It’s disconcerting how many business owners neglect to spend time thinking about their vision, how they plan to achieve it and the risks they are likely to face along the way. Worse still, many also fail to invest time in thinking about the people who will take them to their ultimate destination.
The fact is that cosmetic appointments can result in catastrophic consequences, especially when a business fills key positions without any clear purpose or intention. This has often been the case in some B-BBEE appointments, commonly known as fronting or window dressing; or when an employer hires an employee as an independent contractor simply to dodge the relevant employment laws.
These practices may be extreme, but their impact can be highly damaging. That’s because one of the core principles of South African law is that the intention of the parties involved dictates the legal ramifications. Without getting too technical about this, our courts apply a number of tests to measure true intentions. It’s unlikely that the fronting approach to team selection would pass any of these tests.
Another mistake that employers make when it comes to selecting the right people boils down to reaction rather than prevention. In other words, a business will only fill a position when its need is so urgent that there is no time to give proper consideration to the appointment.
Desperate moves like this can be as damaging as our other two approaches mentioned above. What’s more, reactive decisions can also apply to selecting shareholders and other stakeholders, not just team members.
Long-term, poorly considered appointments can even result in litigation and business failure. With prevention in mind, this article focuses on some of the questions to weigh up when selecting a winning team.
Independent contractor or joint venture?
It’s not unusual for two parties that are independent from each other to join forces on a specific project. When this happens, the parties can opt to enter a joint venture agreement that clearly sets out their respective obligations. In many cases, however, a joint venture agreement constitutes a partnership which, in turn, raises the inherent risk of unlimited liability.
The alternative would be a contract/subcontractor arrangement. Here, the party that is awarded the main contract would appoint the other party as a subcontractor. In many cases, this option would address the risk of unlimited liability.
Another case where the independent contractor agreement may be the most feasible option is when suppliers are engaged. Such an agreement could be defined as a supplier agreement, a service level agreement or an independent contractor agreement. This option applies when an organisation has a specific project or specific requirement and needs periodic assistance from a suitable service provider to deliver.
It’s crucial to understand the risks associated with all these options, weigh the risks against the potential gains and purpose of the engagement – then formulate the most appropriate contractual arrangement.
Employment contracts: fixed-term or indefinite?
With the recent amendments to our labour legislation, it is even more important than ever to give proper consideration to engaging employees. That said, South African employment practices have never been defined by a golden thread of proper consideration. Unfortunately, the new amendments will not address this weakness.
One might think that employers would be motivated to select the right people for the right positions by the threat of a possible penalty from the Commission for Conciliation, Mediation and Arbitration (CCMA) totalling up to 12 months’ salary. Not so, in many cases.
Often, businesses going through growth spurts only focus on reacting to their current needs rather than planning and implementing their recruitment activities strategically. This often results in appointing the wrong person, who is simply incapable of doing the job.
Square pegs in round holes are not the only cause of disputes at work, but they are certainly a significant contributor.
So, it’s imperative that employers consider their human resource needs carefully and scrutinise the applications they receive with equal rigour. Beside the risk of incurring a CCMA penalty, failure to exercise care and attention could result in retrenchments that expose you to a whole new set of regulations and challenges. Put bluntly: getting rid of a few employees will no longer be the quick financial fix that it used to be.
In future, employers will be compelled to consider the exact causes of any financial problems they are facing. They will only be permitted to retrench people if they can show that their financial problems are directly linked to employing those people in the first place.
As far as the fixed-term versus indefinite contract argument is concerned: rather than invoking provisions related to an employee’s probation period, when their performance is closely monitored after first starting work with a new employer, there is a trend towards appointing people as independent contractors or as fixed-term employees. In many cases, employers do this solely to circumvent the process and procedure laid down for dismissal in our employment laws.
For this reason, the CCMA now follows guidelines to determine the true intention of the contracting parties. If the authorities find that an employer is evading an employment law provision by circumventing it, it may be deemed that they engaged an employee on a permanent contract of employment with an indefinite term.
This is yet another compelling reason to have a clear understanding of purpose and strategy when appointing a new employee. It is equally important to put the relevant human resources paperwork in place.
