Ent 600 Week 6 Blog Discussion

“Keeping Top Performers and other Hiring Dilemmas”

Employee turnover is expensive in any business. According to Christina Merher from PeopleKeep, it can be anywhere from several thousand to 1.5x or 2x the annual salary.  It all depends on how you measure cost and what factors go into the study. Some studies might include the revenue loss from vacancy if it was a profit center or the time the new employee takes to reach the revenue targets of a previous employee.  Either way it is a lot of money.  Needless to say, an emphasis should be made on keeping your top producing employees.

According to Eric Herrenkohl in “How to Hire A-Players,” it is important to not take your “A-players” for granted.  This is includes recognizing their valuable contribution to the business. Having a conversation with the employee is the first step. This lets the employee know that they are being thought about and appreciated. Let them know you are interested in their future plans. This conversation can provide valuable information on their thoughts about their future. A manager would want to find out whether or not they plan to stay with the company. It also helps for future planning. Although it may look static on a piece of paper, an organizational chart is more like a chess board.  Changes will be made and the owner or manager needs to be ready. By having employees in the organization on the “bench,” this could help backfill vacancies.  Valuable employees appreciate knowing that their career has direction. According to Valerie Bolden-Barrett from HR Drive, lack of career development was the top reason for employees leaving their company in one study.

In today’s economy, jobs are plentiful.  I know business owners that have problems with employee turnover. Another hiring manager will offer a small raise in pay and they will leave their current job. If the employee is indeed an “A Player,” then you will want them to know their value to the organization and how their career will reap long term benefits by remaining loyal.  

I heard many people say that they have left their job because they did not like their boss. Open and honest communication should be made between manager and employee.  Concerns about the job can be addressed immediately this way.

“Each time a startup hires a new employee, it faces a choice between hiring a specialist, who can usually be counted on to do a specific task well, or a flexible generalist or jack-of-all-trades, who cannot do any particular task as a specialist could but can move across multiple tasks more effectively than a specialist would.” (Herrenkohl, How to Hire A-Players,2012)  

In the beginning of a startup, usually generalists are hired. There are multiple tasks to be handled, but the cash flow has not begun yet. As the company grows it is important to make sure those early hires are moved into a specialist role.  Identifying their natural talents and moving them into such a role will increase employee satisfaction. In addition, one can usually perform one skill very well as opposed to multiple tasks mediocre.  As the startup matures, there is likely to be specialist positions that are established. This changes the recruiting dynamic completely.  Now the hiring manager needs to look for a candidate that is proficient in that functional area.

As the specialist becomes more proficient in their area, they expect more compensation which is another reason why there tends to be more specialists in a mature startup.

I have created a plan for NC Aerial Images in this entrepreneurial planning course.  This plan looks great for a mature company that has been in business for many years.  However for a hypothetical startup, it seems unrealistic.  That is because timeliness is important.  An owner needs to be ready to bring others into the business if the situation is correct. If there is not enough cash flow, then an employee may not be feasible, but perhaps the meeting the right person can be involved other ways such as an investor, advisor, or even partner.  A Founder needs to remain flexible and think long term, but at the same time understand budgetary concerns of the business.

References:

Employee Retention Now a Big Issue: Why the Tide Has Turned, Josh Bernsin on LinkedIn, August 16, 2013

Employee Retention – The Real Cost of Losing an Employee, Christina Merhar, PeopleKeep, February 4, 2016

How to Hire A Players, Eric Herrenkohl, 2010

HR Drive, Study:Turnover Costs Employers $15,000 per worker, Valerie Boden-Barrett, 

August 11,2017

“Role Dilemmas” Week 5 Post for Ent 600

Deciding which partner takes on which roles can be an ordeal in any startup.  Although a title might not mean much amongst close friends, it can cause chaos soon into the start of the operation. Friends that are starting a company usually take a more “egalitarian” as opposed to a “hierarchical” decision making approach. It is important to define roles for functional areas that one is going to handle. Once the title is decided, it is more important to decide on the responsibilities that go along with the title. Knowing that when situations arise they can be properly handled by the appropriate person is key to a well oiled machine.  In the event the partner or employee leaves the operation, there is an established position with clear responsibilities in place. This will allow for a more seamless transition to the new employee.

