Hiring and Firing: Who's to Blame When it Does Not Work Out?

About 18 months ago, I interviewed a candidate for a position that I had posted on the internet. He had the proper qualifications and enough experience to warrant a visit. Since I was out of town and did not want to slow down the process, I scheduled a telephone interview with him.

As we began the interview, everything was pretty typical with me asking questions based on his resume as well as more probing questions about how he had handled certain situations in the past. As we neared the end of my questions, I asked if he had any questions of me. His first question went something like this: I have been checking around town and it sounds like you have been hiring someone frequently for this same position. Everyone seemed to think this must be a difficult place to work if people keep leaving.

I smiled (which he could not see over the phone) and replied that, indeed, we had gone through a few people in this position. However, the assumption people were making was a poor guess. I explained that the reason we had been re-hiring for the position is because I had to fire all but one of the people that I had hired. The lone exception left us to take a management job elsewhere that I simply did not have available. There was silence on the phone and I suspected that I had just scared the heck out of the gentleman. I quickly continued that this was because I had done a poor job in the hiring process. Once I realized the mistake, I quickly had to step up and start the process to fix my error.

I’ve been hiring people for 30 years; either for companies at which I worked or those that I have owned. I seem to be better at hiring some positions than others but, in totality, I have not exactly been a rock star at the process. Turns out, I am not alone. Even when I hired on behalf of large employers who used the latest psychometric tools, we only hit on about 60% of them. I don’t know what the average is currently, but I suspect it is still not much better.

So, like any other business problem, this is a leadership problem. When we hire the wrong person, it is incumbent upon us to not let it drag on as that does no good for the employee nor the business. It’s not easy on either party at the moment, but it is better long term for each party to find a better fit. If you make a mess, it’s your job to clean it up.

FYI, I did not hire that particular gentleman. We did find a person for the position and he is coming up on his 2nd anniversary this Spring. I think we got this one right (knock on wood)!

Business Problems are Leadership Problems

I met a gentleman many years ago that I quickly came to know and trust. He taught me several great lessons. One of them came rushing back to me recently as a result of a situation that will take far too long to discuss in this forum.
If you are in a leadership position…take a seat. This one might make your BP go up. “All business problems are leadership problems.”
Not sure if he coined the phrase, but it has proven true throughout my career. I look at it in two directions: 1. If a business has problems (they all do), it’s because the leader has failed in some way (yep, that includes me). 2. Leaders are responsible to ensure that problems get solved.
OK, Leaders, if you are part of the problem are you ready to fix yourself and fix the problem?

Entrepreneurial Self-Awareness

It has been said that, “No man can gain perspective in the midst of his circumstances.”  This is especially true with small business owners.  With the success of their business being dependent on their every move, business owners have precious little time to assess anything beyond the tasks of getting work out the door on a daily or hourly basis.  Add to that the responsibilities of supervising their teams, reading financial statements (however infrequently they may be produced) and trying to ensure a steady pipeline of new business, and it’s easy to see why entrepreneurs have a difficult time looking strategically at their business (working ON their business) and, more importantly, their personal weaknesses.

That said, it is critical for business owners to carve out time in their over-packed schedules to do exactly those two things.  In order of importance, growing their self-awareness has to come first.  Until they gain a more in-depth understanding of themselves and create an executable plan to fill in their skill gaps, it isn’t particularly practical to attempt to spend a lot of time refining the business.  That’s not to say that much of working ON the business and gaining more self-awareness cannot occur simultaneously, but the lead dog has to get him/herself some perspective before real changes can occur.

Growing one’s self-awareness is a very brave undertaking for most business owners. I say this takes bravery because, in my time working with business owners (and being one myself), they usually have been the “Shell Answer Man (or Woman)” for their business for so long that they tend to think they have all the answers.  Of course, none of us have all the answers.  The key is to know what we don’t know and either get training to fill in that knowledge gap or hire people, either on staff or as mentors, to compensate for the holes. The most effective/efficient way to do this, in my experience, is to engage mentors to spend time, quiz and observe the owners in order to make recommendations as to areas that are not their strong suits.  

