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.
Why You Should (Seriously) Stop Hiring People
Employing a whole bunch of people means you have a ‘real’ company, right? Wrong. The best thing you can do for your young company is to hire slowly… very slowly.
When does a start-up begin to feel like a proper business? For many people it comes down to two things: Renting a fancy office and hiring a whole bunch of people. And because these two things signify success in many peoples’ minds, founders tend to rush into them, hiring a bunch of employees and installing them in a freshly-painted office. However, according to Sam Altman, the president of Y Combinator, it’s the worst thing you can do as a founder.
“One of the weird things you’ll notice as you start a company, is that everyone will ask you how many employees you have. And this is the metric people use to judge how real your start-up is and how cool you are. And if you say you have a high number of employees, they’re really impressed. And if you say you have a low number of employees, then you sound like this little joke,” says Altman.
“But actually it sucks to have a lot of employees, and you should be proud of how few employees you have. Lots of employees end up with things like a high burn rate, meaning you’re losing a lot of money every month, complexity, slow decision-making, the list goes on and it’s nothing good.”
Growth is a good thing, of course, but the kind of growth is important to pay attention to. You want your sales to grow. You want your revenue to grow. You want your profits to grow. You don’t want your expenses to grow any more than is absolutely necessary to facilitate revenue and profit growth.
“You want to be proud of how much you can get done with a small numbers of employees. Many of the best YC companies have had a phenomenally small number of employees for their first year, sometimes none besides the founders. They really try to stay small as long as they possibly can. At the beginning, you should only hire when you desperately need to. Later, you should learn to hire fast and scale up the company, but in the early days, the goal should be not to hire,” says Altman.
“And one of the reasons this is so bad, is that the cost of getting an early hire wrong is really high. In fact, a lot of the companies that I’ve been very involved with, that have had a very bad early hire in the first three or so employees never recover, it just kills the company.
Early hires are tricky, argues Altman, because they are more like co-founders than employees. They will be entering the business when it is still young, so they need to be motivated by the same things that are motivating the founders.
If they need ‘management’ in the traditional sense, and if they care about things like working hours and number of leave days, they probably won’t work well in a start-up. So, when hiring an extra hand becomes an absolute must, you need to fight the urge to employ the first decent person you interview. Hold out for someone you could picture as your co-founder.
“Airbnb spent five months interviewing their first employee. And in their first year, they only hired two. Before they hired a single person, they wrote down a list of the culture values that they wanted any Airbnb employee to have. One of those was that you had to bleed Airbnb, and if you didn’t agree to that they just wouldn’t hire you. As an example of how intense Brian Chesky is — he’s the Airbnb CEO — he used to ask people if they would take the job if they got a medical diagnosis that they have one year left to live. Later he decided that that was a little bit too crazy and I think he relaxed it to ten years, but last I heard, he still asks that question,” says Altman.
Facebook’s Mark Zuckerberg was similarly careful about hiring in the early days. “Mark Zuckerberg once said that he tries to hire people that he’d be comfortable hanging with socially and that he’d be comfortable reporting to if the roles were reversed. This strikes me as a very good framework. You don’t have to be friends with everybody, but you should at least enjoy working with them. And if you don’t have that, you should at least deeply respect them. But again, if you don’t want to spend a lot of time around people you should trust your instincts about that,” says Altman.
3 Steps To Find And Keep Top Talent In Your Business
In just ten short years digital solutions have revolutionised the way we do business — but have they changed the way you hire and engage staff? Here’s how you can use online tech to find and retain top employees.
The world is more connected than ever before. This has opened up endless possibilities for businesses, and allowed companies to understand their markets better, to collaborate more effectively internally and target prospective clients and talent more accurately.
Having said that, I don’t believe that human resources as a discipline has been given the necessary attention online, especially alongside other disciplines such as marketing, sales and customer relationship management. Those who work in human resources, particularly within medium to large businesses, know that there are challenges when attracting the best talent and doing so within tight deadlines.
I’d like to share with you a simple model that I’ve developed that should help you effectively consider how HR management lives within the business and operates online. The model is called the TOE: Talent, Organisation and Employees. It answers the very simple questions of: How do you attract talent; retain your best employees; and enable your employees to engage with prospective talent — all encompassed by technology?
This model demonstrates how businesses can no longer rely on B2C or B2B communications, but that the key to successful communication is H2H: Human-to-Human. This is where empowering your current employees to attract talent on your behalf becomes powerful.
I break this model down into three steps: Attract, Retain and Engage.
1Attract: How does your organisation attract talent?
Here you outline the type of talent you’re after and you draw up a persona that includes the possible online ‘watering holes’ where this talent may be found. You may want to make use of the four dimensions of audience profiling as well: Motivational (the why behind the career); Demographic (the affluence and life stage); Attitudinal (emotions, preferences or needs states); and Behavioural (what are they doing online?).
From there you evaluate the type of content that would most likely resonate with this talent group. It may be something like an eGuide within their field of interest; a How To guide similar to this one; a video interview with a big player in the industry that speaks positively about your business.
