How To Get What You Pay For: Cost vs. ROI

Hiring talent at any level can be challenging. Even when they are fractional. How do you know what you need and who you should hire?

In any talent situation you are at risk of either over-hiring (Skills exceed the tasks) or under-hiring (Person is working above their skillset) In this episode, we will share our experiences and what we've learned about hiring, deliverables, and setting expectations.

Discover how to make sure you maximize results and save money in the long run!

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[00:00:10.10] - Alice

Hello. Welcome to Books in the Biz, a podcast that looks at both the financial and operational sides of success. Please welcome our hosts, Dan Paulson and Richard Veltre. Dan is the CEO of Envision Development International, and he works with leaders to increase sales and profits through great cultures with solid Valid operations. Rich is CEO of the Veltri Group and a financial strategist working with companies to manage their money more effectively. Now on to the Welcome back to Books in the Biz.

[00:00:46.27] - Dan Paulson

Alice, thank you. As always, our lovely AI assistant has helped us out. What can I say, Rich? What can I say? She's spot on every time.

[00:00:58.13] - Rich Veltre

Every time. Perfect.

[00:01:00.00] - Dan Paulson

It sounds like the same over and over and over again. It's almost like we planned it that way. But today, I guess today's show should be called Show Me the Money or You Get What You Pay For type thing. And maybe we use Alice as a good example. So Alice is, as we joke about, is our AI assistant. And we did go out and hire professional talent for this. And maybe our production quality isn't quite what some people's are, At that same point, we're looking to provide value in the message. We're not looking to provide value in the look in the field. But one of the things that popped up when we were discussing, well, what should we build this episode around? You have mentioned a couple of things related to, sometimes you hire based on price, you get what you pay for. And I think people need to realize that and need to understand what alternatives are and maybe like with Alice, where you need to invest the money to make the So with that, I guess, what was your thoughts on why we should talk about this particular subject around money today?

[00:02:08.24] - Rich Veltre

Well, I think that it's come across a lot of times where I've come into a client that it's said, this is what we expect. And it's a blanket request. And you realize that even when they're paying you, they're overpaying because they're not being very specific. So when you're not being very specific, it allows for people to interpret what they think you need. It falls back on that old school 40 hour work week. I just have to be at the desk. It doesn't matter if I'm actually doing anything. The efficiency quotient is not in the conversation where it should be. So I think it winds up where we, as process engineers, as that person who says, here's what your workflow should look like, We're seeing it as, wow, that's just a whole awful lot of waste. But I'd like to see that in the conversation more. And recent examples have just said, look, people are overpaying for stuff because I saw somebody yesterday posted this, and I'm going to steal it because she said it's called talent inflation, where basically they're saying that somebody comes in and basically says they can do something, but they actually They really don't have the experience to be able to do that.

[00:03:32.22] - Rich Veltre

But then if you don't really be specific and test that the person you're hiring can actually do what you want, then they're going to run amok because they're going to go and get that experience and be able to say, Well, this guy hired me to do that, and therefore, I must have the experience. But they didn't actually do the work, so they don't have the talent. I think that's where this conversation has evolved from, that this is what's going on, that people are basically inflated inflating their title and not so much their actual experience. So you're going to overpay for that if you're not paying attention.

[00:04:08.09] - Dan Paulson

Well, and I would say on the other side of this, because I know you and I have both been in the situation, too. So this isn't something that we're saying is everybody else, and we've never had to deal with this problem. I can think of a couple of situations where I was brought in to do some very specific tasks, but maybe the owners weren't quite as... They They didn't have this clear of a picture of what they wanted as they thought they did. And even though you try and draw it out of them, there's still a lot of this... If there's one thing I've learned about business owners, especially entrepreneurs for small to medium-sized companies, is they want a lot of freedom in their ability to make decisions and change their mind. Heaven forbid, they commit to a direction and stick to that direction to get the the ultimate results they're trying to achieve when they can say, well, if I'm not comfortable with it, I can I can create an out for myself and then go a different direction. And that's something I've experienced where I'll be asked to do something. And I'll be, again, like you talked about, giving a lot of latitude to how I go about getting that outcome.

[00:05:14.28] - Dan Paulson

But with that comes, okay, business owner, you're going to need to do X, Y, and Z to support this, or we're not going to get the results. And then, of course, you move along in weeks and months, and they change their mind or change direction. And now So here we go again. There's one client I can think of. Every 2-3 weeks, we're going to do this. I invest full head on into getting those tasks set up and trying to work with the team. We're not going to do this. We're not going to do that. Two or three more weeks. We're not going to do that. We're going to do this. And kept bouncing around. And I could have probably been a lot more effective in some ways had he agreed to, this is the outcome I This is why I'm willing to invest to go get there. This is what I need help with because I either can't do it or don't want to do it. And you just make it happen. And really, when you're looking at a fractional person, that's what you need is if you're going to give them the latitude to do that, you need a very clear and specific outcome that you want.

