Rally the Troops

Morale building on the cheap; hiring a manager

Chris Lyons

Q: Our small company wasn't able to give raises or bonuses this year, and we're looking for ways to boost morale without spending a lot of money.—Paul Brockmeyer, Chicago

A: That's a perennial question, but one even more entrepreneurs grapple with during an economic downturn. You may not be able to give bonuses, but you do want to make sure everyone who works for you feels appreciated. "It is much more about recognizing the good job an employee does than about the raise or bonus," says Ross Zimmerman, co-founder of Exequity, an executive compensation company in Libertyville, Ill.

The key is carefully managing expectations. Admit that the company has not had a good year and that you can't afford to give raises or bonuses. Tell employees your own compensation isn't going up either, if that is the case. And make sure you impress on workers that any future bonuses and raises will be tied to company performance.

Consider rewarding employees with everything from gadgets—a new laptop or iPod—to items such as airline tickets. Giving a valuable employee a prime parking spot might do the trick, or more vacation time or a flexible schedule. Just understand that what you are offering may be less welcome than cash. "You have to be careful about showing it as a complete trade-off, because people will say it is not the same," says Bill Coleman, senior vice-president of compensation for Salary.com in Waltham, Mass. Owners of public companies can award equity, and private companies could try a phantom stock plan, a nonqualified form of compensation that offers invisible ownership without actually giving away equity. When employees have skin in the game, they'll likely work harder to make the company successful again. That way they will profit, too.

Q: When do I hire my first manager and what duties should I should hand over?—Amaebi Digitemie, via e-mail

A: First, make sure you can afford to hire. A good rule of thumb is to have at least three months of that manager's salary already in the company coffers, says Mark Deo, executive director of the Small Business Advisory Network in Torrance, Calif. That said, the moment you expect significant growth in market share, profit, or innovation, it's time to bring in a professional who can handle the daily operations of the business so that you can concentrate on developing products and relationships with clients. "Your focus as CEO is to generate revenue," says David Allen, director of the Center for Entrepreneurship at Baylor University.

Begin by assessing what needs to be done to help your company grow. Create an organizational chart, detailing what roles each person in the company performs and what you'd eventually like your manager to take over.

The very first tasks you hand over to your manager, however, should be routine duties such as payroll, scheduling, and distribution. While learning the ropes, the new employee should shadow you through your day. "One of the biggest mistakes that owners make is they hire a manager and then think they can suddenly disappear," says Deo. "Spending time with your managers initially allows them to learn."

Once your new hire is familiar with the workings of the company, let him or her take the reins on streamlining operations, whether that's by creating new procedures during weekly staff meetings or resolving employee conflicts. As for how many hours you should spend with your managers, there is no magic number. You'll know it's enough when you can confidently step away from operations.

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