In the example of a startup that has multiple partners that are close friends, it may be difficult to decide on who will have a “Chief” title.  Noam Wasserman answers that question in “The Founders Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.”  First the level of commitment needs to be determined.  If one of the partners holds on to a “day” job, they may not be the best person for the title of Chief Executive Officer.  Noam Wasserman also suggests that it should make a difference who the “idea person” is to determine position.  It only makes sense that the person the came up with the idea will be the most passionate about the business.  Wasserman also mentions in his book that consideration of human, social, and financial capital should also be considered.  The more a cofounder brings to the table, the more his collateral will be worth to the startup.  

In order for the startup to be successful, it is important that the person that came up with the idea give up some control of key functional areas. In other words, he should not have total control with the CEO title.  As discussed in previous posts, allowing oneself to maintain total control can actually lead to less growth in the company. This is because a CEO usually does not have all of the skills and assets to bring the new startup to immediate significant growth.

I have indicated throughout this post that it is key to a startup to have clearly defined roles. However, it is also important to be flexible enough to allow for evolution of an organization.  Situations change constantly.  The growth of the business might be faster than you expected. In this example, the founders may have to add people to the organization.  What would happen if the founders suddenly met someone who had tremendous social capital in their industry?  An adjustment would need to be made in the organizational structure.

I am not advocating for either an egalitarian or hierarchical approach to creating roles within a brand new startup, but it is necessary to properly define roles and responsibilities.  It also important to remain flexible for changes the startup will inevitably make.

References

A Founder’s Dilemma’s: Anticipating and Avoiding the Pitfalls that Can Sink a Startup, Noam Wasserman, 2012

Ent 600 Week 5 Blog “Skills you Cannot Teach”

Ent 600 Week 5 Blog Post

“Skills you can not Teach”

When faced with hiring decisions, the resume is the first place many hiring managers turn. It provides much of the basic information that a prospective employee requires. Their educational background and relevant work experience are all important to a hiring manager and are available on any resume.  But there are qualities that a person could posses that are invaluable to a business that a candidate could posses.  Life experiences that create quality character are one example. In “How to Hire A-Players,” Eric Horrenkolhl discusses hiring waitresses that are single mothers.  People that have gone through tremendous life challenges could have a work ethic like no other.

In my previous personal experience as the manager of a retail paint store, I can say that it far better to wait to find the right person than hiring the first person that comes through with a half way decent resume.  There have been many hiring managers that have made a rash decision at hiring someone just to fill a position.  Although there might be pressure to hire as soon as possible because there is work to be done, having the right employee in place saves time in the long run.

Hiring the right person for the job comes down to understanding your company’s core values.  Asking the candidate for examples of experiences that relate to the company’s core value will identify skills that you cannot teach. Hiring individuals with the kind of skills that cannot be taught saves your company time and money.  It is loosely relatable the statement Eric Herrenkohl states in “How to Hire A-Players.”  In Chapter 1, he implores the reader to “Stop trying to turn c-players into a-players.”  I don’t believe the other is saying that he does not believe in coaching employees.  As well all know, a great coach is paramount to any winning team. I believe the author is saying that is far easier to hire the candidate with the necessary basic skills and values than teach them once they are hired. It is near impossible with the unteachable skills. Caring about the quality of your work and passion certainly are not going to be learned in a conference room.

The pharmaceutical company Merck has several core values. One of the core values is related to diversity and teamwork.  “Our ability to excel depends on the integrity, knowledge, imagination, skill, diversity, and teamwork of our employees.”  This value is stated on their website.  Knowing this information can help a recruiter to decide on interview questions.  For example, a hiring manager or recruiter might be interested in hearing about a time the candidate worked on a complicated project in a team environment.  Integrity is also a value in Merck.  Another example of an interview question might be “tell me an example of an ethical dilemma you encountered and how did you handle it?”

Although it is difficult to identify skills that you cannot teach, it is well worth the extra effort to find that person.  Passion, commitment, teamwork, and integrity are all qualities that you cannot teach. These qualities are just a few of many.  Finding the right person with the intangible skills can make a difference for your life and your customers.  It will allow you, as a manager, to pursue other avenues to grow the business instead of extra supervision and coaching. You will also be able to relax properly when you are not on the job because you will not be worried about the business.