[00:06:21.00] - Dan Paulson

And then you also need to stick to that. And when things get a little bumpy, you can't just go, well, that's not going to work. So we're going to go a different direction. I mean, there's times when you need to know when to pull the plug, but there's also times when you got to get through that change process to get the results that you're looking for. And when employees start pushing back or when, again, the owners realizing it's probably going to be a little bit more work on their part than they wanted it to be, that's where I see the issues coming in.

[00:06:47.11] - Rich Veltre

Yeah. I had also, like you said, I had similar situations where someone says, oh, I'm bringing you in to do CFO work, and you're going to help us build this model, or you're you're going to cover the chair, right? Until we actually get our full-time person in there. And then you walk in and you're like, okay, well, who's my team? Well, there is no team. You're it. You build the team. So I'm paying the bills, too. So I'm doing the bookkeeping. I'm doing the recording. So you're doing all these accounting tasks. So none of that really was the CFO chair.

[00:07:24.28] - Dan Paulson

Right.

[00:07:25.17] - Rich Veltre

So you weren't specific about what you wanted. Okay, I'm at this level where after 30 years, I expect that I should be able to help you do X, Y, and Z. But then when you asked me to do something that I could have done the day I left school, you're overpaying me. So again, we get back to that, the payment level, like realize what you just asked for. Like learn from what you just asked for. But they won't because they're going down that same old, have somebody at the desk. That's all we know. That's all we need. Well, if If you dig a little bit down to the next level of detail, you could have saved yourself a lot of money by bringing in more than one person, as opposed to putting one person in there just expecting they're going to work 90 hours a week to cover you until the new guy shows up and builds his team. Well, I can't do that whole job because I don't have the team, and I'm not allowed to hire anybody. Even if I did, I'd have to train them my way, and you got a new guy coming in.

[00:08:30.04] - Rich Veltre

So it's not one transition. You're actually creating almost two.

[00:08:35.24] - Dan Paulson

Well, and here's the other thing with that. You talk about, well, they need to hire people, hire staff. Maybe they get to a point where, okay, I'm frustrated with Rich because he's doing all this other stuff, and he's telling me, I need to hire more people. I'll just find somebody who's less expensive, and I will hire them to do the job. And then we also run into a situation where now they make that hiring decision, but they didn't vet that person out fully, and now they're not capable of doing the job. Yeah.

[00:09:06.03] - Rich Veltre

This specific example I was just talking about, that's what they did. When the new guy showed up, he immediately saw the need. He needed somebody. And I told him this was what's going to happen. I said, the new guy is going to come in. He's not going to want to do half of this stuff, and he's going to want to hire somebody. And he did that. And it was a bad hire because there was the talent inflation, right? Yes. I don't know what she was because she came in. She had a great attitude. They hired her, I would think, because of her attitude, that she was a go getter. She wanted to do all this stuff. When it got down to the time of actually understanding that her job was to do accounting work, bookkeeping work, it fell apart. She was starting to show that she had absolutely no concept of what we were asking her to do. And it just became one of those things where you just You just knew it was a bad hire, and you said, got to cut this one and get to a new person. But that becomes the embarrassment move.

[00:10:10.18] - Dan Paulson

Oh, yeah.

[00:10:11.12] - Rich Veltre

Because now they don't want to because it's embarrassing to be able to say, I hired someone and I have to let them go inside of a matter of weeks. And yet, if you hang on to them, the damage will be bigger than the embarrassment.

[00:10:24.28] - Dan Paulson

Yeah. Well, I've seen it a lot. Hire fast, fire slow, because they've made that initial commitment to hire somebody. And well, I live here in the Midwest. I know you guys out on the Coast tend to be a little bit more to the point on some things. But out here, we have a lot of Midwest nice that goes on. So if they've made the investment to hire that person, well, they're going to give them every chance to succeed. Now, in most cases, I accept that philosophy. I actually think that's good. But if you didn't do your checks and balances in the beginning, you just trusted a resume and some basic questions and didn't really find out how good they were or didn't put them on some, I'll call it probationary period because that's just what it is. It's really hard to determine if they got the capabilities to fulfill what you need. And then you hire that person and it's like, okay, they're not going to work out. We're going to make some investments now to try and get them up there. We're going to hang on to them. Maybe they just need more time.

