Small Business Owner Hiring Mistakes

Small Business Owner Hiring Mistakes

Hiring friends

First-time business owners get excited when their business starts to boom.  They may move into an office from their home, expand the size of an existing office and begin to hire or contract people to help manage the day-to-day activities of their business.

The first place they look for hiring people? Their current contact list. They feel confident and comfortable hiring or contracting people they know through friendships or former fellow workers. They trust these people will provide the skills and talent required to continue to help them manage their business. Owners feel they can rely on these people to be trusted which allows the owner to be more “hands-off” and begin to work “on” their business instead of “in” it. Happy and excited that they can leave their friends to help make business decisions, business owners are off working on growing their business some more.

While working on this expansion, owners presume their doors are open and customers are happy. These friends/employees feel confident they know what is best for the business. These new employees feel their contributions give them phantom ownership to make tough decisions.

What can happen with this arrangement?

Plenty of things can go wrong. These new hires may have limited skills and no experience in owning a business. They base decisions on opinion and not skill. Or they may feel challenges that arise may not be serious enough and allow things to go unaddressed. Unhappy with their actions, the owner becomes consumed on micro-managing them. They become concerned their friends do not have the company’s best interest at heart. Because these employees may not understand the financial metrics of the business, costly mistakes begin to happen. The business owner may begin to lose money.

These new employees are so comfortable with the business owner as a friend, they begin to take advantage of the time off or not show up to work on crucial days. Owners are challenged with acting as their friends or employer. These same people could not possibly take a position with companies that enforce employment policies. Yet, owners do not understand why they feel taken for granted.  

Many times as companies begin to rapidly expand,  higher skilled employees are required to manage it to the next level. This is where startup friends/family employees and contractors begin to feel slighted when they no longer report directly to their friend/boss. Yet this happens many times and business owners need to be prepared and set employment expectations as soon as possible.

How to fix this problem?

Whoever your employees are, friends, family or former co-workers, remember you as the owner are their boss during working hours. Set the boundaries and parameters at time of hire. Whether you bring them into your company as an employee, temporary worker or contractor, the boundaries are the same.

Set your expectations of their work performance from day one. What hours will they work, the description of their job, and what expected performance? All of these conditions should be placed in writing. Work with legal and human resource experts to create an employee policy handbook. All contractors should have a formal contract.

If their performance is lacking, you may have to terminate their employment. Remember to obtain legal advice about local and national employment laws.

Protect your business

Several of my small business owner clients shared horror stories of employment lawsuits initiated by some of their best friends. Don’t allow this to happen to your business.

Written by Darlene Ziebell

Darlene brings extensive knowledge in business consulting and entrepreneurship. She bases her methods on a unique blend of effective enterprise strategies and the battle scars she acquired in four businesses, including startups, ESOP, acquisitions, partnerships, bankruptcies, and lawsuits. Her management consulting firm grew sales by over $40M advising more than 20% of the Fortune 1000. In addition, she mentors business owners, guiding them on successful growth strategies through her customized business methodologies.  Nothing beats her experience.

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