When Theresa Thompson’s 18-year-old son Ryan wanted to work in the family business, Thompson didn’t just clear off a desk and put him right to work. Instead, she sent him through the same rigorous hiring process she uses for any prospective employee.
“I learned the hard way that you don’t just hire someone because you know them personally or because they are family,” says Thompson, president of Tea Time Events, a full-service event planning, management, and production company. “My mother used to work for me as my receptionist and bookkeeper. But it turned out that she was not the representation that I wanted as it relates to establishing customer loyalty and being the first point of contact when someone calls, because if a client had not kept a payment schedule precisely, she would not greet my clients with a smile or pleasing voice,” she says.
Now, when looking to bring on new talent, Thompson first assesses the type of temperament that would best fit the job. She reviews her business culture to see how it has changed. This gives Thompson further insight into what type of individual would fare well within her organization. She then evaluates how to cultivate the talent once on board and creates a plan for how the new employee can contribute to the team. Lastly, Thompson begins the actual interviewing process to vet likely candidates based on the core skills and competencies required for the position.
Human resource consultant Patricia Mathews says effective team building is critical to any company’s success, but is especially important for the small business owner who often finds it more difficult than larger shops to absorb the financial and operational impact of a hiring blunder.
“Replacing a poor hire can cost up to 80% of an employee’s salary, not to mention the fact that companies are going to lose sales and productivity,” says Mathews, owner of Workplace Solutions, a human resources consulting company and affiliate of St. Louis-based Quest Management Consultants. “There is a negative impact on morale, a risk to projects and clients, a drop in organizational efficiency, and it can increase work-related accidents,” she says.
Mathews adds that any claims of discrimination as a result of a bad hire can run businesses $50,000 or more to defend in court. That type of payout could kill a small business.
“Good hiring is a function of finding new hires with the right skills, abilities, and competencies, the motivation to use those skills, and who are a good fit with the organizational culture,” Mathews says. “But small business owners need to understand that employment is a process that involves recruiting, assessing the candidates, interviewing, selecting, and organizational orientation. So, it takes time, careful thought, and planning,” she says.
If done correctly, small businesses can increase their market value up to 2.4%, according to global consulting firm Watson Wyatt. But many small businesses fail to reap the benefits of smart hiring because they either cut corners to keep costs down or fail to clearly outline their mission and goals moving forward.
Here are the top 10 hiring mistakes small entrepreneurs make:
Hiring someone as a favor or because you know them personally: This applies to family, friends, neighbors, that friend of a friend, and former co-workers. Those that you know personally expect to be treated according to a different standard, but you must always be objective when considering a new hire. The person should bring value to the business and be able to meet the expectations of the job. If you hire someone based strictly on a referral or as a favor, you could open yourself up to discrimination complaints, particularly if there were other candidates, internally or externally, who could have filled the position. Also, if a subjective hire doesn’t work out, you then have to face firing that employee, which is a much harder task to tackle.
Hiring in haste: “Small business owners are oftentimes really strapped, so if somebody leaves, they go out and hire one of the first two or three people that come through the door without thinking it through,” Mathews says. Taking on a new hire too quickly can cost you customers and loss of productivity. If an employee leaves the ranks, don’t rush to fill the opening. First evaluate if it is really necessary to fill the job. You may be able to re-distribute the work among your existing staff or designate someone in-house to transition over to the job and assume its responsibilities.
Not clearly identifying your business culture: Define those things which are deemed mandatory and appropriate in your organization. This can include professional appearance, conduct, and expected hours of work. Document the details in your employee handbook and have all new hires sign an acknowledgement that they’ve read and fully understand the information that you’ve outlined. Also, explain any penalties for not adhering to the company’s rules and regulations. After Thompson received negative feedback from a client upset over seeing one of her employee’s tattoos, she now states three times during interviews with potential hires that all body art and piercings must not be visible while working an event. She has also placed a clause in her employment agreement that says display of any body art and piercing at a function is grounds for immediate termination.
Trying to hire a duplicate of someone else: Don’t try to hire someone who is exactly like someone else on staff because you’re not going to find that person. Realistically, you’re probably only going to get someone who is about 80%-90% like someone else. The remaining 10%-20% of what you’re looking for may require you training that
person who meets all of your other criteria. “Look around at everybody that works well in the company,” Mathews says. “Ask yourself what you see that’s the common thread and then go find people who also have some of those same competencies because they will be a good fit for your business.”Not conducting a background check: Thirty percent of people embellish their employment history or education. More than 8% have criminal records, 6% provide false social security numbers, and more than 3% test positive for illegal drugs. Performing a background check is essential to identifying exactly who you plan to hire. Ask for and check professional references thoroughly—at least three. Ask past supervisors and managers about the person’s work ethic and how they performed on the job. Also, ask if the reference would rehire the person. Depending on the position you’re looking to fill, you may also want to issue a pre-employment drug test. Failure to do so could cost you productivity and profits, as studies indicate that regular drug users are 2.5 times more likely to be absent from work, one-third less productive, and 50% more likely to steal from your company.
Asking illegal or non job-related questions: Generate your questions before the actual interview and stick to those pertaining to general background, and the skills and abilities required to do the job. Stay away from questions about age, race, or sexual preference as they could lead to discrimination complaints filed by a potential hire who feels wronged for not getting the position. Mathews advises using an updated job description prepared by the person who is leaving to help determine what you should ask. “It will set you on the right track so that you can effectively probe for those skills and competencies you’re looking for.”
Conducting an interview alone: Interviewing has become somewhat of an art, and it’s something at
which people have become very good, so don’t rely on just your gut or impression when making a decision. Have at least two or three people help with the interview process, and get opinions from each. Don’t monopolize the interview by doing all of the talking. Encourage the candidates to ask questions and give them an opportunity to share experiences as well.Failing to document the interview: Take notes during and after the interview indicating why you are considering a particular candidate. It’s critical that you document acceptable reasons because a candidate who is not given a job offer has 300 days to file a complaint with the Equal Employment Opportunities Commission if he feels discriminated against. “If you don’t get the complaint for 200 days, how will you ever remember why you didn’t select this person,” Mathews says.
Failing to use validated testing: Many companies create their own tests to administer and then base their hiring decision solely on how someone scores. But oftentimes these exams don’t fully measure the capabilities of a potential hire. Make sure the tests you use are valid and fair. Such things as math, editing, and personality tests can be purchased and are already proven to generate fair and equitable results. Rather than trying to test for every single competency, you may want to opt for some training instead.
Hiring one person for two jobs: Small business owners may think they can get more bang for their buck by having one person assume the responsibilities of two jobs, but an overworked employee can cause decreased productivity, low worker morale, and ultimately high turnover. Thompson says if you can’t afford to hire two people, cross-train all of your employees so that any one person can pick up the slack where needed. Remember, happy employees are one of the greatest assets to your business.