References:

merck.com

How to Hire A-Players, Eric Herrenkohl, 2012

Employee Assignment for Ent 600

Michael Weimar

Ent 600

Non Equity Employee Pay Scale

The spreadsheet I created references 5 categories of employees making it easier to determine which area of management will be responsible for the employee. It also allows for the creation of additional functions within each category as the operation grows.

It is important to provide a competitive salary for employees. This will attract the best potential candidates. However, because payroll is a such a major expense for a business, it is also necessary consider the company’s bottom line.

I researched average salaries for each position. I found that many sources will having varying average salaries. For example, glassdoor.com listed the average salary of a sales manager to be $68,957. U.S. News and World Reports listed the same position to have an average salary of $137,650.  There are many variables in researching salaries. The same position within different industries could vary greatly in compensation. Also pay scales are different based on geographic region.  In addition, job title makes a difference when researching salaries.  In my organizational chart, I listed two accounting positions.  I intended for these two employees to cover various bookkeeping tasks. This would included accounts receivable/payables for one position. The other would take care of payroll.  There is a large difference in average salary for an accountant and payroll clerk. 

For this project, I decided to use Glassdoor average salaries for all positions.  They seemed realistic for the model that we have been provided.  In addition, to keep employees loyal, many are incentivized by annual increase in salary.  By stating at a lower salary, annual increases are more affordable for a startup.

The sales positions are the most difficult to monetize. I used an average salary for the spreadsheet but most employed in sales are motivated by additional incentives.  In my research and drawing on my own experience, companies will primarily use monetary rewards as additional incentive.  This might include a 5% commission on sales made by an individual representative. Sometimes non monetary incentives are used such as merchandise and other non cash cash gifts, but cash incentives seem to motivate most individuals in this profession.

The salaries listed are only payroll expense. They do not included other benefits the employee may be entitled to receive.

References:

glassdoor.com

chron.com

US News and World Reports, Best Jobs, 2019

Is Cash King for Sales Compensation Plans? Evidence from a Large-Scale Field Intervention, Madhu Viswanathan, Xiaolin Li, George John, Om Narasimhan

The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls that Can Sink a Startup, Noam Wasserman, 2012

How to Hire A-Players, Eric Herrenkohl

weimar_michael_ent_600_employee-assignmentDownload

Ent 600 “The Benefits and Risks of a Homogenous Team”

Assembling a team is a difficult task. Many considerations need to be made.  This was true of the 1980 USA Olympic hockey team.  The head coach, Herb Brooks, had the difficult task of selecting the best amateur hockey players from around the nation.  At first the team did not work well together. This was because there were players with different personalities and backgrounds.  This is the problem with not having a homogeneous team.  The benefit is that each player brings an important element to the team. As history holds true, having players with strengths in different areas, allows for the team to achieve its goals.

A leader needs to understand the value structure needed in a teammate. This means deciding on what Noam Wasserman in “The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls that can Sink a Startup” describes as “non negotiables.” According to Marillyn Hewson, Chairman, President, and CEO of Lockheed Martin, “Lockheed Martin’s core values are non-negotiable: do what’s right, respect others, and perform with excellence.”  These are values that all Lockheed Martin employees must possess.  Finding employees with these core values begins with the selection process. According to Eric Herrenkohl in “How to Hire A-Players” you should “find a large pool of people who have the basic skills and hire the best. That is a simple formula for consistently hiring A-players.” This means consistently talking to people that you think may be an asset to your company. Basic skills should include core values.  The right questions in the screening process will reveal the best candidate that also has the values the company requires.

It may be tempting for a small business owner that is trying to assemble a team to hire people that are from similar backgrounds. Many times family and friends become part of the business. In the short term, this seems like a good idea. Since there is a previous personal relationship, it is less likely that there will be personality conflicts. Most people feel very comfortable with family and friends. This comfort level may make them more likely to make an assumption of how a person might feel about a situation. Family might be more likely to act on their own without consulting others.  In addition, formal agreements are not likely to exist in a friendship. This leads to misunderstandings.

