A Framework for Hiring and Managing Employees

If you are reading this post elsewhere, click here to see the video presentation (~15 minutes).

How do you know when it’s time to hire somebody? 

Until recently, I’ve never had a consistent rule-of-thumb for knowing when to hire. Every single time it was a one-off call– often based on hope or hubris.

There are few questions in my career that have been so consistently complex. Even seasoned business owners seem to find hiring decisions laced with anxiety. As Felix Dennis quips in the excellent How to Get Rich, “overhead walks on two legs.” 

A new approach…

My gut feeling approach to hiring was challenged recently when we brought on a new team member. I recounted the story on this episode of the Lifestyle Business Podcast. We had taken the lessons from a book called Work the System to heart and wrote down– in detail– how to execute the processes that delivered value to our customers.

Those processes helped us to look at a small bundle of standard operating procedures (SOPs), figure out about how much they cost us to execute, and then say (for example): we should hire somebody to execute SOPs #1, 2, and 3, assuming their salary is in x range. We felt empowered to step back and take an objective look at our business. Should we automate this with software? Should we hire a consultant to do this stuff? Should we be doing it at all? 

If you don’t give the job to somebody else, it’ll be yours.

The system I created for my new small business was inspired mostly by Sam Carpenter’s Work the SystemI very much recommend you read the book if you plan on doing this. You could also take a look at Gerber’s The E-Myth Revistedalthough it’s a bit redundant after reading Work the System. 

The punchline– most small business owners are above-average at their craft. Baking cakes, getting #1 rankings for websites, designing logos, writing sales pages, etc. The problem comes when those business owners conflate their sought-after skill set with the skill set of entrepreneurship.

One of the best ways to go from “small biz owner” to “entrepreneur” is to get good at building systems.

For many of us our most powerful points of leverage will come from building SOPs from scratch, day by day, spreadsheet by spreadsheet.

Outlined in the video you’ll see some of the following benefits we’ve seen in our business:

  • Increased precision. Our conversations and the actions we take are more elegant. Why are we doing this? When are we doing this? What precisely do we do? How much does it cost us?
  • Increased modularity. It’s much easier to outsource elements of our business, hire new team members and train them, or to leverage ourselves out of lower value tasks.
  • Added legacy to our conversations. Every important decision, principle, and process in our business is recorded on our live document so our conversations build out assets for our business. We see business failures as failures of process, and that give us an opportunity to address those problems in a positive way.
  • Reduced email volume and removes some of the need for project management software. 

An example of a Standard Operating Document (SOD).

You can see it here.

Screen Shot 2013-05-21 at 6.48.37 PM

Want to implement the Strategic Operating Document (SOD) in your business?

The biggest issue I have not addressed in this post is how to get team buy-in and compliance. Many of our listeners have had challenges in this regard. In general, it’s very important to use systems your team already uses. They are unlikely to implement this stuff if it means more work. In our case, Google docs for the win!

We are currently applying this system to our larger company and are finding a few more challenges (but more upside!). Hopefully we’ll have more to report on that shortly. These are live documents and we continue to evolve how we work with them on a day to day basis.



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