What are the three most important factors in retailing success? Location, location, location? Nope – they are staff, staff, staff.
Personnel experts contend that poor hiring decisions are the main causes of absenteeism and poor productivity, which ultimately result in employee turnover and profit loss.
The smaller your business, the more important each person. Just one bad apple in a staff of three can spoil your business barrel in a variety of ways – from boosting costs to depressing sales. On the other hand, a staff of 50 safely dilutes any one individual’s negative influence, unless of course the individual happens to be an embezzler.
Before you start the process of hiring someone, be warned that you’re playing hardball in this game, and the court, judge and jury are umpires. Consider, too, that the number of employment discrimination lawsuits has risen by 2,200% in the last 20 years, and plaintiffs win 70% of such jury trials.
First Things First
First, draw a profile of the job and the ideal candidate, listing job duties and matching each with skills needed. This should be done formally and in writing, even if you never show it to a candidate. Why? Because the profile provides a crystal-clear picture of job requirements before you advance to the next steps – recruiting, interviewing and hiring.
Preliminary analysis of a job helps define working conditions, compensation and career opportunities. If the job you’re hiring for is a dead-end position, for example, recognize that up front and deal with it in recruitment.
The Search is On
So, how do you find a new employee, anyway? Your choices are many and include supplier or customer referrals, newspaper ads, private and public employment agencies, recruiting or placement agencies at schools and recommendations by colleagues or even by competitors. The best method for your recruiting will depend on the nature of your dealership, the job to be filled and the type of candidate you seek.
One swift search path is to go directly to colleagues, competitors, customers or suppliers. Just put out the word that you are hiring. A big advantage here is that someone proposing a candidate will have at least a few words about qualifications or credentials. Unlike having to check references of an applicant after the fact (which too many dealers often fail to do), the reference or referral comes ahead of the candidate.
Most of the time, a position in a small dealership goes to someone who knows someone. This could be the friend of a customer, a former employee of a colleague or a friendly competitor (not so friendly, perhaps, if you are raiding its staff) or a recommendation by a supplier who knows your operation and your needs. Selecting someone who knows someone saves you the time and money of a formal search through advertising, employment agencies or schools. Besides, a personal recommendation usually comes with the candidate.
There are, however, a few downsides to using this method. For one, you risk alienating a customer, friend or colleague by rejecting their candidates. And, any recommended candidate will have a special status, unlike someone you discovered yourself and with whom you are free to manage as best suits your needs.
Perhaps the most professional approach to recruiting is through an agency. This may be the state employment service bureau or a private firm. State or regional employment agencies look to place those out of work, and you can often find good help there.
A private agency may provide a higher level of candidates, but then you run into the problem of who should pay the agency’s fee. While you are better able to afford the fee, job-hopping will be discouraged when the candidate has to pay it. Usually, the employer pays at least part of the agency fee, but typically only after the new hire has completed a trial period.
Both public and private agencies save you time by screening candidates before sending them along for you to interview. Private agencies usually boast a more thorough screening process, which partly justifies the fees. In addition, dealing with an agency will force you to define the job and its requirements clearly.
You can also consider putting a help-wanted sign in your window. Or, you might contact the local high school or junior college, the local Chamber of Commerce or other organizations.
If you decide to run a help-wanted newspaper ad, consider screening replies by using a box number for responses instead of your phone number. You won’t get as many replies, but you will save time and learn a few things – spelling skills and writing abilities, to name a few ®€“ about each applicant.
When crafting your help-wanted ad, avoid any language that even hints at sex, race or age. For example, never use the words “young,” ®€œmature,®€ or ®€œretired,®€ all of which have been ruled discriminatory by the courts. If you want a young candidate but fear listing that as a requirement, it’s better to advertise for someone who is ®€œattuned to the interests of young people.®€
Gender discrimination may sneak up on you. In very few cases do government regulatory agencies rule that some jobs are best for men and others for women. Never advertise jobs as having light or heavy duties with the intention of filling the light ones with just women and the heavy ones with men. It’s better to stick with gender-free terms in your ad. Avoid such references as “this position will require him (or her) to®€ƒ” Instead, refer to ®€œthe candidate,®€ a gender-free term.
