02.25.20163 min read

Take-home Pay vs. Payroll in the Stage 5 Business

By the time you get to a Stage 5 business—with over 25 employees and usually more than $3 million in annual revenue—the question of “Should I hire an employee or maintain my take-home pay” is much easier to make. Hopefully, by stage five, the business owner has created a business that can effectively bring in employees and turn them into valuable assets. But, it doesn’t always work out that way.

HR statistics suggest the best companies make a mis-hire three out of 10 times. Most companies make a mis-hire far more often than that. My experience with stage five businesses is that they make a good hire about half the time. This means the other half of the time, the business owner would be better off keeping the money in his pocket or putting it to work in a more productive way (increased marketing investment, equipment purchase, etc.).

So, how can you increase the odds in your favor? Far and away, the biggest issue is making sure you have effective leaders who are hiring, trainingn and firing to your purpose, values, and mission. And that means you as the business owner need to be living your purpose, values, and mission—and ensuring your leaders are doing the same. This is much more difficult than it seems on the surface. 

Most leaders hire primarily for skill and secondarily for fit. This is backwards. If a candidate doesn’t fit, you’re wasting time and money looking at people with the right skills. Read that again. Most people hear this, but don’t do it. When your leaders go ahead and hire someone with great skill who doesn’t fit the culture, they’re taking a jackhammer to the cultural foundation of your business. They’re increasing the odds that a new hire will be a mis-hire (read: a waste of YOUR money). Make sure your leaders are hiring first for fit, then for skill. Because if you don’t do that, you’ll waste a ton of money on mis-hires and all sorts of other problems will arise.

Of course, all of the other hiring tips in stages one through four apply in stage five. But by the time you get to stage five, the question of whether you should hire an employee or keep the money in your pocket comes down to leadership: do you have effective leaders who are hiring, training and firing to your purpose, values, and mission?

SBS Idea of the Day: Examine your hiring approach. Do you hire first for fit, then for skills (the candidate MUST have the skills—cultural fit, alone, is not enough)? How about your leaders—are they doing the same? Or is it the other way around in your business?

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