Welcome | Step One: Getting Started | Step Two: Operating a Business | Step Three: Business Plan

Step Two: Managing Employees: The Basics

This section is broken into two main parts:

• Managing Employees: The Basics
  • Hiring Smart & Capable People
  • Keeping the Smart & Capable People You Hire from Quitting
• Employement Termination

Managing Employees: The Basics

Unless you plan to run your business by yourself or with one or more partner(s), you will have to manage employees. If your business depends on its employees to thrive, remember these two rules:

1) Hire smart, capable people; and
2) Retain the smart, capable people you hire.

Hiring Smart & Capable People

Different people are suited for different types of occupations. If you need a mechanic for your auto repair shop, you will look for someone with different skills and interests than the CPA who is looking for an accountant to help with her tax preparation business. Write a complete job description of the position you want to fill. Thinking about and writing down the specific skills and attitudes needed to complete the job at hand will help you find the right person. Once you have your job description, you are better equipped to both find and hire your new employee.

You may already have the perfect person in mind or be able to fill your opening from a personal reference. If not, there are many ways to advertise for employees, including trade journals relevant to your field; Internet sites; and, of course, the help wanted section of your local newspaper. The method you choose will depend on the position you are filling. For instance, placing a "help wanted" poster in the window of your coffee shop may be all you need to do to get qualified applicants for the open counter position, but this method will probably not work if you are trying to hire a computer programmer.

For information on hiring:

• BusinessTown.com — Hiring Top Performers
• BusinessTown.com — Streetwise Tips on Hiring

After completing the job description and finding one or more qualified applicants, the next step is making a job offer and hiring someone. You will probably want to interview your applicant(s). You may have a good idea of the applicant's skills and experience based on his or her application or resume, but the interview will provide you an opportunity to get to know the person's personality and level of enthusiasm. Do you click with your applicant? Personality and attitude are important factors to consider. You want to hire someone with whom you get along and who will function well in the position. For instance, someone with a friendly, outgoing demeanor would probably do well in a customer service position, whereas, an introverted person may perform well in a position as a bookkeeper.

• Sample Interview Questions

The Small Business Interactive CD includes a table (from NOLO.com ) that provides you information on questions that can and cannot be legally asked during a job interview. Please note that these questions are not necessarily all-inclusive. Contact the Coastal Carolina Community College Small Business Center to obtain a copy of the CD.

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Keeping the Smart & Capable People You Hire from Quitting

Once you have a great employee working with your business, treat her or him as you would a great customer. Everyone is different, of course, and has different career goals and requirements, but, in general, your employees will want to be compensated, motivated and rewarded.

Compensation is the combined package of salary and benefits, including health insurance and time off. Be stingy with a good employee and it may end up costing you much more than the compensation would, both financially and in terms of the hassle-factor involved in finding and training a new person when your prized employee leaves for greener fields.

Motivating your employees will require finding out more about them, since different people are motivated by different things. Reviews provide a good forum for discussing issues such as motivation with your employees. They are also important for accountability and legal backup purposes. Keep records of your employees' performance, including documentation of any needed discipline or reprimanding. Some people may need autonomy and control over a project in order to feel motivated. Others may require a certain type of work environment or an opportunity to take classes or receive training. Find out what motivates your employees and make sure you provide it for them.

Rewards are the good grades of the business world. Provide rewards, such as a share in profits or even something as simple as verbal recognition, to high achievers. Let them know they are doing a great job. Rewards help keep morale high.

For more tips on retaining employees, refer to the following articles:

• ZeroMillion.com — Motivating & Retaining Employees
• Entrepreneur.com — How to Build Loyalty Before the Employee Shortage Hits

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Employment Termination

If you take the time to interview your potential employees and check their references, you will hopefully hire a great and loyal employee and never have to go through the rough job of firing someone. But what do you do if the person you hire steals from your business, is rude to your customers, is unreliable, or is not getting the job done?

For some offenses, such as stealing, immediate dismissal might be the best solution. In other cases, you may not need to fire someone, but just provide additional training or other assistance. For instance, perhaps an employee clearly is trying to do a good job, but is making mistakes. More training may be all it takes to turn this employee into a loyal and capable addition to your staff.

In other cases, you may wish to give a series of warnings to an employee who acts in an inappropriate way to give him / her a chance to change before taking the drastic measure of firing the employee. For instance, perhaps you have a policy that your employees always show up on time for work. If someone is perpetually late, you could start with a verbal warning. If the poor attendance continues, you could follow the verbal warning with one or two written warnings. Finally, as a last resort, you may decide to fire the employee.

Sometimes you may have an employee who breaks a rule (such as not showing up on time), but does an exceptional job. In this case, you may wish to overlook a rule. The product, in this case, the work completed, may be more important to your business than the process, in this case, the time in which the employee comes in to work. Remember that people have different personalities and different requirements for a work environment in which they can perform their best. Another idea is to discuss with your employee reasons for his or her misconduct. In the case of the employee who is late, maybe the employee has another obligation, such as getting a child to day care or school. You may be able to work out an adjustment in your employee's schedule. An employee with less stress and who feels that you are on his or her side will be more likely to work hard and remain loyal to you.

If all remedies fail and you do have to fire someone, there is no easy way around it. One way to fire an employee is to call the employee into your office or another private work area. Explain the reasons why you are letting him go. Point out the series of warnings that you offered, and give details on how a final paycheck will be made. Give the employee a letter of termination which you prepared ahead of time. Above all, make sure you are abiding by all legal requirements related to firing someone. If possible, try to end the meeting on a friendly note, with a handshake and a wish for luck.

Letting Someone Go when They are Doing a Great Job

For additional information on termination, refer to:

• NOLO: Questions and Answers about Firing Someone
• All Business Web Site: When you can Legally Fire Employees

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