Also keep in mind that the wording of a help-wanted ad puts you on record forever. There’s always a chance it will be used against you in a subsequent discrimination, wrongful discharge or unfair labor practice suit. Some examples of phrases to avoid include: “permanent position” (nothing is forever), ®€œearn $X®€ (what if this is a commission job, and the candidate fails to reach that level?) and ®€œrapid advancement possible®€ (what if you hire a dead-ender for whom advancement is impossible?).
Now comes the really tough part – selecting the new employee. From a group of applicants, you must find and hire the best of the bunch.
The first step is drafting an application form and formalizing the interview procedure. The easiest route to an excellent application form is to buy one at the local office products store and adapt it for your business needs.
Include in the form a release giving you the right to conduct a background check, screen for illegal drug use and ask previous employers to disclose personnel files.
The application form must not include questions about applicant’s date of birth, marital status, names of household members, number of children or their ages, how children will be cared for during business hours, where a spouse or parent resides or works, ownership of residence or history of arrests or wage garnishments. Also dangerous is the question: “Do you have a car?” This could be perceived as discriminatory against low-income people.
Nor should you request a photograph or ask about height or weight (which may discriminate against women and some ethnic groups) or physical condition not related to work requirements. Some of these questions may be asked later, such as age, when required for benefit programs. However, focus your help-wanted advertising, application and interview on just the requirements of the job, and you should be able to avoid legal trouble. If the job doesn’t require a high-school education, don’t inquire about it.
Both the application form and the interview process must strictly conform to Equal Employment Opportunity provisions and other worker protection laws. If you have questions, call the state employment service bureau or the Equal Employment Opportunity Commission. Inquiries to avoid, plus other tips for hiring, can also be found in the Federal Employment Law Handbook (800-552-6342 or visit www.nfib.com/legal).
When used in conjunction with a written application, pre-employment testing can help you get a handle on candidates before the interview process begins. These usually are general ability tests. One source is Wonderlic Personnel Test (800-323-3742). You may find others in the Yellow Pages under “Test Publishers”
After you’ve completed recruiting, the application form and testing, the next step is the most crucial – the interview itself. If you’re personally doing the interviewing (you should at least participate), acknowledge that you may not be good at it. What made you a good business manager does not necessarily make you a good judge of people.
So, prepare yourself. Make a list of knowledge, skills, personal characteristics and attitudes that the job requires and then determine how to evaluate each candidate consistently. Much of this list may be found in the job description you should have created before you began the recruiting process.
Study that job-requirements list to determine what questions should be asked in the interview. For instance, if you have a sales vacancy, you might ask: “In conversation, are you more a talker or a listener, and why?” Of course, the best answer would be ®€œa listener,®€ since in most selling situations, the most successful listening:talking ratio is about 3:1. When a candidate realizes this and gives the right answer, observe whether the candidate does indeed have good listening skills plus an ability to grasp what you’re saying about the job.
Having a list of identical questions to ask all candidates allows for an apples-to-apples comparison later and also avoids discrimination charges. Another tip: Use open-ended questions, such as “What do you like about retailing?” rather than asking simple yes-no queries, such as ®€œDo you like retailing?®€
Study the candidate’s attitude and personality. Does the applicant maintain eye contact? Does he or she criticize a previous employer or seem more interested in compensation, perks and fringes than in the nature of the job and its duties and your company?
Every candidate you interview deserves a realistic description of the job, including duties, hours, compensation, benefits, vacation time and opportunity for advancement. Never hide unpleasant aspects of the job, such as cleaning during slow times or working overtime on occasion. Also stress the positives of your operation. Just like the applicant, you should put your best foot forward, too.
Hopefully, a candidate’s potential supervisor will join you in the interviewing process as that person will be more interested in having the hiree succeed.
