WEEK 7 : MARCH 2

1. WEEK 7 : MARCH 2 MBAX 6860 : Bootstrap Tactics for Entrepreneurs • BOOTSTRAP HR BOOTSTRAP

2. OVERVIEW • How to Hire • Interviewing • Employee vs Independent Contractor • My take on it… • Week 8 BOOTSTRAP

3. ACCOMPLISHED TO DATE: • Business Formation • Bootstrap Founders • CI / Research • Bootstrap Finance • Bootstrap Marketing • Bootstrap HR • Bootstrap Sales • International Bootstrapping • Bootstrap PR • Lifestyle Business • Bootstrap Ops • Bootstrap Leadership BOOTSTRAP

4. HOW TO HIRE • Figure out job functions, skills, to ask specific questions • Ask culture / behavioral questions • Ask what makes them mad • Ask what they liked about their last job • Characteristics of the best supervisor they ever had • Ask open-ended questions • Listen for cooperation, especially if position requires it. • Only job-related questions • Is there anything about you that would prevent you from performing these duties? BOOTSTRAP

5. INTERVIEWING • Interviewing steps • Pre-interview preparation completed • Candidates ID’d, pre-interview questionnaire… • “Green room” atmosphere, look-n-feel • Formal introduction – the hand-shake • The interview location environment • Meat of interview • The salutation • Interview completed, hiring process continues • ….it all matters!…. BOOTSTRAP

6. INTERVIEWING • Know what questions, by law, you cannot ask • Age • Race • Marital status • Pregnant? • Religion, etc BOOTSTRAP

7. INTERVIEWING • How to ask the “right” questions • In direct alignment with job duties • In direct alignment with company culture • IBM, formal business environment? • Birkenstocks and hacky-sack environment? • Open-ended • Behavioral based • Probing BOOTSTRAP

8. EXAMPLES OF INTERVIEW QUESTIONS • John Discerni , CEO, Physicians Formulary International, a wholesale pharmaceutical company in Phoenix with 1998 revenues of $18 million. • What he asks: "What's the last book you've read?“ BOOTSTRAP

9. EXAMPLES OF INTERVIEW QUESTIONS • John Discerni , CEO, Physicians Formulary International, a wholesale pharmaceutical company in Phoenix with 1998 revenues of $18 million. • What he asks: "What's the last book you've read?“ • Why: Discerni says that it's not what they read so much as the amount of time it takes for them to answer the question: If they have to think a long time, they probably aren't that well read. BOOTSTRAP

10. EXAMPLES OF INTERVIEW QUESTIONS • Tony Petrucciani , CEO, Single Source Systems, a systems integration company in Fishers, Ind., with 1998 revenues of $6.5 million. • What he asks : "Why do they make manhole covers round?" BOOTSTRAP

11. EXAMPLES OF INTERVIEW QUESTIONS • Tony Petrucciani , CEO, Single Source Systems, a systems integration company in Fishers, Ind., with 1998 revenues of $6.5 million. • What he asks : "Why do they make manhole covers round?" • Why : "We ask this of potential developers to see if they get flustered, and how they think on their feet," says Petrucciani. (The answer: Because covers of any other simple geometric shape could fall through.) BOOTSTRAP

12. EXAMPLES OF INTERVIEW QUESTIONS • Robert Baden , CEO and president, Rochester Software Associates, a software developer in Rochester, N.Y., with 1998 revenues of $5 million. • What he asks : "If I stood you next to a skyscraper and gave you a barometer, how could you figure out how tall the building was?" BOOTSTRAP

13. EXAMPLES OF INTERVIEW QUESTIONS • Robert Baden , CEO and president, Rochester Software Associates, a software developer in Rochester, N.Y., with 1998 revenues of $5 million. • What he asks : "If I stood you next to a skyscraper and gave you a barometer, how could you figure out how tall the building was?“ • Why : The answer: Well, there really isn't one. Baden just wants to see how creative people are. According to company lore, one interviewee responded that he'd find the building's janitor and then offer the janitor the barometer in exchange for information about the building's height. BOOTSTRAP

14. CONTRACTORS vs EMPLOYEES • Independent contractors are good for bootstrap entrepreneurs • Tax advantages • Legal employment law advantages • Be careful not to treat an employee as an independent contractor! • Have contractor sign an independent contractor agreement BOOTSTRAP

