Chris Bjorklund: Do you know which of your employees are contributing the most to your bottom line? Hello and welcome to the AllBusiness webcast. I’m your host, Chris Bjorklund. In this program, we focus on how you can cut your labor costs and improve employee productivity at the same time. The key is to evaluate your existing employees, terminate those who aren’t performing and then identify and hire the right people going forward. There’s no better time to reorganize your work force to identity those employees who aren’t performing and replace them with those who will. So let’s get started. First, what’s the best way to evaluate your current team? Rieva Lesonsky, CEO of SMB Connects and editor at large for AllBusiness says, you begin by separating your employees into four groups.

Rieva Lesonsky: You should evaluate your A people, separate them out. These are your best employees. You don’t have to worry about them but you do have to reinforce to them, tell them they’re doing a good job, occasionally reward them, buy them lunch, give them twenty bucks, here’s something’s special, go out, thanks a lot. The B group, they could be A’s. There are some people in the B who may someday get to be an A. Chances are, they’re always going to be solid performers so if you’re doing okay, keep your B’s. You don’t have to necessarily give them extra but you do have to tell them that they’re doing a good job but also tell them where they can improve. That’s really important to B people because you have to keep them motivated. Employee reviews are good part of this. I actually don’t believe in doing them just once a year because I think people will fill their form; you fill out their form. I think you have to constantly kind of informally review people. The C people, here’s where you start getting into trouble. You really have to break your C’s into the ones who you think have potential to one day be a B or the ones who you think are just going to maintain that C performance and eventually, you’re going to have to get rid of them because they’re not really helping you do anything. If there are jobs that you have and very few entrepreneurs have this kind of jobs where it doesn’t really matter if things can just get done, you may be able to maintain life with a C person, so I think you look at your C’s, give the high performing C’s, help them along, give them a lot of feedback. Ask them, “What do you want to do? What are you comfortable with?” and constantly talk to them to help them be the B and then at some point, you might want to say to the other C’s, “You might be happier elsewhere.” And the D’s, if you’ve got a D person, you’ve got to have some plan in place to get rid of that D because that D person’s just going to weigh you down.

Chris: Another factor you should consider when determining which employees to keep is your ability to outsource their work. Many small businesses are effectively outsourcing their HR and accounting. For more on how to do this, we turn to small business expert Katie Ford. We asked Katie about when you should hire an agency to handle staffing needs.

Katie Ford: There are four situations in which it might make sense to use a professional recruiting or staffing company. The first scenario is if your hiring needs are cyclical. Perhaps you bring in a lot of temporary or seasonal workers on a regular basis. If that’s the case, you might want to delegate that function to a professional agency so you can focus on your business. The second situation is if you’re hiring needs are confidential. This would be if you’re replacing someone on staff and you really want to keep the hiring process under the radar. The third scenario is when you’re making a key hire and this position would demand some expertise that might be hard to find. Let the experts do that for you. The fourth scenario is if you’re an unknown company which is the case for a lot of small businesses. Sometimes when you’re a little-known company, it can be hard to generate a buzz and recruit talent. A professional staffing agency will have the connections to generate a steady flow of resumes.

Chris: If you’re like most companies, once you let go of your underperformers, chances are you’ll have the resources to hire a few key people. Be smart. Hire only those employees who will help you bring in additional revenue or better manage profit centers. These folks should quickly become your new A players. For an inside look at the hiring process, we got some advice from Michael Beardsley, managing director of Padilla Speer Beardsley, a New York public relations firm. According to Beardsley, the number one thing to consider with a new hire is whether they’ll fit in with your company’s culture.

Michael Beardsley: I think a sense of humor is a really important element when you’re hiring somebody. I generally try in an interview; I try to do some kind of test where I had to go, if someone says a joke. I will ask a dumb question or maybe it’s completely off the subject or I always try to have a social banter before we get into the serious questions because I think that’s really urgent and there’s a high stress that’s high energy and that requires an environment where it’s important for everybody to get along.

Chris: When making a new hire, it’s also important to consider character. To do this, Connie Hernandez of Reuse Concrete Ceiling in Overland Park, Kansas uses a rather unorthodox approach.

Connie Hernandez: I think from my point of view, the most valuable questions are where do you expect to be in the future? If you can see whether they have a vision for their personal life, if you get people who say, “I don’t know, I guess working.” They don’t have a very long-term view, they don’t have much investment in themselves so how can they possibly invest in the position that they work for? I read an interesting thing the other day. A guy said that when he hired people, he always took them out to eat because he could tell more about them by the way they treated the wait staff than any other thing that they did. If they were rude to the people that waited on them, they were going to be rude to the customers. And I thought, “Boy, that’s really…you know.” So I think observing the way that they behave to the other people in our office is a very valuable indicator of what kind of character that person has. And I think character is one of the most important things to hire for. You can teach them how to do the job but you can’t teach them character.

Chris: So that’s our program for today. Next time on Thriving in Tough Times, we’ll explore ways to improve your business’ cash flow management techniques. I’m Chris Bjorklund for AllBusiness, thank you for watching.