You also want to showcase your business as an employer of choice and so this content needs to showcase the inner working of the business, the culture, the people and the ‘team’. From there you would use programmatic media buying (or platform marketing) to effectively target this talent group online.
With the use of offline and online data, targeting carefully selected channels, the ability to address this talent group personally and at scale is very possible.
Channels that work for attracting talent include:
- LinkedIn: Particularly sponsored stories and inmail
- Programmatic third party: Especially when an effective data management platform is incorporated, such as a tool like Google Double Click as a DSP (demand side platform) and Blue Kai as a DMP (data management platform)
- Facebook: Focusing on dynamic content that can easily be shared.
2Retain: How does your organisation retain top talent?
If there’s one thing that can be said about social media and the Internet, it’s that it has opened doors of communication in a new way. Communication between top executives and personnel is what breaks down the barriers of hierarchy and builds the sense of ‘team’.
This is where you want to enable effective communication through tools like Facebook for business, the Intranet, and smaller huddle groups that can be formed on tools like Slack. This is also where you want to find ambassadors within different business units and clusters that can be catalysts for conversation between the different layers of hierarchy.
Through this process you want to equip your employees and make them believe they’re working for the best business in the industry. That’s why sharing success stories, sharing tools for career advancement, and competitions, is important.
Channels that work for retaining involve:
- Facebook for business: Chances are your employees are on Facebook already
- Slack: A collaboration tool for task teams
- Intranet: With chat and forum capabilities.
3Engage: Are you Enabling Your Employees To Be Your Voice?
We all know that when a brand talks about itself it’s not as believable as when our peers talk about a brand. That’s the gist here. You need to develop an online policy that enables your employees to engage with prospective talent online.
From here you want to identify certain passionate employees that you feel most embody your brand values. The next step is to encourage them to connect with and converse with their peers online, thus portraying why working for your organisation is preferable. You want to equip your ambassadors with great content to share so that they engage as thought leaders.
Great content may come in the form of thought leadership blog posts generated by your organisation that can be shared by your ambassadors online.
Channels that work for engaging involve:
- Twitter: This is the foremost tool for easily jumping into conversations online
- LinkedIn: LinkedIn groups which are industry-specific are the best place to get involved in conversations online and to connect with peers
- Forums: Industry-specific forums are a great place to get connected and to share your expertise
The role of employees
Human resources is any business’s cornerstone. Even the most machine-heavy businesses need people. And that doesn’t mean only people who can do a job, but rather, people who make a difference in an organisation. That’s why attracting the best talent is not only a must, it’s imperative.
Through the above-mentioned model, I demonstrate how communicating from the organisation to the talent pool is only one piece of the pie. The most important piece is, without a doubt, the human-to-human element; the channel where your current employees become your ambassadors, and in turn start attracting talent on your behalf.
Hiring The Right Person Is Critical When Growing A Business
But how do you find the right mix of people?
There is no escaping the fact that human capital is often a company’s greatest asset. The right people actualise opportunities into results that boost not only business and financial growth, but inspire innovation.
By building a bigger pool of knowledgeable people, entrepreneurs can create different groups that all network and collaborate to deliver their unique skill-sets, be it strategic conceptualisation or creative support, ultimately your business’ growth will only benefit.
But how do you find the right mix of people?
The Cost of Mr./Ms. Wrong
It can take up to 6 months to 1 year to find out that you have made a hiring mistake and the cost implication is a big one. It is believed that a bad hire costs a business 50% of the employee’s annual salary. But it also goes beyond that, there is the cost of job advertisements, time associated with screening and shortlisting, administration and placement fees which impact your bottom line.
Once they enter your business there is the time associated with mentoring and training the person to get them to be where they need to be.
Realising you’ve made a bad hire takes time and in the months that lead up to the employees last day, your corporate culture could be severely disrupted.
Disengaged employees are likely to place strain on the rest of your workforce, while apathy and negativity may spread through your offices before the employee’s departure. But there is light at the end of the tunnel and all is not lost. It’s simply about learning how to find the right person!
Technology is Your Best Ally
Traditional hiring practices have become less accurate and difficult to measure, so in the information age it seems illogical that we are still using them.
We live in a world where technological revolutions are constantly changing the way we do business, and advances in recruitment technologies are reducing the chances of making a bad hire.
Through science and technology, entrepreneurs can now make informed decisions when making new hires, based on both culture and skills.
The right kind of technology can even automate part of the workflow that comes with repetitive and high-volume tasks of the HR function, leaving your manager free from CV diving, and giving them time to focus on the people in your business that are the right fit.
Through deploying people analytics using the data and data analysis techniques you will be able to understand, improve and optimise the people side of your business, thus improving growth and profit potential.
The logic is simple, predictive analytics to create a predictive model that determines future probabilities. Did you know that today there are algorithms that can predict potential and performance for recruitment, development and retention? Let’s not forget that machine based learning is not influenced, by emotional tags like personality, looks and familiarity. In fact, algorithm will only continue to learn from new data that is input to increase the accuracy of the solution it comes up with.
We all want the best for our business, and no venture is without risk. However, it’s also about mitigating that risk, and the simplest way is to do so is to make sure that the right people for your business keep revolving that door that creates opportunities for all.
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