Today I’m going to share with you a secret for getting more value than you pay for when hiring someone.
All else being equal, someone with more knowledge and/or skills (i.e. someone able to complete more tasks) is more valuable to you than someone with less knowledge or fewer skills. If you have Applicant A and Applicant B, and they’re identical in all ways except Applicant A can make a spreadsheet and Applicant B can’t, then Applicant A is a better hire for the same money.
Now, let’s do a little math. Let’s say that your time at your company is worth $100/hour. Anything you do needs to, on average, be generating that much revenue or you’re making bad business decisions. You shouldn’t wash the windows at your own company, because you could hire someone to do that for $15/hour, and you could spend the same hour making $100, and thus you’d be $85 richer by hiring someone else.
Now let’s assume that you need to hire someone to do 5 different tasks, and it’s reasonable to roll them into a single position. While you could do the tasks yourself, it wouldn’t be efficient for you to do so, for the reason described above. You know these tasks very well, so you’re hoping to find someone who could do them at least close to as well as you could. You find such a person, and the market rate for them seems to be $60,000/year. Let’s call this person Amy for ease of the hypothetical.
Simple so far, and I probably haven’t said anything you didn’t already know. But now, let me get to the secret.
Let’s say instead of that person that knows those 5 tasks, you find someone who doesn’t know them. Call them Evelyn. Evelyn is in every way identical to Amy, except she doesn’t know those 5 tasks. But she has the same level of general intelligence, character, initiative, etc. So clearly she’s capable of the tasks, she just doesn’t have the knowledge. Because she knows fewer skills, perhaps because she’s earlier in her career than Amy, the market rate for her employment is only $40,000/year.
You are, personally, an expert on those 5 tasks. You could teach them to Evelyn, it would just take time. Many people think they should hire Amy – but if you can teach those skills to Evelyn, you’d be crazy not to hire her.
Why? Well, consider: If you can teach all 5 tasks to Evelyn in 100 hours, you’ve spent $10,000 of your own to do so – but now you have someone working for you for $40,000 a year who is worth $60,000. You’re $10,000 richer in the first year alone, and every year after you’re $20,000 richer. It involved a little more up-front investment of time and energy, but the end result was huge value.
“But what if Evelyn takes these new skills and then leaves for a $60,000/year offer?” Guess what – she will. Eventually. But she won’t do it in the first year, or probably even in the second or third, if you’re treating her well. And if she leaves after the third year, you’ve made $50,000 hiring Evelyn over hiring Amy, and you can do the same thing again with your next hire. And of course there are a hundred other confounding factors that could change that – a raise of $5,000 in her second year makes Evelyn very happy and still keeps her well below what you would have been paying for Amy. Plus, it should never be discounted that you get a lot of loyalty by investing in your people early. It pays dividends.
Why don’t more companies do this? Because this, despite its long-term value, is hard in the short term. You have to have foresight to make hires before they’re emergencies so you have time to train. You have to be willing to put the effort in to train someone. You have to be accepting of some risk. But these are the practices that build empires. And who doesn’t want a good deal on their empire?