This week marks two years as an entrepreneur, two years since I packed up my apartment in New York and moved back to LA to pursue the dream. I’ve learned way more over the past two years than I could ever cover on this blog. But I’m going to try to boil down what I have learned about starting a business into three simple principles – People, Process and Persistence.

Today we will cover people.

“If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don’t have to manage them.” Jack Welch

When I started this journey I believed that the harder I worked the better I would do. I’ve found that there is no greater illusion for an entrepreneur. Building a business takes hard work, sure, but hard work alone is no guaranty of success. In fact, I’ve seen many an entrepreneur, myself included, waste hours, weeks, even years on “hard work” when they should be delegating, taking a vacation and getting perspective.

People who are hard workers make great employees. They don’t make great entrepreneurs. I was a hard worker two years ago. Coming off an investment banking job it was what I had been trained to do. But I’ve changed. I’ve learned that as an entrepreneur it is much more important to be a hard motivator and have a keen eye for talent.

People are everything in business. If there is one lesson you need to learn before becoming an entrepreneur its this – you are only one person. No matter how good you are at financial modeling, database design or writing creative briefs you will only ever be able to do the work of one person. So rather than stubbornly doubling your working hours to scale your business, step back, hire and train. I assure you that you will run a leaner, more effective and profitable business if you hire two people to do whatever function you need done for 40 hours a week a piece, than you will if you stubbornly insist on putting the 80 hours of work yourself each week.

I give you this assurance on one condition – you pick the right people. Over the past two years I have built a business of over 100 people. The cause of my greatest successes and my greatest failures have always been people. My people have built this business. They have established more efficient processes and procedures, design innovative and creative approaches for our clients, and have even volunteered to cut their own benefits to enhance the firm’s bottom line. But people have also burned this business. Altogether people have cost the business well over $50,000 and those are just costs that can be tracked to egregious acts of negligence.

So here are my rules about people:

1) Always Go With Your Gut: If you get a strange vibe there is probably a reason for it. Never hire someone who triggers the warning signals of your intuition. First impressions aren’t always correct. Sometimes the person you are interviewing is having a bad day, or maybe you are having a bad day. But you are operating in an information vacuum and have a time line by which you need to hire someone, so cross the one’s you don’t like off the list and move on.

2) Get a Second Opinion: This applies to hiring and firing decisions and things as simple as day to day business interactions. Always, always, always have someone else chime in before you make a decision. We are all vulnerable to the perspective of our own egos. Often someone will rub you the wrong way because they challenge a decision or object to something you did. In these cases that person may actually be doing what is best for the business. So check your ego at the door and ask a partner or manager to assess your feelings.

3) Carry a Big Stick: If you tolerate mediocrity you will build a mediocre business. Demand the best of your people and clearly outline the consequences if they don’t deliver. Try your best to quantify this – sales numbers, project deadlines, etc. You should be able to quickly identify underperforms and let them go. A tougher situation arises when you have a star who stops delivering. In these cases take the time to talk to the employee. Small changes can go a long way. But generally if they have lost motivation, bored of the job, they ought to be removed quickly. Negative energy is infectious, and wasting money on people who aren’t producing isn’t a luxury most businesses have.

4) Inspire: All the latest neuroscience has proven that feedback doesn’t work so don’t waste your time (for more on this read: Management Rewired). What does work is inspiration. People want to be part of something bigger than themselves, they want to be part of an important narrative. Great CEO’s are often great storytellers who conceive of a world in which their company is wildly successfully and accomplish it by convincing their employees that it’s a reality. It’s a game of make believe…until it comes true. Write your companies narrative and tell stories sticking to it weekly.

5) Incentivize: While, everyone wants to feel like they are part of something bigger, everyone also looks out for their own self interest. If you give them the ability to earn extra money, praise or benefits in exchange for delivering, their overall productivity will increase dramatically. People will tell you that they will work hard for you no matter what, but when they are sick, demotivated, and angry at you what will keep them going to the thought of a bigger paycheck to bring home to their family.

Finally, remember that building a company is the closest experience you will ever have to building a family. You will go through great times and wretched times with your people. Be transparent. Be kind. Be loyal.

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