This should cover policies relating to the use of facilities such as email, internet and phone; remuneration and leave; sexual harassment; grievance procedures; and disciplinary procedures. In addition, job descriptions must be properly defined and employment contracts should be drawn up in line with the latest provisions.
These documents are fundamentally important when it comes to setting boundaries and guidelines for how your employees should behave in the workplace. And the way your employees behave is vital to achieving your long-term strategic vision.
What about shareholders and other stakeholders?
Electing the right stakeholders and shareholders is just as vital to minimising business risks as appointing the right team members. Here, it is important to observe the Companies Act 71 of 2008, among other laws, as well as the current B-BBEE legislation, which is especially relevant if you are bidding for large contracts, corporate or government. In both cases, you need to build your B-BBEE scores.
Defining a B-BBEE strategy that makes business and moral sense is a unique process that your business should only undertake with utmost care and attention. There is no such thing as an off-the-shelf B-BBEE strategy and you should never seek to implement one.
Shareholder agreements have always been very important tools in negotiating stakeholder involvement or attracting additional investment. Usually, these agreements also included provisions regulating governance, which is of particular significance when investing in any company.
With the emphasis on maximum transparency and proper governance structures, the law has not changed, which means your shareholder agreements must align with the new Act.
Further, in terms of the provisions relating to shareholder agreements under section 15(7) of the Companies Act, shareholders may still enter into any agreement with one another provided it is consistent with the provisions of the Act and the Memorandum of Incorporation (MOI). Your MOI is defined as a document that:
“sets out rights, duties and responsibilities of shareholders, directors and others within and in relation to a company, and other matters as contemplated in section 15; and by which:
i) the company was incorporated in terms of this Act, as contemplated in section 13; or
ii) a pre-existing company was structured and governed before the later of:
aa) the effective date; or
bb) the date it was converted to a company in terms of Schedule 2.”
Therefore, in the case of a conflict between the agreement and the MOI, the MOI will now prevail. If a clause in the agreement conflicts with the stipulations of the MOI, then only that clause will be voidable and it can only be voided by a court application.
Each document introduced by the new Act has its own specific purpose that must be acknowledged and applied in the best interests of the company. Ideally, these documents should be living documents rather than dead paperwork that ends up in someone’s desk drawer, never understood nor implemented.
Accordingly, shareholder agreements that incorporate your B-BBEE strategy on ownership and your MOI’s content on governance and voting must reflect what management is actually doing to implement your long-term vision.
Your team members are not only those people on the frontline or shop-floor of your business. They also include your managers as well as your stakeholders and shareholders. The support service providers you engage are equally import to your team’s success.
To achieve your long-term vision, you need to regulate the relationships between all these parties judiciously using the most practical, feasible and business-friendly legal solutions. We strongly advise you to work with us to develop and implement the most appropriate approach for your business.
Are You Hiring A Cultural Fit? Do You Actually Want To?
Acknowledge your culture, and share it with applicants before they even get to the interview phase.
Who should you hire: The superstar with great skills who feels like a poor fit with the culture, or the person with weaker skills but who fits in culturally? Even though I believe in hiring the stranger, cultural fit really matters.
I once had an interview set up with a candidate who looked strong on paper. Within one minute of meeting him, it was obvious that he was too crude in his language and thinking for the culture I was building. I would have been embarrassed to have him introduce himself as affiliated with our company. I terminated the interview faster than I had ever done before.
Forty-six percent of newly hired employees will fail within 18 months, while only 19 percent will achieve unequivocal success, according to a study by Leadership IQ. Of those that fail, 11 percent lack the necessary technical skills. The remaining 89 percent have other difficulties integrating into the workplace. That statistic – the 89 percent – is startling, but even more startling is that a majority of employers are not addressing it sufficiently. How many interviewers make a formal assessment of cultural fit? Even the most impressive candidate may turn into a mis-hire if he or she onboards into a poor cultural fit.
