BSM Executive Advisor
	David C. Guenthner
	dave@bsmexecutiveadvisor.com
	(402) 660-7667
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People

A company's success is directly attributable to the number of excellent people it can hire. It is the only way you can grow. If you can't attract the right people to your company you will never achieve your growth objectives. People, good people, drive growth. In order to hire good people, there are a few basic rules you must follow.

Never hire yourself.

Most people, given the chance, tend to pick employees the same way they pick friends. They want people that share their interests and think the same way about issues that they do. This is a big mistake in hiring employees. You already know what you think and what you know. When you hire employees, hire to your weaknesses, not your strengths. The diversity, as long as they buy into the culture and core values, will result in new ideas and better solutions to problems than a company full of me thinks could ever hope to achieve.

Employees are an investment not an expense.

Warren Buffet, in his 2005 annual letter to shareholders acknowledged what I had learned years ago at InaCom. Employees should not be viewed as an expense, they should be viewed as the asset they really are. You need people to grow a business. Not unlike a computer, a new press or some other fixed asset, employees increase your capacity, product quality and efficiency.

The same amount of care should be given to hiring an employee, as you would give to making a $1 million dollar investment. The average employee will work for you for five to seven or more years. Each employee you hire will require equipment, training, office space and supplies to do their job. In addition to their salary, you will pay benefits to the employee; if the employee travels you will pay those costs. I'm sure you get the picture that the cost of an employee is far more than just their salary. Take the time to hire the right employee, not just any employee.

Your most expensive employee should be your cheapest employee.

The concept is simple. The person you pay the most should be generating the most profit for the company. If they are not, they are over paid. The concern needs to be what the person is accomplishing in relationship to how much they are being paid. Make sure your getting your money's worth.

This concept is why sales people make more than accountants or operations personnel. It does not mean they are smarter or work harder, it means that they can do something very difficult and do it well; they can make people decide to buy your products. This results in more money for the company which translate to a higher return on the sales person than the accountant or the operations manager.

Never let a few dollars stand in the way of hiring the right employee.

In business, one of the most often repeated mistakes is refusing to higher the most qualified candidate over a difference in compensation of a few thousand dollars. The issue is not what you are going to pay the employee, the issue is what the employee is going to make for you. If you have to pay more to ge the person you want that's okay. Just make sure the employee understands that you expect more form them and if they don't deliver more take the appropriate action.

Hire the right person set the expectation and let them do their job. Don't' over manage them but do keep an ey on what they are doing and meausure their success.

When you hire people, hire them for the skills they possess and their ability to do a specific job. If you must hover over them to make sure they are doing their job and doing it effectively, you probably hired the wrong person.

At InaCom I tried to hire people that had different skills than I had. I pointed them in the right direction or the direction I wanted them to go and I let them do their job. I did this because if I had to be involved in every decision they made, I would become a bottleneck to getting done what needed to be done. Don't be a bottleneck. If you over manage good people they will soon become unhappy. They want to show what they can do. Let them.

Once you have set expectations and turned your people loose to do their thing, you are not done. While you must let them do their job, you must have measures and reviews in place that will allow you to effectively monitor what the employee is accomplishing.

When it comes time to downsize and look at cost reduction, look at $ savings not a headcount.

I am always amazed when I see the headlines saying Company X to lay off 200 employees in cost cutting move. If you lay off 200 employees at $30,000 a person you saved $ 6 million but you lost an awful lot of company knowledge, industry knowledge and goodwill. You also hurt the company's ability to gear the back up if things turn around.

The right question to ask is how do I get $6 million dollars of cost out of the system while creating the least disruption to the company and the customer's I serves? The answer may very well be to eliminate a layer of 20 or 30 managers to get the $6 million or it may be 10 managers and 70 employees. Always look at the low impact way to get the cost savings.

When looking at people costs, don't forget about all the employees that are not on the payroll- those 10 temporary helpers in accounts payable or those thirty contractors' in the IT department. They are really salary costs and should be looked at hard.

Often times when a company starts reducing employee headcount, there is suddenly an increase in the number of contractors that start working for the company. Contractor's are generally hired by a department and do not go through the normal human resource hiring regimen. Make sure you look at contractors as part of the overall employee costs.

Employees rarely leave just for money.

Money is the most often cited reasons that employees leave for but is probably, assuming your pay is reasonable for a position, the last reason a person will resign. People want to feel like they are contributing and that their contribution is recognized irrespective of pay. Make sure everyone knows what their job is and how it contributes to the goal of the company.

At InaCom I constantly talked to the accounts payable people to make sure they understood that their prompt and proper processing of vendor invoices was important to our success. They knew if the bill was owed and not paid IBM or Compaq could decide not to ship products. They also knew that if they could prove IBM or Compaq wrong, they shouldn't pay but we had to tell them and prove why they were wrong. They knew how they contributed to the success of InaCom.

We used to say that InaCom was a company that was managed by walking around. The CEO and I were always very visible on all floors of the building, at the warehouses, in our branch locations and at our customer sights. We stopped and talked to people. We made sure they knew what their job was and we made sure they knew that we appreciated them and if they ever had an issue they felt needed to be discussed that they could call or email us. They felt like they were part of the family and that we knew what they did.

At InaCom, our largest turnover area was in tech support at client locations. We had our techs working at clients' sites. They reported to that office for their workday. If their manager did not come and visit or they were not required to come to the regional office every week or two to renew acquaintances, they felt ignored. This was the number one reason given for high field turnover- I don't see my supervisor enough and I don't know if I am doing a good job or not.

Every employee, no matter what department they are in, is a profit center. There are no cost centers. Every employee contributes to the success of the company. That includes the janitor, the CEO and everybody in between.

Focus on retention not replacement of employees.

The next hire will not be the best person you ever hired, you will just be more aware of their strengths and less aware of their weaknesses.

Your lowest cost employee in the future is the employee you have today. Turnover of employees is incredibly expensive and a company should go to great lengths to keep its employees in the fold.

You don't have to bring your current employee up to speed on the industry or your culture and business. You don't have to get them comfortable with all of the employees they will be working with. This educational process can take weeks or months and there is no guarantee that the new hire will work out.

You don't have to spend money recruiting an existing employee. The money saved in recruiting should be spent on retaining the existing employee base.

The opportunity cost, because of the learning curve, is generally pretty high with a new employee. Unless the new employee has been brought in to fill a void or create a change, you can't afford this learning curve downtime.

Your company is only as good as your least productive employee.

Your least productive employee will eventually become the standard that your company is judged by. Invariably, this person will offend a customer, key employee or vendor. Their attitude will spread through the organization like a cancer affecting everyone that they come in contact with.

The issue will be, "Why should I must my butt when they don't and get to stay employed."

If you are the smartest person in the room, you have done a bad job of hiring.

You hire to your weaknesses, not your strengths. My strength at InaCom was the ability to understand the business and communicate with all divisions, departments, vendors and customers. I was not the best accountant or the savviest financial person in the company. I hired them and I listened to them through the filter of what I knew about the company and the various other operations. With their expertise in specific areas and my general knowledge, we usually came to the right conclusion.

Hire people who are smarter than you in your areas of weakness. You can't be the expert on everything. A rising tide lifts all boats, including your own.

© 2007 BSM Executive Advisor, All Rights Reserved.