All successful entrepreneurs have made mistakes. But there is one in particular that almost all will admit – and that is hiring certain people. Granted, hiring people for any company is never easy, but it can be even more difficult for new companies.
I have spoken with other entrepreneurs and reflected on my own hiring mistakes. We all agree that the most common entrepreneurial hiring mistakes fall into three distinct categories:
1. Hire when you need to hire, and not when you don’t.
The only way to grow and scale a business is by having employees. Limited personnel can only take you so far before you have to start refusing work or sacrificing customer expectations. I have seen many businesses start with momentum just to shrink or fail because the owner refused to hire more people. Likewise, I've seen new companies go on a hiring rampage believing the business would grow rapidly, only to let people go months later. This, of course, has a negative effect not only on employees, but also customers. When it comes to deciding when to hire, it’s essential to have a measured and balanced approach. Hire when necessary, but hire with a plan.
2. Fix hiring mistakes sooner than later.
Every business makes bad hires. And the good businesses correct this problem when it’s discovered. It’s difficult for an entrepreneur to admit they made a mistake. It's even more difficult for entrepreneurs to release an employee who does not fit the business. According to the U.S. Department of Labor, the cost of a bad hire is at least 30% of the employee’s first-year earnings. This cost will increase the longer a bad employee remains, and could be a financial disaster for an entrepreneurial company. Every venture must have the right people on board to succeed. Hanging onto a bad employee, for whatever reason, is never a good idea.
3. Be very careful in hiring friends or family.
It’s common for a new entrepreneur to reach out to the labor pool they know, friends and family. But the reality is that friends and family rarely make good employees. The expectations of employees in an entrepreneurial venture are high. When business is starting out, there will be great demands on time and accessibility. Roles and responsibilities are fluid, dynamic and uncertain. The work environment can be stressful. This environment doesn’t allow a personal relationship to develop into a professional relationship. Then, if the friend or family member doesn’t work out as an employee, it becomes difficult for the entrepreneur to make the necessary decisions. I have many friends that work within my business. But in every situation, they were business relationships first, and then became friendships.
I don’t think any new business can escape making hiring mistakes. It’s going to happen. The key is to minimize the impact of these mistakes upon the business. Seek out the right employees, beyond those within your circle of friends and family. Have a solid strategy of when it is necessary to hire, and when to avoid bringing on new hires. And most importantly, don’t let a hiring mistake continue to linger. By following these actions, there is a much higher chance of having the right people in the right position within the business.
Brian T. King is the founder and owner of multiple firms encompassing design, construction, real estate, and manufacturing, and currently president of the integrated Design-Build firm A M King. Brian shares his passion for mentoring young professionals, rising managers and entrepreneurs at speaking engagements around the country, on podcasts and via his blog.