Only with better self-awareness can critical business assessments and decisions be made optimally.  Think about the difficulty of trying to decide if an expansion is appropriate for your business without adequate and honest self-awareness of the owner’s ability to lead this growth.  Similarly, how can one determine if the business is salable without being real with one’s self in determining what we do/don’t know about making a business salable?

If you are a business owner and have not spent the time to build relationships with trusted mentors, get started today.  Only by having someone looking at your circumstances from the outside can you be sure that your weaknesses are properly identified so you can improve yourself, and move your business forward.

 

Transition to Working “On” Your Business

I run into a lot of business owners that have successful businesses as well as many that are struggling.  Whether they are successful or still trying to figure it out, what most of these have in common is that they spend a lot of their time each day working IN the business.  In other words, they are grinding to make sure their product or service is getting performed to their customers’ satisfaction.  Being a business owner myself, I can testify to the necessity of doing this.  Nobody can articulate the owner’s vision as well as the owner!

While a business can be successful, i.e., profitable, operating in this manner, the long-term purpose of the business owner should be to sell it one day.  This, along with the inevitable burn out that will occur, necessitates a change of approach:  Working ON the business.

Now one does not make an abrupt change from working IN the business to working ON the business.  It’s actually an evolutionary process.  You go from working all day, every day IN the business to spending a few hours a week working ON the business and evolve from there.  Doing this, naturally, requires the business owner to cede control over certain hour-to-hour tasks within the business.  How does one decide where to cede?

I suggest making two lists.  For the first list, the owner should answer the question, “what are the business tasks which you most enjoy?”  There are no right or wrong answers here.  Simply list his/her opinion.  Love making widgets?  Write it down.  Really like dealing with customers?  Write it down, etc.

On the second list, write down the answers to this question, “At what tasks do you create the most value within the business?”  Here, it’s really important that the owner be honest and accurate.  Don’t just write down a gut feel (although a gut feel might be correct).  Deeply consider which business tasks will help the business grow/reduce costs/improve customer experience/increase cash flow, etc.

Now, let’s juxtapose the lists.  Here is where we separate passion (what we love) from what creates value (makes someone want to pay top dollar for the business one day).  Compare these two lists and see which tasks drive business value and fuel passion.  The owner should absolutely keep doing these tasks.  That is an easy call.  On the other end of the spectrum, any tasks not on either list should be passed on to someone else in the organization.  Another easy call.  The challenge comes where passion and value-creation skills are not matched up.

In my case, I really like wrenching on cars.  However, if I’m honest, I’m not very fast.  So, I quit wrenching and hired another technician.   I also love working with clients, vendors and creating processes.  I kept doing those things.  Guess what?  The year after stepping out of the shop and handing the wrenches to someone more talented, we grew 17%.  I was actually less stressed, clients were happier, I was happier, the technicians were happier (they got their parts faster with me in the office).  Winner!

This was just the beginning.  Over time, I slowly released more activities to employs.  Now we are at the point where the operation is turn-key.  I am not integral to its hour-to-hour success.  My trusted team handles that.  I still set the tone with clear expectations on process, client care, building appearance, etc.  But, I trust my team to do it right.  I also leave an open channel for clients to reach out to me when their

7 Ways to Create Value

I ran across this article in Pro Painter Magazine and, while it’s about running a painting business, it applies to any small service business…..
You’ll never earn a profit as a painting business owner unless you bring real value to the table. Here are seven essential ways to make that happen:

SELL WELL: Selling jobs at profitable prices is a completely different skill than painting, and most painters don’t like to find new jobs and clinch deals. Selling well is key to any business, and if you don’t like selling you shouldn’t try starting a painting company. And selling effectively these days always involves some kind of online presence. It’s certainly not the only part of selling, but it is the new normal for any painting business owner who expects to thrive. If the internet scares you, don’t try starting a painting business.

ORGANIZE BIG JOBS: The larger the painting job, the greater the role for you to coordinate painters, supplies, timelines and financials. Solo painters simply can’t do this on their own, so it’s a natural role for you as leader. Many successful painting companies find a profitable niche doing jobs that are too big for anything other than an organization to handle.