[00:11:24.23] - Dan Paulson

And pretty soon, 2-3 years have gone by. And depending upon the level of position, how many tens of thousands or hundreds of thousands of dollars have you paid in salary and benefits and everything else, only to find out that in the end, one or two things happen. Either that person gets really frustrated and they quit, which is what most of them hope for, is that the person will just resign, they'll walk out the door, and they don't have to confront them that way. Or you reach a breaking point where then it gets ugly, and then you have to let that person go. Usually it ends in one of those two scenarios. I really see an amicable split one way or the other when it comes to these situations. So it is a bit of a challenge to get owners to see that and understand and realize that making the investment up front, taking more time, more diligence, even if it takes longer and it's harder to find the right person, produces a better result. Because I'm trying to remember what I used to use this analogy all the time, but I believe the statistics said it was about two and a half times salary when you hire the wrong person.

[00:12:33.20] - Dan Paulson

So let's say you hire them for $100,000. It costs you about $250,000 in that first year. If you hire the wrong person, have to let them go and then have to repeat the process. So when you talk about hiring and firing, it's not a cheap proposition. And you know this from the financial side. There's a lot of investment that goes to finding the person, getting the person, negotiating the salary and benefits and then putting them in position. And oh, by the way, there's that ramp up period where they're not going to be productive. And that's anywhere from six months to a year before they're truly in a productive position in the company. Because that first six months, they're just Like you, trying to figure everything out how it works. And if you're a whole new person in a whole new department running it yourself, you pretty much have to create the process on your own. And if somebody else was in there and there was no handoff, then you're completely changing process disease without any reason.

[00:13:33.11] - Rich Veltre

Yeah. I'm 100 % for training, having a training period. The basics have to be there. And if your interview process only identifies the fact that this person has a good attitude or a good go-to, let's get this done, the whole ra-ras, Maybe that's okay as long as you can at least tell me that in the interview, you figured out that they had the skill.

[00:14:07.18] - Dan Paulson

Yes.

[00:14:08.17] - Rich Veltre

If they don't have the skill, them being ra-ra, it doesn't matter, especially in a really small team like that. There was no team. She was the team. She had to be expected to be able to pivot and do a bunch of different things at different times and be a self starter. If she had to ask how to do something on everything if you had to do, there was no way anybody else was getting anything done. You were still in the position of doing what I was doing, which was do everything. There were a lot of things that didn't get done, and I got blamed for it, but that's because they didn't realize that I was doing all this other stuff. And now, when I stop doing that because I'm not there anymore, I don't know what happened, but I can only imagine what happened when I wasn't there to pick up the pieces and fix the accounting, which the accounting The accounting side of it, especially in the CFO office, the accounting side of it is the foundation. You need to have somebody there telling you, Look, we did it right. We did it according to the workflow.

[00:15:10.26] - Rich Veltre

We did it according to the plan or the company policies. And therefore, you're good to make your decisions based on the information we handed you. So I was doing both sides. So I could tell you that every decision I made was based on what I had done. So I was comfortable that I was okay there. But the new guy, he had to rely on her. There's no way that he didn't have to fix everything at some point.

[00:15:40.00] - Dan Paulson

The main reason for your situation is there was no handoff period, correct?

[00:15:44.11] - Rich Veltre

There really wasn't a handoff period, not at all. Me handing off to the new guy, month, maybe, somewhere in that range. But there was no one underneath. It was essentially, I was expected, or I was expecting someone to come in and take everything off my plate, and that would be my exit. So the fact that she didn't have the ability to take it off my plate, I don't know what she actually did. I'm not 100% sure what she accomplished. When I left, there were things undone that I was like, that's going to come back to haunt me. That's really going to come back to haunt. But it's not going to be me because I'm not here.

[00:16:21.28] - Dan Paulson

Right. So our takeaway from this, because as we're sitting here ranting about these situations, is we had to learn And I guess I'll start with you. What did you learn from this process that is essentially something we're trying to tackle going forward with XCXO?

[00:16:42.29] - Rich Veltre

I learned that it more than likely was my spot where I realized that hiring one person to throw them into the old school, as I said before, where they're sitting at a desk for 40 hours, isn't necessarily Not necessarily the most efficient way to do it, nor is it the most... Efficient is a good word, but I think the other thing is, I think sometimes it's better to have more than one mind. So even if you don't have it for 40 hours. I'm not asking people to go out and hire. You need to hire five people for 40 hours a week each. I'm looking at it as different skill levels can work off of each other, can learn from each other. And I think that if you really looked at the tasks that you want, you can hire a varying level of people and really get a team that's going to give you what you were asking for. What you thought you were asking for in one person, ask for it for three fractional people, and what winds up happening is you got everything covered. You got all your bases covered, and it probably cost you less.

