Better Hiring for Better Business Value

By: Bruce Gelfand

Your journey starts with two values; how much do I need to live the life I want and is my business worth enough after tax to meet the first value. We at RBC can help with both, but if the answer is no you’ve got work to do.

In our last blog we discussed the favorable environment for selling closely held businesses.

The window has gotten a little jammed up lately with uncertainty, but we are all hopeful that it will clear up soon. Don’t stop your planning and process now.

Your journey starts with two values; how much do I need to live the life I want and is my business worth enough after tax to meet the first value. Both of these numbers need to be determined with precision; a customized wealth plan for the first and a business valuation for the second. We at RBC can help with both.

If the answer is not yet, you have to get to work on improving the companies value. Most likely that is going to include important hiring decisions; either a serious ramp up or some very important, key positions. Jim Collins, in his classic Good to Great says personnel is the most important factor in business value. Not to mention, the marketplace has shown that buyers pay more for companies with solid management teams independent of the owner, established hiring processes and happy, loyal employees.

So, today’s blog is going to cover raising your hiring game – a key step in increasing company value.

We reached out to good friend and associate Gary Mika, former head of recruiting at ADP and now a consultant to closely held businesses. Our discussion focused on what a middle market, closely-held business can achieve and repeat, given they don’t do this regularly. We assumed that there is no dedicated person running recruiting and that some hiring service – agency, consultant, contract service – is used to fill the pipeline.

But that still leaves you and your management with serious work and the final decision. That’s where we focused.

Posting is step one. Don’t leave it to the agency/consultant entirely. Someone close to the position, probably the manager, should lay out the opportunity, the skills and experience needed, the benefits and perks and do some salary research. They should pay particular attention to promoting the opportunity. You are trying to attract quality employees which means you are competing with nationally known brands. If you want a strong pipeline of good options, you need to promote and be competitive.

Interviews come next. Be proactive and decide who should do the interviews and in what order. Suggestions include direct report, their manager, peer and, depending on the position and company size, maybe someone from top management. Even more importantly, Gary believes that successful (i.e. revealing) interviews depend on the preparation of good questions that get the candidate to talk specifics. He recommends behavioral based interviewing, of which much has been written. Good follow ups should be included in the preparation. And remember the promoting. The interviewer’s job is not to “catch” the candidate or scare them, it’s to attract the best and most options you can.

The same applies to references. When an offer is made and accepted references should be requested and checked with the same specificity as interviews; diligent follow up and planned questions. While some dismiss the usefulness of references, Gary is adamant on their worth. “You may get nothing worthwhile, but you also may get red flags and warnings of bad apples, the disgruntled or even liars. Time well spent. Background checks are also a part of this process and should be done with licensed practitioners.

Once selected, welcoming and onboarding the candidate is an area Gary feels is too often ignored, but very easy to fix. “Getting a new hire off to a good start is a major contributor to retention, and it’s not rocket science.” Prepare for their arrival. Make sure equipment and location are in place. Introduce them to all with an announcement online and make a few personal connections to key co-workers. Most importantly, have someone as high up as feasible, sit with the new hire to communicate the soft, but all-important company values and mission statements. If the owner/founder/CEO is not the right choice, the person who is should have a firm handle on the values and missions, having gotten them directly from the owner/founder.

Building all this into a process takes time and effort but it is not an insurmountable task for the closely held business. Hopefully, once in place, this will help both filling the pipeline with better options and preventing the kind of turn over that wastes time and effort.

As always, please reach out if there is any part of today’s discussion-- personal wealth planning, business valuation or a session with Gary-- that you would like to pursue in more detail.