If you are just starting a web business, or any business for that matter, hiring employees is a wormhole of confusion. Putting them in the right position and growing them into a keeper, that’s an even bigger one.
Luckily, there are people like me who have already gone through this process, and it was a long, difficult process. But I want to help you avoid my problems. I’m taking all the questions I had back when I was just getting started and looking to hire, and answering them now. It may be 12 years too late for me, but it’s not too late for you.
Forgive me in advance, international BrainLeaf users, as I am writing about the hiring process from an employer’s perspective in the U.S. I am working on getting more info on the blog that speaks from an international perspective since many of you are from all over the world.
How do I know when I need to hire someone?
When you have enough revenue coming in to afford a new person and not enough hands on deck to complete projects. Also, it is important to note that in this article, we’re talking about full time people, not subcontractors!
Getting the right people and interviewing.
I love doing interviews. Really, really love it. Maybe it’s a weird thing since so many people really don’t, but I definitely do. The thing with bringing on new people is that it is your opportunity to make your business grow or shrink, succeed or fail. If you get the right people, even if you screw up sometimes, they will make you successful. If you get the wrong people, no matter how good you are, you’re going to have some serious problems. Clearly this is an important decision, so no pressure right?
When making hires, especially programmers, I don’t hire someone because they have every single skill needed for for the job, I hire someone who wants to do the job and is really excited about it. In my agency, we do our best to get enthusiastic, interesting, interested, quick, driven, rockstars of people that are generally a lot smarter than me. And in the interview, I want to make sure that every one of these people can THINK.
In this industry we generally don’t do repetitive jobs. At my companies, every single person is a thinker, solver, fixer and innovator. Every single person. So we have to make sure that when we’re bringing on new people have these qualities. So here are some of my secrets:
- Ask open ended thinking questions. Here are some of my favorites:
- Why are manhole covers round? – I like this question because it helps me understand if someone will take the time to figure it out. Or, if they figure it out quickly I ask how they figured it out and it tells me a bit about how they figure problems.
- How much would you charge to wash all the windows in Whatevercityyourein? – This is a problem that is about removing a variable, an important skill for project and account managers.
- If you were in the middle of a high school gymnasium and an infinite number of 5th graders came streaming through the doors trying to kill you, and they can’t be reasoned with or stopped, how long would you last and how many would you take with you? – I like this question because it throws people off. Sometimes you have to deal with a complex problem while simultaneously dealing with an upset client, and you have be able to answer their questions. This questions throws people off, but the reason I ask is because I want to know if they can answer the question.
- If you have people already in place that this person is going to be working with, get them in the interview with you!
- The best people generally need your paycheck, and will work for it, so find out how badly they need this job.
- If you’re going to hire for a design or programming position and need the work done quickly, don’t hire someone who you think you’ll need to train. It’s just not going to work out well for you.
- Ask questions about why people want the job, and make sure they have thought about it.
- Ask questions that help you understand how people deal with situations. One of my favorites for this is to give a business marketing scenario where one business is in direct competition with another. Explain the back story behind the two or more businesses and tell the applicant that they have just been hired as the marketing manager for one of the companies. Give them a budget, a timeline, and some broad goals, then ask them to put together a marketing plan in 5 minutes and ask them to tell you their narrowed goals, strategies, and methods. About three quarters of the way through their presentation, tell them that they have been hired by the competitor and ask them to give you an off-the-cuff marketing plan, with goals, strategies, and methods for the other company.
- Make sure that the people you are hiring will fit in with your company culture. We have hired a lot of young people that were freelancers before they worked with us, but at one time hired someone from academia. It didn’t work out.
- Ask what people read. Blogs, books, magazines, newspapers, recipes, whatever. I like to hire people that love to read blogs about their career. If designer says they follow some other big designers, reads A List Apart, and references Eric Meyer, they definitely have my interest.
- Get people who aren’t afraid of asking for money. I used to have a problem where people in my company hated talking about money with clients. Everything was left to the billing department, and it didn’t work. You and your people need to be able to talk to your clients about money and payment.
I’m sure as soon as this blog is posted I’ll think of a hundred more things for you, but this is a good start. If you’re looking for more though, there are lots of great resources on interviewing potential employees, and I think Google has a good interview process. Here are some of their tricky questions.
Should I hire my friend who’s looking for work?
