. I’ll share the most asked question in a moment. But, this one is actually a more difficult question to answer so let’s dive in.
First, let’s tackle the subtext of this question. There are a few ways this has played out in clients’ minds. It’s usually some combination of: will I make a good decision? Will I be able to afford them? And, of course, what will they do?
The scary statistics about hiring gone bad and the story you heard from the friend of a friend who had a horrific hiring experience can send chills down an entrepreneur’s spine. We resolve that we’ll just do it ourselves. We’re a bootstrapping sort, anyway. We’re not afraid to get our hands dirty so to speak. And, I’ve even met a few entrepreneurs who proudly proclaim that they don’t need to hire anyone because they can do it all with some great tools and a couple of contractors.
Here’s the trouble with that scenario, that entrepreneur has placed on themselves under a ceiling and chances are they aren’t going to break through it. No one has simply automated processes and cut costs on their way to a wildly successful business. Each and every person who is or ever was a successful business owner has made investments in people. If your big dream is to impact the world with the work you do, the problems you solve and your unique contribution to your industry, I applaud you. It’s not easy to stand up and be counted among those who take a big swing and even when we miss, we get up and try again and again.
If you’re asking yourself when you should hire an employee, you’re already ahead of the game. So, how do we create a structure that’s simple, repeatable and gets results?
Figuring out when to hire is different for everyone which is why it can seem confusing. My business strategy is different than yours and my current growth trajectory is unique to me. I don’t believe in cut and paste hiring strategies, but I do believe there are a few simple principles that will get you started on the right path and provide peace of mind as you consider this important question.
Principle One: Have Money in the Bank
This may seem obvious, but the first principle is ensuring that you can afford to hire an employee. A simple way to do this (thanks to Mike Michalowicz) is to have three months worth of wages in the bank before you make a hire. This makes sense for many reasons. My take on this principle is that it does two very powerful things: it removes the fear that we won’t be able to pay someone and it gives us the time to focus on setting a new hire up for success. A study by the Society for Human Resources Management found that a new hire who went through an onboarding process was up to 50% more productive. In my view, that makes it worth every minute of my time.
Principle Two: Understand that You are Making an Investment
You’re probably familiar with the cost vs value equation. The cost is what we pay, the value is what it’s worth. Value can go up or down over time.
In context of hiring, we can say that the cost is the sum of wages + benefits. Value is the degree that they are able to provide expertise, experience, perspectives and knowledge that we otherwise didn’t have in our business. Hiring, even someone in a part time capacity, is the single most effective way to grow your business.
A secondary part to this principle is that we’re not good at everything and that’s a good thing! Specialization is part of the beauty of business. Making the most of being a specialist, even if we’re not ready to hire an employee, can be found here.
And, like most good investments, hiring provides a return over time. It’s never too early to ask your new hire about their goals. One of my favorite parts of being a corporate recruiting leader was to have one-on-one discussions with my team about their goals and aspirations. Sometimes it fit into my long-term plan and sometimes it didn’t. Those conversations created a path for us to have a durable, productive relationship and I definitely received great returns on that investment.
Principle Three: Realize that It’s a Dynamic Relationship
Contrary to the transactional nature of hiring a contractor, hiring an employee is a dynamic relationship.
This third principle also takes a little soul-searching. The transactional nature of hiring a contractor asks the question, what can I get? And, that’s the value of that type of employment relationship. Before hiring an employee, the question to ask is, what can I share?
In order to create a durable, long term relationship, we have to realize that the investment happens in both directions. As long as someone can see themselves growing professionally and developing their career with you, you’ll be in a much stronger position to retain them.
Principle Four: It’s Part of Your Growth Strategy
This principle is one of my core beliefs about business: we have to build in growth. Building in growth happens when we expand our products, create repeatable processes and hire a team (even you + 1 = a team). By developing each one of these areas we have the opportunity to be creative, develop new strategies, focus on quality interactions with clients and foster new relationships. And, of course, generate more revenue.
Contrary to what you may have heard, it’s not about hiring someone for the things you don’t want to do or feel like you don’t have time to do. Your first or next hire has to be the person who will help you to continue generating revenue.
I’m all for operating on a budget and taking advantage of automation, and as mentioned previously, no one has ever cut costs and automated their way to achieving their dreams and changing the world. Increased revenue is the single most critical factor in business success. And, one of the best ways to continue to increase revenue is to hire a top performer who will support the growth and mission you’re on.
However, this fourth principle is a different kind of readiness than money in the bank. This principle requires us to do things differently than before. It may include creating processes (better yet, ask your new team member to do it after onboarding!). It most definitely means delegation. Delegating responsibilities is part of your growth strategy and a principle that requires a CEO to be aware of their own mindset and ready to tackle the work of getting things done through other people.
There’s plenty of good reasons to hire an employee. The guidance I give my clients is to hire someone who can handle the revenue generating tasks that aren’t getting done or that need to be done more frequently.
And, we know that when a client or customer has an issue or a concern, they want to talk to someone. If we’ve got the right processes and people in place, they quickly realize that it doesn’t have to be you, the CEO. Isn’t that wonderful to think about? You don’t have to be running around putting out clients’ fires.
As CEO, developing a new offering or creating a new strategy requires the ability to step away from some of the day-to-day responsibilities and have a trusted delegate manage things on your behalf. Choosing to build in time to be creative and having the energy to develop an innovation you’ve had in your mind (but just haven’t gotten around to doing) is another great reason to hire. If you don’t have time to listen to your clients and customers in order to solve their problem, trust me, someone is!
Being a CEO doesn’t mean Chief Everything Officer. And, these hiring principles are not as tactical as they are strategic and I hope they provided a jump start to thinking about your business strategy and hiring plan.
Finally, you may be wondering about the question is that I get asked most often. It’s “where do I look?” To answer that query, I’ve developed a simple tool called, The Pick and Post Playbook. This Playbook breaks down the top 10 places you can use to get more high-quality eyeballs on your job ads. And, you’ll get the Pick and Post Matrix so you can track your success.
Beginning with the end in mind is a not just a good habit, it’s the starting point for a great hiring plan.
My hope with this 3-part series on hiring, whether a contractor or employee, is that CEOs will be empowered with a deeper understanding of the purpose of those relationships and corresponding outcomes.