Cultural fit includes both a firm’s personality – values, interpersonal skills, extracurriculars – and how a firm works – management, hours, pace, etc. I know one well-known start-up that, in its early days, required that every hire be interviewed by the entire team. Not only that, but any one person could veto a candidate. “I think there is something to be said for the ‘airport lounge test,'” a colleague said to me. “If you don’t want to sit with somebody when stuck waiting for a plane, you probably won’t want to work beside them either.”
At the same time, cultural fit should not become a euphemism for hiring a bunch of people who look or think just like you. “Don’t hire people you know.” If you do, you’re not going to get the best fit for your organisation. An organisation that selects for the highest performers cannot possibly also be a homogeneous organisation.
It’s also worth assessing if your culture is what it should be. Let’s say you interview someone who tends to be very frank, and therefore irritates people. In your culture, people tend to speak indirectly about sensitive matters. They say, “If I could make a suggestion” and “perhaps” before saying, “We’re screwed.” On the one hand, you might say this person is going to irritate folks.
On the other hand, is your firm burying problems rather than addressing them? Every hire shapes future culture; the new person might be an infusion of useful straight talk.
Related: Hiring Your First Employees
For employers, here are six steps that you can take to increase the likelihood of attracting candidates who will be cultural fits within your firm:
1. Have a company mission plus values statement, and list it on the job posting and your website
Every firm has a culture. What is yours? We recommend to acknowledge it, and share it with candidates. In particular, highlight what is unusual, not generic, about your firm. If everyone in your office is obsessed with sports, then mention in your job posting. “Benefit: Get to attend home Rangers games with many of your colleagues!” This allows for candidate self-selection based on their values and whether they would feel like they fit into the culture.
2. Obtain data on a candidate’s behaviour, values and most preferred/least preferred company culture
My executive coach observed that it’s helpful to ask candidates to describe their ideal corporate environment, their “most preferred” culture, as well as to describe a place where others might like the culture but where they would not. This is to discourage them from describing a company culture that no one would like. These open-ended questions encourage candidates to free-associate about their company culture wish list, and can enable you to assess whether their ideal company is close enough to your real company.
I recommend to screen for cultural fit values and technical skills separately, in order to minimise the risk of missing something. Some firms make a point of screening for cultural fit, before even bothering with the technical fit interview, on the grounds that it’s a waste of time to do otherwise.
Related: When To Hire A Consultant
3. Enforce a standard rating system
I suggest formally assessing against the mission values of the firm. Show the mission statement to the candidate, and give an example of the mission conflicting with itself or other imperatives. Example: We have committed to a deadline of July one for a client, but the product still has bugs. What should we do, given our cultural imperative of keeping promises? See what the candidate recommends.
4. Assess a candidate’s interactions with other employees and make observations
Take note if they fit in with the rest of the firm’s people by observing how the candidate participates in group exercises and how effectively the candidate communicates with the rest of the employees.
Ask people at all levels to interview the candidate. After all, the candidate will interact with people throughout the organisation once they start the job. To encourage interaction, pay attention to how they talk with the receptionist, security guard and/or other candidates in the waiting room. The candidate is more likely to show his/her true self in these interactions.
5. Ask the candidate for their observations
Dattner suggested you can also ask the candidate what they observed about the culture in discussions and meetings with you to ascertain how attuned they are to the culture. You may get valuable feedback about how an outsider perceives you.
6. Execute a post-facto analysis
Review any mis-hires retroactively to determine what went wrong during the interview process. You can also interview any candidates you made offers to, but who did not accept, to get additional feedback about your company and its employment brand.
The candidate’s point of view
Here are some questions I suggest candidates ask before accepting a job offer:
Office personality and communication
- How have you responded to feedback from subordinates?
- Can you give me examples of how you support your subordinates’ growth and development?
- What does my working group do together outside of work, if anything? Friday get-togethers, other functions?
- When do most people arrive/leave work?
- Am I expected to be on call and/or checking email often in case any work needs to be completed outside of office hours?
- How formal is the firm? (Dress code, etc.)
- How many reporting layers are there?
- How often and how will I have access to senior management?
This article was originally posted here on Entrepreneur.com.
The Consequences Of Appointing People In The Wrong Positions
Let’s consider the consequences and impact of poor appointments.