When you think you’ve found Mr./Ms. Right, don’t make the mistake of promising too much in your eagerness to hire this candidate. Here are some promises that could come back to haunt you:
- “Do your work, and you will always have a job here.”
- “We are financially strong and will never have a lay off.”
- “Company policy is to promote from within. In two years, you should be a manager.”
To cover your legal bases further, make sure you conduct a background check, contacting (preferably by phone) the references listed on the application or given during the interview. Of course, previous employers are worried about potential job discrimination lawsuits, too. They probably will not go into detail about qualifications, but you can probably get answers on dates of employment (some applicants fudge these to cover up long breaks in employment) and perhaps even reasons for leaving, including whether the applicant was terminated or resigned.
Because of ever-tightening labor law, checking references can be like walking on eggs – one misstep, and you’ve got a mess. Courts are extending new privacy rights to employees, limiting what you can ask and what a former employer can reveal. You might want to refer to a recently updated publication of the Society for Human Resource Management, entitled “Reference Checking Handbook” ($20 plus shipping, 800-444-5006).
You can choose to hire a detective agency, many of which do background checks. The ones we talked with quoted an average of $300 minimum for a non-executive candidate check, including arrest record, education and job history.
If your open job involves driving customer vehicles – or your own ®€“ checking candidate driving records is a must.
Whatever method you use, personal or professional, be sure to check references. Reference checking will not only provide the best candidate, it also may protect against a subsequent negligent hiring suit. For example, if you hire a truck driver without checking his driving record, anyone he injures may sue you for negligence. Ditto if you fail to check a criminal-conviction record of a new hiree who then later turns violent with a customer or staffer. So, be thorough and keep a paper trail of your procedures, including questions and answers during interviews, to establish that you were diligent in screening new hires.
Once your selection is made (and don’t be so slow that good candidates turn elsewhere), notify all others interviewed that the job has been filled. They are entitled to that. This may be by letter or even a phone call, but never get specific as to why a candidate was not hired. The safest explanation is simply that you found someone better suited for the job.
Hopefully, you have hired an excellent candidate for the job. The better you hire, the less you have to fire. But even the best-laid recruiting/hiring plans go astray at times. Then, firing may become necessary.
- Know the law
- Keep good records
- Parting words
Even when you win, you lose. That’s often the sad truth with labor lawsuits. Lawyers, court costs, time away from business – they all mean big losses in the end.
What’s worse, both large and small businesses risk facing a labor lawsuit at some point. More than half of companies surveyed by the Society of Human Resource Management reported that an ex-worker had sued them in the previous five years. Half of those suits involved a discrimination charge. Statistics show that 3.8 of every 1,000 employees are fired or resign each month, and experts say more than 250,000 workers annually are terminated illegally or unjustly.
Wrongful termination suits cost companies an average of $13,200 each – even when they win ®€“ according to Jerald Greenberg, a professor at Ohio State University who has researched termination practices.
Considering these costs, a $500 to $1,000 fee for an employment lawyer to review an employee’s file before termination seems money well spent. How you proceed with a termination usually will influence whether you are sued or not.
To prevent a lawsuit, you may want to consider mediation or arbitration instead of termination. With the help of a labor attorney, you may offer either option to the court-bound employee. A Roper Starch survey found that 59% of employees would choose arbitration over a lawsuit. That percentage jumped to 82% when survey respondents were told that arbitration costs a fourth as much as a lawsuit.
Know the Law
Labor law exists to protect both employers and employees. Almost all states recognize the concept of “at will” employment. It originally meant that the employer had a right to fire a worker for any – or no ®€“ reason. However, employers today must conform to federal laws and some state statutes, which protect workers from discrimination based on age, sex, race and disability.
Actually, in the hazy vagary of labor law, the at-will concept, while not overturned, has been seriously eroded in most states. Now, the accent is on “implied contract,” which infers job rights even though no explicit contract exists. This implied contract becomes considerably stronger with tenure – the longer a worker has been employed at a company, the more likely a court will assume that there is an unwritten binding agreement that discharge will not be without cause.
