Hiring an All-Star Employee Can Involve Tightening Your Own Belt
Albert Karoll is hiring again. It’s not because he has money to burn—in fact, Karoll cut the pay of his 12-person staff by 10 to 15 percent across the board in 2009, when his business fell off dramatically, and he has only partly restored those cuts this year.
Nor is it because he always trusts his hunches about growth. When the recession hit, his company had just completed its first move in nearly 40 years, to a far more expensive Chicago storefront.
Instead, Karoll is hiring because he happened upon a candidate who was simply too good to pass up. His company, high-end clothier Richard Bennett Custom Tailors, employs classically trained master tailors, usually from Europe. They are an increasingly rare breed, so when Traian Riceanu, a Romanian tailor in his 30s (none of the tailors at Richard Bennett were younger than 60), approached Karoll and aced an informal audition, he was hired on the spot.
“This is the kind of guy who can be a building block for us, who could stay here a decade or more,” Karoll says. “Sure, it’s a bit of a calculated risk because I’m forecasting growth, and who knows what will actually happen, but this is also a long-term move on my part because this is a guy who could develop into an all-star for us.”
With unemployment still high, the job market is loaded with candidates, including plenty of blue-chip prospects, to tempt CEOs who may or may not be able to afford them. Entrepreneurs such as Karoll are prone to risk-taking, but in this economy they have to weigh both sides of the hiring gamble: If the new person works out, the company could benefit. If business takes a hit, however, that extra salary could be crippling.
“This is a wonderful time to hire strategically, but you have to make sure you have the financial wherewithal to do it,” says Mitchell Petersen, a professor at Northwestern University’s Kellogg School of Management. “If you hire based on expected revenues that are already in the pipeline, that’s a good gamble. If it’s based on revenues you expect maybe to have six months from today, that’s not a good gamble.”
Hedging your bets
Sometimes reaching for a standout candidate means seeing if you can tighten the belt another notch.
Chicago tech startup YouSwoop, which launched in December, had already more than tripled its staff, from three to the equivalent of 14 full-time employees, when its founders stretched to add a star salesman seeking a premium salary. Wary of taking on debt, the company’s partners decided to cover the extra salary by reducing their own pay.
“It was ‘Guys, we found a gem. Are we prepared to cut our pay to get him?’ ” YouSwoop CEO Alexander Lurie says. “It means we’re eating a little more ramen right now. But we’re going to be stronger in the long term by sacrificing in the short term.”
That’s a fine proposition, provided that the long-term benefits manifest themselves and the short-term sacrifices don’t stunt a company’s growth—or put it out of business.
Workforce Management Online, July 2010 — Register Now!