We all know of someone who might have been appointed on a whim, based on someone’s gut-feel or because of their connections, just to discover that they do not fit the job description – or the organisation.
What are the consequences of this? Why should we care about recruiting the correct people for the correct positions? Simply put, the negative consequences of poor appointments can drain money and energy and have long-lasting effects on the organisation. In fact, I believe this to be one of the fundamental dysfunctions that negatively impacts leading purposefully. Jim Collins, author of Good to Great, expresses the same sentiment advising to rather keep the position vacant than appoint inappropriately.
Consider the case of James who happens to meet the required qualifications for the post as advertised for Financial Manager at Company ABC. He is interviewed and seems to know his stuff. James is appointed in the position and starts with great enthusiasm. However, it soon comes to light that, despite his qualifications on paper, James does not fit into the company culture at all. He also seems to divulge a bit too much. A few weeks after having started, someone overhears him openly sharing information that is considered highly confidential.
He is approached about this by Company ABC’s Financial Director who explains that it is completely unacceptable for him to betray confidences and that there will be a formal disciplinary process if he does this again. James feels threatened and defaults to “water cooler talk” about his boss, belittling him and saying that the organisation obviously doesn’t recognise his worth, all while trying to justify his actions.
Needless to say, not too long thereafter – following a few more incidents – James leaves Company ABC. He also leaves a mess that now needs to be cleaned up.
Let’s consider the consequences and impact of poor appointments such as that of James:
- Severed relationships: in the case of James, team members have now become privy to information which they should never have known about. Leaked information can cause great discomfort within the team and impact relationships between leaders and teams negatively. This needs to be managed very carefully with all to move forward and regain trust.
- Lack of trust: those who appointed individuals such as James may be second-guessed if they are ever to appoint others in future. It might also impact the level of trust the team has in their other decisions, even if not linked to any appointments.
- Frustration: if the person who has been appointed simply cannot do the job, there is a huge risk for the organisation. Not only do others need to step up to guide the new team member (consequently taking time away from their own work), but it causes irritation and possibly resentment amongst those involved.
- Lost traction: we often appoint hastily because we can’t afford to lose time, but we don’t realise that by appointing inappropriately, we lose even more time. While the role is vacant, the work that needs to be done will most probably take a backseat or not get the amount of focus it requires. Also, if you appointed the wrong person the first time, you will have to do damage control on top of that. This causes a backlog which affects not only the organisation, but the team and the person who will fill the role in due course.
- Cost of re-appointing: once the person has left the organisation, it could take months before someone new is appointed. More than that, it takes a few months at least for the next new person to be brought up to speed and on track to fill the role effectively. Don’t forget the bottom-line costs of recruitment which could include a fee for finding a new placement, or opportunity costs of HR now having to spend time on filling this role at the cost of other roles that need to be filled.
While it is easy to think that the only cost of a team member leaving is that the work is less likely to get done, the above shows that it can also have dire impacts on culture and bottom-line. While most of us are aware of these consequences, we still fall into this trap. But there are a few ways to apply ourselves and avoid appointing poorly – although there are, of course, no guarantees:
- Hold panel interviews: even if doing this prolongs the recruitment process, it can be hugely beneficial to have more people involved in the selection process. It is important to make sure that everyone’s opinions count. If possible and appropriate, have the person who is leaving the organisation be part of the interview panel as well.
- Assess functionally: have the potential candidate/s complete a practical exercise or even give them the opportunity to spend a few hours in the office to see and experience ways of working. This will also give them the opportunity to see whether they feel comfortable in the environment.
- Assess psychometrically: have them complete suitable psychometric tests to gauge their suitability for the organisation and the role from a personality and aptitude point of view. Culture fit is vital.
- Interview references: it is important to ask the questions that really matter i.e. did the person welcome constructive feedback? Would you re-appoint this person if you had the opportunity? Are they self-driven or do they work better in a team environment? Which three words would you use to summarise this person’s work ethic?