STREAMLINE THE FINANCIALS: Invoicing and collecting payments will always take too much time and too much effort if you don’t design a streamlined financial system intentionally from the start. The slickest I’ve seen painting business owners use is on-the-job digital payment systems at the end of each project. Swipe the clients credit card through a reader on a cell phone and you’re done. You get instant payment and there’s no need to follow up with paperwork. Painting business owners I know who use on-the-job payment also find that clients are less likely to call back for touchups and repainting when they’ve paid immediately, too.

PROTECT YOUR PAINTERS: Part of running a successful painting business involves finding and keeping skilled and loyal employees or contractors. And a big part of loyalty comes down to creating a hassle-free zone for your painters to work within. You need to protect them from the conflict caused by angry customers and the hassles involved in gathering paints and painting tools. Eliminating everything beyond the work of painting is one way you can bring value to your work as a painting business owner. Painters will want to work for you because it’s a simple, hassle-free experience for them.

PAY LIKE CLOCKWORK: This is huge. One of your main roles as a business owner is to cushion your employees against all financial shocks. Making payroll late is a recipe for disaster because your painters will jump ship. It doesn’t matter if a client pays late or stiffs you for an invoice. Your job is to take the hit and make it up another day. If you don’t have enough cash on hand to make at least three months of payroll with no revenues, don’t start a painting business. You’ll fail.

RESEARCH & DEVELOPMENT: As the painting world advances, it’s your job to stay on top of technical advances, try them out, then introduce the good ones to your crew and clients. Don’t neglect this role or your business will slowly lose vitality and profitability as the painting world advances.

GATHER AND ANALYZE NUMBERS: Bidding profitably on jobs is the single most important skill you need as a business owner, but it’s a skill that requires informed practice. And the only way to get that practice is by monitoring the numbers to see if they lead to profit or loss. Keep close tabs on what your crew actually costs you in time, wages and benefits, then compare these costs to the offsetting revenues from your bids. While you’re at it, monitor the productivity of individual employees and contractors. You need to know who’s actually delivering more value than you’re paying them for. Some employees will contribute much more to your bottom line than others.

Transitioning to Working ON the Business

I meet a lot of business owners that have successful businesses as well as many that are struggling. Whether they are successful or still trying to figure it out, what most of these have in common is that they spend most of their time each day working IN the business. In other words, they are grinding to make sure their product or service is getting performed to their customers’ satisfaction. Being a business owner myself, I can testify to the necessity of doing this. Nobody can articulate the owner’s vision as well as the owner!

While a business can be successful, i.e., profitable, operating in this manner, the long-term purpose of the business owner should be to sell the business one day. This, along with the inevitable burn out that will occur from the grind, necessitates a change of approach: Working ON the business.

Now one does not make an abrupt change from working IN the business to working ON the business. It’s actually an evolutionary process. You go from working all day, every day IN the business to spending a few hours a week working ON the business and evolve from there. Doing this, naturally, requires the business owner to cede control over certain hour-to-hour tasks within the business. How does one decide where to cede?

I suggest making two lists. For the first list, the owner should answer the question, “What are the current business tasks that you most enjoy?” There are no right or wrong answers here. Simply list his/her opinion. Love making widgets? Write it down. Really like dealing with customers? Write it down. And so on.

On the second list, write down the answers to this question, “At what tasks do you create the most value within the business?” Here, it’s really important that the owner be honest and accurate. Don’t just write down a gut feel (although a gut feel might be correct). Deeply consider which business tasks will help the business grow/reduce costs/improve customer experience/increase cash flow, etc.

Now, let’s juxtapose the lists. Here is where we separate passion (what we love) from what creates value (makes someone want to pay top dollar for the business one day). Compare these two lists and see which tasks drive business value and fuel passion. The owner should absolutely keep doing these tasks. That is an easy call. On the other end of the spectrum, any tasks not on either list should be passed on to someone else in the organization. Another easy call. The challenge comes when tasks that the owner enjoys doing don’t enhance enterprise value if the owner is doing them.

As an example, in my auto repair business, I really like wrenching on cars. However, if I’m honest, I’m not very fast. Any decent technician could blow me away from a quality and efficiency standpoint. So, I quit wrenching and hired another technician. I wasn’t adding enough value. I also love working with clients, vendors and creating processes. I kept doing those things. There, I was adding value. Guess what? The year after stepping out of the shop and handing the wrenches to someone more talented, we grew 17%. I was actually less stressed, clients were happier, I was happier, the technicians were happier (they got their parts faster with me in the office). Winner!

