This course focuses on the common human resource ("people") challenges faced by existing private businesses when they attempt to grow substantially. PART 1 OF THE GROW TO GREATNESS COURSE IS NOT A PREREQUISITE FOR TAKING THIS COURSE.
Risks and Strategies for Hiring
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Grow to Greatness: Smart Growth for Private Businesses, Part II
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Building a Senior Management Team
The required reading is “SecureWorks.”
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Edward D. HessProfessor of Business Administration
Darden School of Business
Now, this thing we've been talking about, upgrading.
Let's just take finance and HR, and let me try to explain what I mean.
When you start a business, okay? A lot of people outsource their
bookkeeping and their finances, okay? They don't have enough business to afford
people. Your business is successful, you probably
hired a part-time person to handle accounts payable and accounts receivable,
you didn't need somebody full-time, your business is not that big.
As you grew, you needed a full time person at a controller level.
Somebody that can basically do accounts payable, accounts receivable, tell you how
much money's in the bank, okay? As your business grows, wow, I need
somebody that can really do financial statements.
Maybe my bank needs that, maybe my investors need that.
Wow. Then maybe, I need even a higher-level
person, a vice president of finance. And then, if I really get big, I need a
chief financial officer. Each of these steps is a different skill
set, different level of skills, different experiences.
But that's sort of the common progression in finance, most of my CEOs did it this
way. An administrative assistant helps with HR
in the beginning, and you outsource workman's comp and payroll.
But somebody vis-a-vis the benefits handles it as part of their job.
As I said, you outsource the payroll and the benefits.
Then, you hire a junior-level HR person, okay?
Somebody that can handle 10 people, 15 people, 20 people.
But as you grow, then you need a more senior-level person, and this usually
happens when you're trying to put in place hiring processes, on boarding process and
training, and trying, if you will, to create ways to measure employee
engagement, employee development the things that you read about in Trilogy, the
things that you read about in "Room and Board.
And if you think about it, same thing happens in sales.
You usually need a salesperson, salesman or saleswoman.
And then you need two, then you need three.
Then eventually, you're going to need a sales manager, and what are you going to
find? Not all sales people are good sales
managers. Not all sales people are a good sales
manager. You need somebody that knows how to manage
sales people, how to hold em accountable, alright?.
How to train, how to teach. Now, do you want to promote one of your
salespeople to sales manager if they've never been a sales manager?
It depends. What's the benefit?
I've got somebody I know, somebody I trust and they can learn how to do it, okay?
How fast are you growing? Alright?
A key question because if you growing real fast, you may not have time for that
person to grow into the position, and make the mistakes, okay?
Then, do I go get a sales manager who's managed 3 people, or 6 people, or 9
people, or 12 people? In other words, what level of sales
manager do I need? And that raises the question, what can you
afford? Which then raises the question, do I
invest ahead of growth, or just what I foreseeably need?
Investing ahead of growth says, I've got this taken care of maybe for 2 years, 3
years. But what's it also mean?
Hmm, that person's going to cost more. Can I afford that?
And that's where the hard judgments of building a business come down.
And I'm trying to sensitize you to this, that you have to plan this and think about
this. You have to take time away from the
business, what I call firehouse time, and think deeply, okay?
How fast am I growing? I can hire someone that can manage three
sales people but if I'm going to be 6 in 2 months and 12 by the end of the year, and
24 maybe next year if all goes well. Do I need to hire somebody that's managed
24? Ooh, that's going to cost a lot more.
Can I afford that? Am I willing to make that investment?
Am I willing to run that financial risk? And you're going to make the hard call
because growing a business will require you to make lots of hard judgments.
We just talked about this. Tension between hiring for the long term
or the near term, okay? Now, here's an interesting question.
We talked about, what can you afford? Who will take the risk to join you?
Lot of CEOs talked deeply about the fact that a lot of senior people that they
really wanted were too afraid to come to the organization when it was too small.
They weren't willing to run the risk, and they would come if you doubled in size.
And that raises an interesting question, do you put that person's resume in the
file and when you double in size you pull it out?
Was that person making a good risk management judgement or was that person
basically saying, I'm not entrepreneurial enough for you?
Yeah. Other ways to manage the risk of hiring.
Hire people you know well or people known well by someone you trust.
Anybody that's building a business is going to tell you, references are
worthless in today's world because everybody's afraid of being sued, and
everybody basically gives medium to good references.
So, you've got to find people you trust. If you trust your employees, maybe you
want employee referrals. Remember?
That's what Trilogy did. We talked about hiring slowly.
I don't recommend a lot of books, do I? Many CEOs in my study recommended the
book, Topgrading: How Leading Companies Win by Hiring, Coaching, and Keeping the
Best People, by Bradford D. Smart, 2005.
Ceos in my study, several of them told me about that book.
I went and read that book, it's good. I also have used the book and given it to
consulting clients, growth companies. And those CEOs have used it.
And they have liked it. You, like any book, you pick out what
applies to you in your context, okay? You scale down for your context.
But it's got good hiring processes, alright?
Conduct rigorous multiple interviews in different situations with two or more
interviewers. That's one thing that Mr.
Smart says. I want to talk about hiring bias.
Do you know what hiring bias is? Well, you know, for years I didn't.
I wasn't aware of it. And once I learned, I sat back and I
thought about, wow, all the people I hired, who'd I hire?
Hm. Well, I tended to hire people that I
liked, okay? Well, I tended to hire people that had
similar interests as me. Hm.
You know, the more I thought about it, I've tried to hire people that I thought
would be just like me. Yeah, you tend to hire people who you like
and who are more like you. You also tend to promote those people.
That's why you need other people involved in the hiring process.
Because you will miss a lot of good people and you don't want everybody the same.
You want different skills, you want people that have different backgrounds, alright?
Because those people, not all your customers are going to be the same.
Different people get along with, with different people, okay?
All right. That's the great thing about say, going
and being able to take classes with lots of little, lots of different professors,
whether it's in school or it's on Coursera, okay?
Not everybody will like my style of teaching, but there is someone out there
for everybody. And so, in building a team, building a
team. Try to build a team where you've got
what's, what's really important. Cultural fit, values, people that want to
learn, people with a good track record, right?
People that are going to fit reasonably well, people that are going to treat my
customers right, okay? And maybe those people, maybe some are
quiet, maybe some are loud. Maybe some look you in the eye all the
time, and maybe some have a hard time. Maybe some, maybe some people when they
get into a situation they're uncomfortable become very quite.
Maybe some people, when they get into a uncomfortable situation, talk too much.
People have different ways. Figure out what you want.
But figure out and be cognizant of the fact, your immediate reaction will be
emotional, and how similar those people are to you.
When you're hiring people for CFO positions or technical competencies that
you're not good at. Technology, okay?
Goodness, gracious. Don't put me in charge of hiring in
technology people, person, alright? Technology people will tell you, okay?
It took them a long for me just to learn where the Delete button was, alright?
I cannot hire a technology person. So, what should I do?
I should find technology people I trust, inside my company or outside my company
who can help me evaluate the technical competencies.
If you don't know finances and accounting, find someone who does, that you trust.
Network. Find a way to test technical competencies.
Because I, if a technology person came in here and started talking to me about all
the programs they've run, and this does that, I don't have any basis to know
whether they're telling me smoke or telling me substance.
Know what you don't know, and where you don't know, get help.
Quiz three. Alright, let's go.
Let's go. We're all making good time.
Stay with me because we're going to Michael Cody and there's some good
learning there. But first, quiz three.
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