While you can never be truly sure about a candidate, and chances are that you could appoint inappropriately despite your best efforts, it is vital to be as thorough as possible during the process. Don’t appoint on a whim or out of desperation to fill an empty position. Spending more time to make a well-considered appointment will serve all organisations and teams well. And if you realise that you have made a mistake, act quickly before too much damage is done.
Unemployment Is Way Down: 3 Tips To Attract Employees In A Tight Market
Now that ping-pong tables have become table stakes, it will take benefits with substance to attract the best employees.
Get creative. From remote work options to diverse compensation plans, employers like you can tailor your employment package to match the employee.
In this way, you’ll follow the path of the most successful businesses, which see competitive talent markets not as an obstacle but rather an opportunity to demonstrate their companies’ merits, and entice would-be employees.
Flashy perks are out of fashion
Startup culture glorifies fun fringe benefits like ping-pong tables, beer on tap and free pizza. After all, what employees wouldn’t choose to spend Friday afternoons goofing off with co-workers and snacks?
Turns out, most of them. Gallup’s State of the American Workplace report found that most employees would leave their current job if a competitor offered substantially more flexibility and money – not perks.
Real adult workers might enjoy Galaga arcade games in the break room, but they would rather be able to leave early to pick up their kids, schedule longer vacations and pay for better lifestyles with fatter pay cheques.
When the job market puts the power in the hands of the worker, businesses can’t skate by on superficial perks. To attract high-quality employees who will stay, companies must offer practical, competitive benefits with long-term appeal.
Here is what the top talent really wants:
1. Assistance with student debt and housing costs
The student loan debt crisis is bad and getting worse. College graduates are finding jobs, but their wages aren’t going up. Those in the workforce are making payments late and falling into delinquency.
The problem isn’t limited to recent grads, either. Debt.org reports that the number of people older than 60 with student loan debt has quadrupled over the last 10 years.
Companies can help workers break this cycle by offering student loan support in addition to regular salary. Some providers of programmes now help employers offer student loan assistance programs, to attract new employees.
Employees saddled with debt often struggle to save up for big purchases like houses. In addition to student loan assistance, consider offering a mortgage assistance programme to help employees pay for housing. Not only will employees appreciate the fast track to home ownership, but they might stay with the company longer if they buy a house with a five-minute commute.
2. Forward-thinking travel policies
The Global Business Travel Association found that 59 percent of candidates surveyed consider travel policies when they choose an employer. And there’s a lot more to take into account here than just help booking a flight.
In fact, a movement is growing to make employee comfort a priority in business travel plans, since 79 percent of business travellers report that travel experiences affect their job satisfaction.
“The direct benefit of revamped travel policies is increased loyalty from employees and potential hires alike,” Scott Hyden wrote on Recruiter.com; he’s chief experience officer for RoomIt, a hotel-booking solution for corporate travellers.
What’s important is that smart employers not cram employees into the cheapest non-chain hotel closest to the airport. They take care of the little things (like storing and shipping business clothing) to make every travel experience go smoothly. They allow traveling workers to earn loyalty perks and points from hotels and airlines for personal redemptions. These small courtesies don’t cost much, but they make a big difference to workers.
3. Preparation help for retirement
According to PwC’s 2018 Employee Financial Wellness survey, most employees are not confident that their retirement savings will even make it to retirement; 42 percent surveyed believed they would need to use money from retirement plans for other expenses.
Leaders should work with retirement plan providers and financial services companies to provide employees with resources and tools to plan for the future no matter what their salary grade.
By providing retirement literacy and investment-education options, enterprises help workers make the most of their pay cheque and live healthy, fulfilling lives. Don’t just put the resources out there and let employees figure it out themselves, though. Invite financial advisors to come talk to employees every few months about their options.
Invest in workers’ futures, and they will be more likely to spend that future with the company that helped them. Even if it’s not currently possible to offer a pension equivalent, employees will appreciate the educational assistance in getting their savings plans up to snuff.
So, yes, ping-pong tables and puppy breaks are fine, but employees are more interested in stability and flexibility than entertainment. Use practical benefits to attract top talent, retain the best workers and ensure that people who work for the company have the resources they need to live successful lives.
This article was originally posted here on Entrepreneur.com.