Cultural differences can also effect team cohesiveness. In ”The effects of Team Composition on Multicultural Group Reference” the authors researched how one communicated compared to participation in the group.  They compared a group with similar backgrounds with a variance in cultural background. As to be expected, when one was within their cultural group, there was a higher level of participation.

Wasserman suggests finding “people that have diverse backgrounds, but share certain core values such as risk tolerance, commitment level, value system, and personality”  is the best model. Having teammates that are similar in social circles and back grounds will not allow the team to gain valuable social capital. In addition, knowledge and skills might be duplicated in teams that are extremely homogenous.  Finding the right balance of diverse backgrounds and core values is the best way to mitigate the risks taken seeking members of your team.

References

Trust Builds Value in Business Ethics Programs, National Defense, Marillyn Hewson, 

May 1,2015

How to Hire A-Players, Eric Herrenkohl, 2010

The Founders Dilemmas: Anticipating and Avoiding the Pitfalls that Can Sink a Startup, Noam Wasserman, 2012

The Effects of Team Composition on Multicultural Group Reference, Jolanta Aritz, University of Southern California, Robyn Walker, University of Southern California, September 1, 2007

Ent 600 Equity Division

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Ent 600 Equity Division AssignmentDownload

The Role of Founders in Building Teams (Ent 600)

“The Role of Founders in Building Teams”

Many founders of new small businesses may have the temptation to do everything themself.  There are many reasons why this is the case. When an idea is your own, the founder may believe that only they are able to properly execute their plan.  They have spent countless hours thinking and developing their idea. Bringing another person into the business that clearly will not have the amount of passion and knowledge of the business will slow down their growth is what one might think. This is furthest from the truth.  While the new business owner is shipping product, sweeping floors, or answering the phone, he could be pounding the pavement and developing sales and customer relationships.  One may think that they do not have enough money to bring on new employees.  This is also flawed thinking.  There are many options that could be considered including hiring part time employees, looking for other founders to share in the startup costs, or even meeting an angel investor.

Once the decision is made that is necessary to build a team, one must decide on what functional areas must be created.  The founder needs to take an inventory of their talents that they possess. Most likely a founder has a passion for an idea and a vision for his company, but lacks the expertise in important functional areas. These include may include developing a marketing strategy, managing a sales team, handling the finances of the business.  There are many ways that this can be handled. The new founder can be conservative and hire consultants. This would save on overhead costs of payroll and benefits.  The disadvantage would be that the new organization would not build a team with forward momentum and a common vision.

It is the founder’s role to decide on the vision for their new organization.  This should be done prior to building a team.  It is paramount to know where your new startup is headed before bringing others onboard that may or may not possess the same vision.  This vision should be put in writing in the form of a mission statement and shown to potential candidates. “Our mission is to be Earth’s most customer-centric company. This what unites Amazonians across teams and geographies as we are all striving to delight our customers and make their lives easier, one innovative product, service, and idea at a time.”  That is the mission of statement of amazon.com. It is stated on the top of their job application page. People that are completely focused on the customer and innovators are traits that Amazon is looking for when their team is interviewing. Hiring the wrong candidate who ultimately acts differently from the mission of the company, can cause tension amongst owners and employees alike.

Although it is important to have all employees moving in the right direction, it is also important to have a diverse team.  A diverse team provides ideas from multiple viewpoints.  It is about cultural diversity and having people from a variety of backgrounds on your team will will increase the likelihood of great ideas coming from their collaboration.  The key is again is to make sure that you are hiring the right individual for the organization. Their attitudes and skill sets need to match the vision of the company.

The founder of a new startup will set the tone for the team they create. Will their team will be built on entrepreneurship or micro-management?  Will it be based on creativity or rigid procedures?  By understanding the founder’s ultimate goal for the company, they can decide who will be their best teammates.

References:

Hiring for Cultural Compatibility, Johnathan Kestembaum, Counterpoint, July 1, 2018

What Are Your Cultural Non-negotiables?, Regis Courtemanche, July 1, 2018

www.amanzon.jobs.com

Three Tips to Build a Diverse Team and Strengthen Your Business, Raquel Baldelomar, Forbes, November 22,2016

The Founder’s Dilemmas: Anticipating the Pitfalls That Can Sink a Startup, Noam Wasserman (2012)