15. CONTRACTORS vs EMPLOYEES (IRS) • Reasonable Basis • There must be a reasonable basis for not treating workers as employees. For example, the employer treats certain workers as independent contractors because a significant portion of the industry in which the company operates also does so, or relied on a ruling from the IRS or legal or accounting advice familiar with the business. • Substantive Basis • Employers must have treated the workers, and any similar workers, as independent contractors. • Reporting Consistency • The employer regularly files Form 1099-MISC to report wages earned by an independent contractor whenever the amount exceeds $600 per year. BOOTSTRAP

16. CONTRACTORS vs EMPLOYEES (BEHAVIOR) • When and where to do the work • What tools and equipment to use • What workers to hire to assist • Where and how to purchase supplies and services • What work must be performed by a specific individual • What sequence to follow in performing work BOOTSTRAP

17. CONTRACTORS vs EMPLOYEES (FINANCIAL) • The extent to which the worker has unreimbursed business expenses • The extent of the worker's investment in the business, (the independent contractor usually has invested in tools, equipment, or education) • The extent to which the worker makes services available to the general market • How the business pays the worker • The extent to which the worker can realize a profit or incur a loss BOOTSTRAP

18. CONTRACTORS vs EMPLOYEES (CONNECTION) • Written contracts describing the relationship the parties intended to create • The extent to which the worker is available to perform services for other, similar businesses • Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay • The permanency of the relationship BOOTSTRAP

19. IRS QUESTIONS • The right of the employer to require compliance with instructions regarding working hours, how the work is to be performed, and type of equipment used; • Integration of the worker into the business; • The amount of training provided to the worker by the employer; • Whether the worker must render services personally (independent contractors can send someone else); • Whether the employer hires assistants for the worker; • Whether the employer and the worker have a continuing relationship; • Whether the employer has set hours of work for the worker; • Whether the employer requires the worker to work full-time or produce so much that the worker cannot work for others; • Whether the work must be done on the employer's premises; • Whether the employer sets the sequence of work to be performed; • Whether the worker must submit reports to the employer; • Payment at regular intervals, rather than by the job, tends to indicate an employment relationship; • Payment of the worker's expenses, including travel expenses, tends to indicate an employment relationship; • Furnishing tools and materials tends to indicate an employment relationship; • Investment by the worker in his facilities and tools tends to indicate that the worker is an independent contractor; • If the worker bears the risk of profit or loss from the job performed, that tends to indicate that the worker is an independent contractor; • The worker who works for more than one person or firm appears to be an independent contractor; • The worker who offers services to the general public appears to be an independent contractor; • An independent contractor generally cannot be fired as long as the result meets the contract specifications; • An independent contractor generally cannot quit without paying for failure to complete the job. BOOTSTRAP

20. MY TAKE ON IT… • Determine your strengths/weaknesses and likes/dislikes THEN fill the gaps • The old adage is true – “My team is the most important asset” • Act accordingly – time & effort, focus • Be diligent in hiring, but be equally as diligent in firing • 3 month trial • When come across amazing people, make a spot for them in your company BOOTSTRAP

21. MY TAKE ON IT… • Culture is critical – create the one you want deliberately and consistently • Events, language, rewards, meetings • Independent contractors are great for bootstrappers in the early stages • Your first few hires are critical • Culture impact, operational success, focus & direction of company BOOTSTRAP

22. MY TAKE ON IT… • Motivating employees, contractors, vendors, temp. help…with no money BOOTSTRAP

23. MY TAKE ON IT… • Motivating employees, contractors, vendors, temp. help…with no money • Good ‘ol Maslow – as a foundation • ASK!! Uncover what motivates each INDIVIDUAL and actually deliver • $Money$ doesn’t make top 5 / 10 on most employees list of motivators • Praise, interest, growth opportunity, recognition, control, make a difference BOOTSTRAP

24. WEEK 8 • Bootstrap Sales • Readings • Tasks • Motivating employees • Interview questions • Offer of employment • Midterm study questions posted – don’t wait until the last minute! BOOTSTRAP

25. “You may be disappointed if you fail, but you are doomed if you don’t try.” • --Beverly Sills BOOTSTRAP