In general, no. The first thing to consider is that when you hire a friend, you are no longer their friend. You become their boss. For this reason I never hire a friend unless I can do without their friendship. This does have one huge exception as I definitely consider one of my employees a good friend. Just remember once you hire someone you decide how much money they make, how much work they have to do, what time they come in and leave your office, and are responsible for disciplining this person professionally. If you have the right person, you can make friendships work. But in general, it does not. In 13-ish years, I have had one real friend who is also an employee, but several people whose friendship I lost because I hired them. Please don’t make the same mistake I did there and lose good friendships because someone wanted to work for you.
How do I make someone an employee?
Ah… now for the easy stuff; hiring someone makes you an employer. Suuuper obvious, I know, but it actually comes with a few strings attached. Being an employer entails a lot of paperwork and recordkeeping. You should set up those processes now as you make your first hire. Here is a good checklist from SBA.gov.
What forms do I need?
First, you need to file for an Employer Identification Number (EIN). Your new employee should fill out a W-4, which you send to the IRS. You also need to fill out the I-9 form, to verify that the person hired is eligible to work in the U.S. Now that you’re an employer, you’re also responsible for sending W-2 forms to the Social Security Administration and to your employees every year.
How do I set up an employee contract?
While you don’t need an employee contract (lawyer’s fees add up really quickly!), it is nice to have something in writing that both you and your employee can refer to. My company uses a workplace wiki, where you can find all kinds of information like:
- Vacation leave and time off.
- Family and medical leave.
- Compensation policies (payday, hours of operation, absenteeism, timesheets, and overtime).
- Jury duty and witness leave.
- Nondisclosure agreement for things you want to protect in the business, like business processes and sensitive information.
Because it’s so expensive, I don’t advise going through an HR company unless you are a really big enterprise or growing so fast that you need professional HR. We were a lot bigger at one point and hired a PEO company who sent in an adviser and helped us put together our employee manual and other management files, but you can find sample manuals online easily these days.
It’s important to have some sort of employee manual in writing because A) you don’t have to repeat yourself, B) everyone can easily refer to it whenever they need, and C) there are SO MANY more ambiguities than you think there are. Making sure everyone is on the same page is a huge deal. What are my vacation days? How are those different from personal days? Can I wear these pj’s to the office? What happens when someone is late or leaves early every day? You get it.
How do I withhold payroll taxes?
If you’ve been freelancing for any amount of time, you know that you pay estimated quarterly taxes. And maybe you pay it from your own personal banking account. Being an employer changes that. You need to open a business bank account where you can draw funds to cover payroll. You can either manage payroll filing by yourself using a software like Quickbooks Online. Or you can outsource payroll to a third-party. If you’re not sure which way to go, determine whether payroll will be a headache. If so, determine whether outsourcing payroll will fit in the budget.
PLEASE REMEMBER: If you are a day late on your payroll taxes, you will pay penalties. Don’t think you can get out of them because it’s really your money. Our bookkeeper Rochelle loves Quickbooks Online because it sends messages and updates for approval and spits out all the reports automatically.
Is there ever an instance when I shouldn’t pay taxes on payroll?
NO! THIS IS REALLY IMPORTANT SO MAKE SURE TO READ IT! If you mess around whatsoever on payroll taxes (whether you’re a day late with payments or skip paying them entirely), not only will you have to pay massive penalties, you also stand to pierce the corporate veil. Piercing the corporate veil means you are no longer distinct from your company, and your personal assets are at risk, including, for example, your car, your house, and your earnings for the rest of your life. This is the scariest thing, and it’s so, SO preventable. Don’t even think about messing around on Uncle Sam.
Do I really need to hire an employee or should I just stick to contractors?
If there’s one thing I hope you get out of this, it’s that hiring an employee is a big investment. I read some great advice the other day that said people in startups should be really picky with their first hire. Because there’s already so much at risk, it’s not worth torpedoing your startup or company by making a bad first hire.
First, you should understand the difference between employees and contractors. Contractors are generally a good way to transition from working solo to hiring a full-time employee. You don’t have to worry about payroll taxes when you hire contractors or freelancers. That said, contractors usually have a lot going on and might not be as loyal or committed to your business as a regular employee would be.
Before you go out and pick up anyone off the street, consider this: you want to hire rock stars. But the tough part is, rock stars usually move quickly to bigger and better jobs. Do what you can to attract the best people within your budget. It may mean a significant investment. However if you don’t find the best talent, then scaling is going to be impossible (when you consider project delays and quality of work).
Alright, now that you’ve got your new person, it’s time to start growing them to greater and greater heights. You never realized running a web company is a lot like farming did you? Look out for another blog on that one upcoming!
Question for the audience: What are some of the issues you’ve run into hiring people? Any horror stories? What happened, and how did you fix it? What are you doing better now?