“This week’s Ask Manny question comes from John.”
My business is growing and I need to hire a new employee. I have a few employees already; however this is a new position that I’ve never had someone in before. How much should I offer to pay them?
Congratulations on expanding your business! A growing business requires more resources, including people, and this inevitably means that you need to develop and hire into new positions. It sounds like you intuitively know that you need to hire a new position, but perhaps you have not created a defined labor structure plan yet.
A labor structure plan will help you to think through the different types of positions you will need to hire over time, along with their job descriptions and salary requirements. Then, as you begin to expand and hire into these positions, you can simply refer back to this plan.
Creating a plan can be accomplished in just a few steps.
Step One: We start with building your organization chart. There are four major branches of any business: Fulfillment (produce and deliver the products and services to your customers); Growth (expands your brand name and acquires new customers); Administration (runs the infrastructure of the business); and Executive (sets strategy, makes major decisions, and ensures the overall operational effectiveness of the business).
Step Two: Within each of these branches are job types. For example, within Growth, you usually see Sales, Marketing, Business Development, etc. Growth, Administration and Executive tend to have the same job types across industries, but Fulfillment can differ. Think about your industry and consider the different types of Fulfillment roles that you will need. For example, if you run a law firm, you may need licensed attorneys as one job type and paralegals as another job type, and can even set up different types of attorneys as different job types.
Step Three: People need the opportunity for upward mobility in their jobs. Otherwise they won’t stick around. So next, think about the different layers within each job type. Some positions within the job type will be more junior and others more senior. For example, sticking with the law firm example, a licensed attorney can be a junior attorney (just starting out), a lead attorney (with some experience), or a senior attorney (with many years of experience). A good rule of thumb is to build out at least three position levels within each job type. This provides the mobility that your employees will need to stick around.
Step Four: Now that you have positions established, think about the different accountabilities and tasks that each position will hold. What makes a junior attorney different from a senior attorney? What tasks would you want a junior attorney to do versus a senior attorney? For example, maybe the senior attorney is responsible for arguing a case in front of a jury, while the junior attorney is responsible for taking notes during the trial.
Step Five: Finally we can get to compensation. Now that you have well thought-out positions with clear tasks and responsibilities for those positions, you can conduct some research to see what the general marketplace is paying for these positions and matching tasks and responsibilities. My favorite places to look are Salary.com and Glassdoor.com. Industry-specific publications are also excellent resources (for example, the American Bar Association publishes a salary guide for attorneys every year). Use the information you gather to determine what you should pay your positions.
This may not be the simplest exercise to go through, but I promise it will be one of the most important things you develop in your business. Take the time to build this plan.
If you need help doing this, my team and I are always standing by. We help our clients build labor structure plans all the time. Simply reach out to us at firstname.lastname@example.org and we are happy to assist!
We also have a fantastic training video on how to work through this exercise. Check out our free resource library and scroll to the “Labor Structure” video, where we take you through a more detailed process of creating your labor structure plan.
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