Start-ups and many small to medium sized companies often think that costs can be saved by hiring poor to average quality candidates, thereby being able to get the adequate “number” of manpower and be able to scale up while keeping salary expenses down.
However, what many of them fail to realize is, that for every average, lower salaried hire, either they or someone from the top team is, indirectly contributing a part of themselves to that new hire’s role.
Because the average candidate will not be pro-active, determined, or have the fire in her or him to do that little bit extra, or for that matter, even just do what is expected, in the right way. They would need to have a baby-sitter to constantly monitor them and keep checking if they are on track from time to time. More often than not, you would be thinking of their action plan and communicating it to them, instead of them thinking of the best solution and suggesting options to you.
So, with each new ‘average’ hire, not only do you compromise on the tasks you assign to them, but your company too gets lesser and lesser of you, since increasingly greater portion of your time and efforts start getting diverted to managing your ‘average’ team’s planning and execution.
Instead, spending more to get a ‘better than average’ dynamic and enthusiastic hire will not only leave you with more time and less tensions/ responsibilities towards them, but they will also contribute in terms of figuring out better/smarter/ cost-effective ways to doing things, thus taking the business forward.
Another way the business would tend to grow multi-fold with such hires is, that you start thinking bigger, thinking more, to keeping such capable employees busy and on their toes. Because they can. Because they want to. And fueling their growth in turn, fuels your business.
So, while a ‘better than average’ hire will always cost more, she or he would more often than not prove more cost-effective in the long run.
If you came here expecting some scoop on Gisele Bundchen or Miranda Kerr, I suggest you hit the ‘Back’ button. This one’s more about the ‘less figure, more strategy’ business models. I’ll work on a post on real models sometime soon though, I promise.
A few years ago, on a random day at office, I received a call about an investment opportunity. At the time, I used to take an average 2.5 inquiry calls per day, speaking to a wide assortment of people. From second and third generation businessmen to entrepreneurs working on their second or third successful venture. And even some final year students who had budding dreams about what could as well be the next big thing. And every once in a way, I’d get a venture who’s business model was confusing. Here’s one of a few business models that puzzle me.
Anyway, so this call, Mr. Promoter of a company that was into the job portal business that was based on referrals. Simply put, the usual job portals work on the model that companies that hire from a particular site would have to pay them certain fees which would give them access to a filtered set of numerous candidates, and perhaps if some of them were hired, the portal would get another x amount of money per candidate hired.
Now that model, as we know, perhaps works just about fine, as demonstrated by the popularity of naukri.com, monster.com, timesjobs.com, and several thousand others.
This particular business model Mr. Promoter told me about, seemed to be based on a reward system. How it works, is as follows. You are a good friend of mine. I know you’re looking for a job, so I get in touch with this company, and give them your cell number or perhaps your mail id. They get in touch with you, tell you that they’ll help you with getting a job. They ask you for your resume, and for the particulars of the kind of job you’re looking for, etc.
Now suppose they find a suitable opening for you. They put you across to the company, and in case you’re hired, obviously this firm would get their fee for helping them find a suitable candidate. Of that fee they receive, I would get a small percentage for the lead. Thus incentivizing me to refer more friends of mine for more requirements.
I tried discussing with Mr. Promoter, almost to the point of arguing. I just couldn’t see the future of such a business, and I wanted to make sure he saw my perspective. It appeared simple to me. I could of course, be totally wrong. I mean, that’s what the VC business, just like anything else, is about. It’s about perspective. I could have my views, Mr. Promoter would have his. The market and success or failure of the company would prove one of us wrong.
Anyway, so my points of argument were, that the higher the post, the higher the pay the firm, and in turn the person referring someone would receive. But, in the real world, you don’t really find a VP or CEO of a company referring someone to a firm. Right? I mean, who would have the time or the inclination for something like this. And at that level, one would have bigger things to worry about that trying to find people in order to make some quick bucks by way of referral.
So that leaves us with entry-level all the way to perhaps lower or mid-management candidates. Now most of them would anyway be registered on all the top job sites, where many if not most companies, would be tapping into, as one of their many sources for finding candidates. So that being the case, we can’t really expect a group of students from a college to refer each other to this firm in the hope of supplementing their pocket-money, eh?
So, anyway, I turned down Mr. Promoter’s investment proposal and even called him later to try to reason out that somehow, the business model didn’t seem to hold. He however, seemed convinced.
So much for one of the business models that puzzled me. The promoter and I have not been in touch since. And while I do hope he’s doing well, I am curious to know how his business worked out for him.
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