One of the costliest things a business owner can do is hire the wrong people. In any business there will always be turnover, some industries have more than others, but in general employees leave and they have to be replaced. It’s just the nature of being a small business.
There are many reasons why people leave. Some are looking for a better salary, schedule, position, opportunity, lower commute, less hours etc. But whatever the reason might be, you still have to hire new people and train them; this costs time and money.

In the restaurant industry for example, turnover is a constant problem. Especially nowadays that minimum wage is different from one city to the other. In the City of San Diego the minimum wage is $11.50 while in many other cities across California is still $10.50.
Last year, San Diego voters approved a referendum to add an extra dollar to the State’s minimum wage of $10.50. This created many challenges to business owners in neighboring cities, who pay most of their workers minimum wage, because many employees are leaving their jobs for a better pay.

Every time someone leaves, business owners have to spend time posting the job announcement, screening dozens of resumes, schedule interviews and finally select a candidate. Once you hire someone, you have to complete all the paperwork and most importantly train them. All these activities require time, energy and money.

To lessen the burden of constantly having to hire new people, it’s better to concentrate on hiring the right people. But selecting the right people can be challenging as well; you just never know. But there are ways to reduce the probabilities of turnover rates and/or finding the wrong people.

Verifying background information

Some of the things that a business owner can do is check references, require a drug test as a condition of employment and request criminal background checks. By law, previous employers are limited to what they can say about an ex-employee but some go beyond just verifying employment dates and talk about the employee’s character, work ethic etc.

In some cases, employers verify employment dates but choose not to say anything at all because they just don’t have anything nice to say. If they’re reluctant to say anything, then that’s not a good sign.

Identifying a job hopper

Gaps in employment and job hoppers are also important indicators that they will not last. If someone worked for a few months and then was out of a job for a few months afterwards it may represent a red flag. Job hopping is also not a good sign.

If you have someone that changes jobs constantly every few months you need to get the full story. Sometimes it makes sense (pregnancy, military etc.), but sometimes they are either not looking for serious work or they are continuously fired from their previous jobs.

Balancing strengths and weaknesses

Another mistake that business owners make all the time is hiring their clones. In the entrepreneurship training programs that I teach I always tell aspiring business owners to hire people that will offset their weaknesses. If a business owner is not good in the organization department, hire someone who is good at that. The same applies with other skills.

There are some business owners who do not like to deal with customers and/or vendors. A chef or engineer might be a good example of this. They are very good at what they do but not so good when it comes to dealing with people. In these cases, it’s smart to hire employees who have good people skills.

The opposite applies to a good people person running a business who is good at business development and providing good customer service, but not so good in doing the paperwork, bookkeeping, legal requirements etc. In this case, it would be beneficial to hire someone who is very well organized, understands numbers, compliance, reporting etc. This would be the perfect employee to offset the owner’s weaknesses.

In summary, business owners should take their time when hiring people. Once they are hired and you’ve determined it was a good hire, take care of them.

One of the reasons Costco has one of the lowest turnover ratios in the industry is because they take care of their employees. Always listen to them, find out what motivates them, be flexible when they have family events etc., and pay them accordingly. Benefits are always an added perk but not every business owner can afford that. Be creative and motivate them as much as you can. This way you’ll have a good and loyal employee for life.