Tread carefully when the termination candidate is one of the “protected” groups – women, older folks (40 or over), minority races ®€“ or covered by the Americans With Disabilities Act (ADA). In all such cases, consult a labor lawyer before you dismiss.
Unfortunately, the definition of a “protected” employee is not so cut and dried. For example, alcohol or drug addiction problems are covered by ADA. A worker can claim poor performance stems from an addiction. In that case, you should require the worker to offer specifics on how he/she can improve. While ADA requires that you make ®€œreasonable accommodations®€ for the disabled, you do not have to lower performance standards because of a worker’s addiction.
Currently, ADA does not apply to small companies with fewer than 15 employees, but such exemption seems sure to end. In some states, such as California, ADA-like rules cover all firms.
There are also several misconceptions about legal termination reasons, so know your facts before you fire, and make them clear to employees.
Nine of 10 employees, for example, believe that firing because of personal dislike is illegal, according to a recent study by a Washington University professor. However, such is not the case. In most states, workers can be fired for just about any reason, except discrimination or refusal to break the law. To avoid these misconceptions among your workers, you must fine-tune your stated employment policy so they realize they don’t have real grounds to sue.
A written policy presented to new hires should state: “We retain the right to discharge employees at any time, for any reason, with or without cause.” One survey shows that having such a statement lowered from 82% to 63% the share of employees who believe it is illegal to fire someone for a cheaper replacement. As with all documents, it’s wise to get employees to acknowledge, in writing, that they have received your written policy.
Before You Fire
Eventually, you may very well find yourself in court, being sued for “wrongful termination” after discharging a worker. Other than economic downsizing, the only readily defensible cause for firing a worker is poor performance. But, you must have given the employee a clear picture of expected performance. When the employee falls short, you must advise that person in writing and then provide a reasonable period for improvement.
How do the courts define “reasonable period?” Most labor experts suggest giving a month, but more time, perhaps, is needed for a substance abuser.
No matter how long you choose to give an employee, you must stick to your improve-or-else deadline. If you delay, a worker may later claim that, while you warned about poor performance, you apparently condoned it by not taking action as promised.
And, be sure to document expectations and probation terms. In every case, have the employee sign that such documents have been received.
You should conduct a periodic performance review for every employee, putting the results into a personnel file. Too often, such reviews are just routine praise. Instead, be tough in job evaluations, advising where and how performance can be improved. Despite what you may have heard, most employees welcome tough evaluations. And, for you, this performance review becomes part of the documentation process if firing becomes necessary.
Proceed Slowly and Carefully
Gone are the days when you can simply roar: “You’re out of here.” However, there are exceptions to the take-it-slow modus. For example, if a worker is a clear and present danger to others, flagrantly dishonest or guilty of sexual misconduct or substance abuse, you may have to take immediate action. That’s especially true if an employee is a threat to others. You would be liable if someone is hurt while you delay firing that person.
In nearly all other instances, however, it’s usually best to go slowly. Rather than an immediate firing, consider suspension without pay pending investigation of the particulars. Whatever action you choose, keep records of all your talks with employees as part of your documentation file.
When a termination finally becomes inevitable and unavoidable, proceed as cautiously as you did during the lead-up period. How you proceed and act at this point will largely determine whether the worker wants to get even by taking you to court.
Note that some labor attorneys report that two-thirds of their discrimination clients complain of abusive treatment upon firing. Such treatment has included being ushered off premises by a uniformed security guard.
When you break the bad news, do it in person and simply. There have been instances of firing by memo, fax or e-mail, which, of course, prompts workers to want to get even. Look for neutral turf – not in your office where it would be difficult to conclude the meeting. If there is no neutral site, then cut the cord in the employee’s workspace, but assure privacy.
Such a session usually should be limited to five or 10 minutes. Ideally, you should also have a colleague present for later corroboration of the details.