This was just the beginning. Over time, I slowly released more activities to employees. Now we are at the point where the operation is turn-key. I am not integral to its hour-to-hour success. My trusted team handles that. I still set the tone with clear expectations on process, client care, building appearance, etc. But, I trust my team to do it right. I also leave an open channel for clients to reach out to me when their experience isn’t what they are used to. Was it scary to let go? Most definitely! Was it necessary? Also, most definitely.

When the time comes, I feel way more confident that the right buyer can be found so I can to move on to the next chapter in life. You can do this, too!!

Being “Solo” Only Works For a While

Are you a solo business practice owner (physician, dentist, chiropractor, attorney, accountant, auto technician, etc.)?

If so, you may have Solo Professional Syndrome. No, of course that’s not a real name for an illness. It’s just how I refer to the situation where you are doing all the work yourself and can’t grow the business or find time to work On the business instead of In the business.

You’ve done everything possible to streamline operations, maximize revenue and increase margins. You may have even outsourced marketing, accounting and payroll to give yourself a few precious extra hours every month. You have proven that you can be successful going it alone. However, you find yourself wondering, “Isn’t there a better way?”

Think about it. You are responsible for every dollar of revenue generated by your business. If you are absent, no revenue comes in. If you are disabled or worse, your practice likely will shut down and you will lose all the value that you have created over your years in the business. Why? Because you have no successor in place.

What if I told you that there is a way to increase your current income without doing all the work yourself? And, at the same time, you would then have time to step back and work On the business instead of In it, reduce your financial risk when you are absent, protect the value that you have created in your practice and provide yourself with a succession plan. Would that interest you?

You may be thinking right now, “Why don’t I just add an associate? That’s what Suzy did on the other side of the city.” That can work….but there are pitfalls that need to be headed off before doing that.

Where will he/she work? Where will I find clients/patients for him/her? I don’t want to eat their salary until their book fills up. How can I be sure he/she won’ t leave after getting all trained up and end up being my competitor? Ugh…I think I will just stick to the problems I already have.

That is an understandable conclusion. But it would be wrong. Let’s get a little creative and figure out how to do it right and provide those benefits mentioned above.

You are right to be concerned about having enough patients/clients to keep the changes from costing you a lot of money. It’s really not reasonable to expect the associate to fill their own book of business. You are hiring them to produce revenue, not make sales calls.

So, to combat those issues, the method I am suggesting is to acquire another solo practice. Preferably, it would be one that is geographically nearby so you can fold it into your existing practice. This will give you a very good chance of keeping that new associate busy.

If this has your interest piqued, let’s discuss where to start.

First and most importantly, you need to make sure that you, personally, are ready to lead another professional. How are your supervisory skills? Do you explain things in a manner that someone else can easily pick them up? Perhaps you need some training. Go and get it!

Second, assess your financial situation. How much cash do you have on-hand? How much can you afford to spend on another business? Talk to your banker about loans, if necessary. Check with your accountant with respect to tax issues. Talk to your attorney about the employment document that codifies a compensation plan that we will cover in just a moment.

Third, start looking for acquisition targets. This may take some time. There aren’t always businesses for sale. Take your time and get it right. This is the beginning of your exit strategy and intended to give you more near-term freedom and strategic thinking time (working On the business).

OK, so getting the acquisition done will take care of the near-term revenue growth and work/life/time balance issues. It does not, however, address how to extract the value you have created in your practice when you decide to retire.

If you hire the right associate, he/she will also be a part of that solution. A really good associate will, most likely, want to own their own business one day. You should make sure it is your business that they acquire to make that dream a reality. Build a compensation plan for them that rewards performance with equity in the business.

As part of that compensation program, you make it clear that there is a specific process for him/her to succeed you when you decide to retire. In fact, it should be documented that they must succeed you and buy the practice. Failure to actually purchase the business from you at the agreed upon time will cause them to forfeit the performance rewards. That is how you will extract the value you have created. It is virtually guaranteed.

It will take some extra work up front and test your coping skills during the early months after the transition. But if you hire the right person and set your business and compensation plan up the right way, you will reap the benefits.