Part of becoming a successful small business is ensuring that your employees contribute effectively to the success of your business. This is critical if you are to grow your business beyond the initial start up stage. In the early start up stage for a small business of say 1-5 employees, the business owner is usually a Jack or Jill of all trades. The owner is manager, problem solver, chief doer and primary motivator for the business. As your business grows, the ability of the owner to be all things to all people diminishes and tasks must be delegated. This can be a nervous period for an owner as it can be hard to let go of some of the roles while at the same time there is a realisation that this letting go must happen if growth is to be achieved. This usually means adding employees.
If you want to grow your business, then you must ensure that recruitment is approached in a planned and professional manner. Many SME owners focus their early recruitment efforts on people they know – friends, relatives, or employees from other businesses they deal with. This is often rationalised as good practice because ‘I am dealing with people I trust.’ Or ‘I know they will be loyal’. This is a hit and miss approach if you have not first properly analysed the needs of your business. The early growth stage for an SME is no time to be sentimental or to use guesswork.
The following steps will help make sure that recruitment contributes to the growth and profitability of your business.
This sounds obvious, but it is surprising how many owners take a simplistic approach to analysing whether a new employee is needed. You should not recruit a new employee just because all other employees are flat out and you or they want to ease the workload. Points that should be considered are:
What is the work operation that is being addressed through the proposed hiring? Alternatives to hiring should be properly considered before any hiring. Depending on the nature of the business common alternatives are contracting out, automation and other IT based solutions, rearranging existing work procedures, rosters, layout etc.
Is the proposed hiring truly addressing growth or is it a consequence of inefficiency? For example, a badly laid out warehouse or store for a retail business can cause additional workloads through unnecessary movement to pick and pack orders. This inefficiency can make it appear that you need an additional store worker when a redesign of the layout in the warehouse may be a more appropriate solution.
What will be the effect on cash flow when you hire a new employee? An employee is a permanent increase in cost to the business. Employee costs are also regular with the period depending on whether wages are paid weekly, fortnightly or monthly. When calculating the financial impact on your business the true cost should be calculated based on gross wages and on-costs, costs of training and opportunity costs as supervisors and other employees must assist the new employee rather than focusing on their own work.
How long before your business achieves a return on the investment in new employee? If you have done your analysis and you are hiring for growth, then you need to consider the time needed before a new employee contributes effectively to the growth of your business. Some types of positions have inherently longer periods than others before a new employee can be classified as generating a return that is greater than the employee’s cost e.g. recruiting an apprentice, or a new graduate typically involves a longer before the employee is effective. Other positions may also require some time.
All the above questions involve both strategic and financial analysis. The smart SME owner seeking to achieve growth will involve their accountant and business advisor in these questions and avoid ‘flying by the seat of their pants’.
Once you have decided that recruiting a new employee is appropriate for your business plans, then you need to decide how you will arrange the recruitment process. Just as with the process of deciding if you need a new employee, there are several logical steps you should take when recruiting.
The first and most important step is to make sure you have an up to date Recruitment Policy in place. Having a formalised recruitment process outlined in a policy will not only make the process easier for internal or external recruiters but will also reflect well on your business from the point of view of the candidate. Recruitment policies should establish the process recruitment will take, including why there is the need to fill or create a new position, advertising the role, and selecting the right candidate. Recruitment can be a time-consuming practice and having a policy in place can make it much more time efficient and streamlined process.
Your next step is to create a detailed and well-thought-out job description. This assists recruiters and job seekers and creates efficiency by targeting the right people for the job and reducing enquiries from applicants who are either not interested in or are not aligned to your job requirements. Things to consider when creating a job description include the skill set required by the employee, how much experience is required to fill the position, and the specific expectations of the role?
The third step is to decide how you will inform the job-seeking community of your vacancy? Will you advertise the position or use a recruitment agency? If you advertise what media will you use, print media such as major or local newspapers, association journals etc., or on-line such as SEEK and similar on-line agencies. You should always ensure that your job description is well reflected in advertisements you place to find the right candidates.
On to one last and vital step. What if you have advertised the position and you have some excellent candidates to choose from? What if all their skills and experience match the requirements for the role and you cannot seem to find any reason to choose one over the other? If you are in this situation and have applicant’s that seem to have similar skills and experience you should look to discriminate among further by:
Checking references and past employers including double checking that this has been done by external recruiters.
Asking for a second interview. It is surprising how many times new information is revealed in second interviews.
Closely consider your organisation’s culture and the personality of existing employees and owners. Then think about the applicant’s personalities. You should at last think about a matching personality but in addition an applicant with high motivation and a willingness to show ambition and leadership can have a positive impact on existing employees. If you are recruiting for a sales or supervisory position, then personality and motivation are critical, and you perhaps should consider using an expert recruiter familiar with techniques in recruiting for these types of positions. Remember that while skills and experience are important, personality factors also contribute to success.
3. Comply with your legal obligations
There are many statutory requirements regarding the recruiting process. Some of these requirements apply to all employees such as anti-discrimination requirements. Other requirements apply to all employees covered by the national workplace relations system, however only certain entitlements apply to casual employees. In addition, there can be Award requirements and requirements related to certain classes of employees, for example apprentices and trainees.
Unless you are fully familiar with your legal obligations, it is best that you seek professional advice in advance of commencing the recruitment process. Some sources of advice business advisors, lawyers, industry associations and accountants. A smart SME owner will seek advice beyond the advice on compulsory obligations commonly supplied by lawyers and accountants and seek advice tailored to the needs of their industry and their own business situation. In most situations this will be a business advisor, an accountant or lawyer who is also a business advisor or an industry association especially where workplace relations advice such as Award interpretation is required.
If you have any questions on this article feel free to contact Fred Walker at Walker Strategies.