6 ways small businesses can reduce risk when it comes to hiring new employees

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6 ways small businesses can reduce risk when it comes to hiring new employees

Hiring always carries some risk, but a bad hire at a small business can be devastating. Here are six ways small businesses can reduce risk when hiring new employees.

Use referrals

Your current employees can serve as a screen to bring in candidates they think might be a good fit, says Bob Leahy, the executive in residence at Bentley University’s career services. “A paid employee referral program dramatically reduces new hire risk,” he says. “Existing employees are only going to refer someone they believe will be successful. The employee is not going to risk their reputation at work.”

Interview rigorously

It can be easy to have just the owner or CEO interview candidates at a small business, but that can be a mistake. “Having a number of disparate employees interview the candidate can go a long way to reduce the bad hire risk,” Leahy says. He recommends three or four employees from outside the hiring department should be involved as well to provide a 360-degree view of the candidate.

Consider background checks

A formal background check can bring to light information that a candidate might not volunteer. While it’s required in some positions, some small businesses use them routinely to get more insight about a candidate. “Background checks are a critical part of the hiring process,” Leahy says.

Check references

Ask for references — and then follow up on them to see if you can get some insight, says Mike Travis, CEO of furniture showroom Travis & Co. “The most effective way to reduce hiring risk is by doing a lot of in-depth references. References are widely neglected, and even when employers do them they are often treated as a formality. Doing them in a serious way is the most powerful hiring tool there is, and can make up for a lot of other mistakes,” he says.

Offer a trial period

Consider taking potential employees on a trial basis or as a contractor for a set period of time to see how they perform, says Nina Parr, co-founder of The Love Your Job Project. “Having them work with their potential new team to see how they interact, perform and fit in with the culture can be a great way to avoid long-term risk,” she says. “If you can pay them hourly for their time while observing them closely, it could be a recipe for recruiting success at your organization. This is becoming more and more popular since the cost of onboarding and training is expensive.”

Make expectations clear

Small businesses are strong on culture, and you want to ensure that your potential hire is a good fit. Make it clear what your company is like and educate candidates, says executive coach Alisa Cohn. “Prepare a Top 10 list about your culture — the dos and don'ts of the informal underground way that works gets done around here,” she says. “Proactively sharing cultural norms with them helps them figure out how to behave to fit in quickly.”

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