Tell the employee why you are discharging him or her without being overly critical. Recent research shows that employees are 10 times more likely to sue when they are fired without being given a reason. When the employee reflects later that you did the firing personally and considerately, you are halfway home in avoiding a lawsuit.
If possible, fire the employee early in the week to prevent him or her from brooding over it during the weekend. And, it’s better to fire at day’s end, or at least in the afternoon, to avoid the possibility of a lunch-time worker discussion topic.
Along with being concerned about the termination resulting in a lawsuit, you probably regret having to fire anyone. But don’t let that feeling show. Any play of remorse will give false hope of survival to the employee. So make it as unambiguous as possible.
And never fire without being ready. Have the employee’s final paycheck cut and ready to present, including back pay and earned vacation and severance pay, if applicable.
Tie Up Loose Ends
After the firing, you’ll have to handle some loose ends, including worker benefits, severance and overall employee morale. Make sure you address information about worker benefits, such as continuing health insurance (check on legal requirements) or a severance package, if any, during the termination meeting. Detail the benefits verbally and also in writing, which will help the worker remember exactly what you said during the often-emotional firing meeting.
You may want to offer a hefty severance if you feel the discharge is on shaky legal grounds. If you decide that such severance would be in exchange for a signed release from any claims, then do this: (1) Advise the person to consult an attorney; (2) Provide approximately three weeks for the employee to consider the deal and seven days after signing to void it; and (3) Make sure the severance is beyond any mandated benefits.
You also may choose to require the outbound employee to sign confidentiality or non-disparaging agreements, which prevent discussing settlement terms or the ex-employee speaking ill of your dealership.
How you fire also will affect other workers and the overall morale in your shop. In a small business especially, the staff is almost like a family – you hurt one, and you’ve hurt all. Remaining employees should know enough about the termination to realize that you have been fair, but don’t go into detail. Bad-mouthing an ex-employee could prompt yet another lawsuit ®€“ defamation. At the least, it will turn off other employees.
If the terminated employee remains at work for a few days or a week after discharge, consider an “exit” interview. This gives the employee the chance to express feelings and concerns, thereby defusing any anger that would prompt a lawsuit. Such an exit interview might also help you harvest some thoughts on how to improve your employee relations.
Even if a lawsuit never happens, it’s still costly to terminate an employee for any reason other than downsizing. Including such expenses as recruiting, selecting and training, the U.S. Department of Labor estimates it costs a company one-third of a new hire’s annual salary to replace an employee.
Today’s employer-employee relationship is more like dating than marriage. It’s not like the kind of commitment your father had when he worked for a company for his entire lifetime. So, remember that with employees, nothing is forever.
Sooner or later firing an employee becomes necessary, and approaching the act in the wrong fashion will get you sued. As difficult as it is, just make sure you are ready.
Try to Make It a “Friendly” Firing
Perhaps no one could ever be fired and come away feeling good. But you can remove some of the trauma with an almost “friendly fire.” Here are some steps you can take to sugar coat that pink slip.
- Always fire in person and privately rather than adding insult to injury by using a memo or doing the dirty deed in front of others. And, keep it short and simple, say a maximum of 10 minutes.
- The employee being discharged is entitled to a reason, so be ready with one. Say why you’ve made the decision without being overly critical.
- Terminate at the end of the day rather than in the morning to avoid an employee lunch-time discussion of what happened. Some human resources experts recommend firing during the workweek and not on Friday, which would leave the departing employee with a sad weekend to mull it over.
- During the final meeting, report on any worker benefits that apply, such as continuing health insurance, earned vacation and any applicable severance. Have the final check covering all of that ready to present.
- Want to be extra considerate? Let the former employee come in to use your phones or fax and office supplies to search for another job.
- Finally, realize that getting fired can feel as horrible as a death in the family or a divorce. So, be considerate throughout the encounter. The employee will appreciate any friendliness, and you probably will avoid being sued.