[00:17:51.29] - Dan Paulson

That right there is the key.

[00:17:54.09] - Rich Veltre

So that's the thing that I think. Instead of sitting there saying, I'm just going to hire somebody higher up, which I've seen people do. They've said, if I hire somebody higher up, they have the ability or they have the skill level to do the lower level, but you're paying for it. You're paying for the lower level to be done by somebody higher up, and you're tying them up at the lower level task. The higher level task is the one that suffers.

[00:18:19.19] - Dan Paulson

And it's the higher level task that gets your company to move forward in sales or profitability or efficiency. So when you're hiring fractional, it's not just hiring that individual. You also have to look at the overall impact on your department, your division, your entire company. And to me, that was the learning lesson in my experiences with this, is there needs to be a lot more It's one thing to say you want a fractional person. It's another thing then to understand the commitment to that. Kind of like getting a puppy. If you get a puppy, while the puppy is cute for a while, but eventually the puppy needs to eat, it needs to be potty trained, There's a lot of stuff that needs to go on in that. And if people just jump in because it was a cute idea, this is why animal shelter fills up, right? Because they didn't realize that there was all this extra work that they had to do to make that puppy perform the way they wanted to. It's the same way from an employee side of things. If you have specific tasks that need to be done, great. We can find ways to get those tasks done.

[00:19:26.13] - Dan Paulson

Beyond that, when it comes to the big picture growth, they're And it also needs to be an investment in that individual that has the capabilities and power to do that. And they need to work hand in hand with the owner, which to me, the big thing is the owner needs to commit to what they want to do. And as we're coming in here with XCXO, that's a big discussion that we have with the business owners is, okay, what's the outcome you're looking for? How are you going to get there? And by the way, when we go down this path, here's some things that you can expect to happen over the course of the next year or two. Are you fully on board to do this or not? Because if this is a, well, we'll try it for a couple of months to see how it works out. Unfortunately, that's not going to produce the results you want. We can lower the cost of the engagement by not having somebody in there full-time at a salary of what a CFO or a COO or a CMO or whatever would be making, mainly because you probably don't need them that much, but also because there is going to be demand on salary and benefits and incentives that are you going to be comfortable selling that out?

[00:20:36.07] - Dan Paulson

And if that person can work for you for a quarter of that time, and then you can hire other people then to do the tasks that need to be done, and that person oversees it and helps build those systems, It's going to be a hell of a lot more effective than just going to say, well, I need a CFO, and he's going to do everything from the bookkeeping all the way up to the strategy development for me.

[00:20:55.11] - Rich Veltre

Yeah, I think the key for us and the key message that we're trying to push to these people is exactly what you said, that it's task-driven, not title-driven. It's not being at a certain chair. It's understanding that this is what has to get done. Somebody gets it done. I got what I needed. So I got what I needed, I got what I paid for. So there's an equivalency there that comes out of it, and that leads to the efficiency that we've been talking about.

[00:21:28.02] - Dan Paulson

Exactly. Exactly. So I think that is pretty much good explanation of what we've been talking about here. So the takeaway for me, I guess, is you can pay too little for something and get a poor result, in which case you're going to have to redo it. It's going to typically cost you 2-3 times more to do that. You can pay a whole lot for something and think you're getting what you need, but actually now you're overpaying. So somewhere you got to find that balance in the middle. How about you? What's your thoughts?

[00:21:58.23] - Rich Veltre

Yeah, I I think that the imbalance to me is I can see it. I can see it all the time. I can see this imbalance that I'm trying to see that this is going to be something that I'm going to use to get back to that balance. And I really do believe that it's finding out that it's task-driven and realizing that there have been so many people out there that are so stuck in the way things were done before. And now there's a growing amount of technology There's a growing amount of knowledge that all can be used to fulfill tasks. And I think that people need to get out of this stuck mentality from before and get into understanding that this is what I need to have done, which is usually a key piece that they don't understand what they need to have done. But let's assess it, come up with the task, get you the right person that can get it done quickly and the right way, and they don't have to be a lingering burden in your business.

[00:23:00.01] - Dan Paulson

And And then the communication part of it. So stronger communication. So you know what's going on, you know what to expect, you know what's going to be expected of you. So that way we can achieve the results. And also that open communication when things do run into a hiccup. So you don't feel like you're spinning your wheels or wasting your time. Sometimes you just need to get over that next hurdle. And that's really what our advisors or our associates are there for. So that said, if you want to learn more about XCXO, I would encourage you to schedule an appointment. Go to XCXO.XET if you don't like talking to me and would prefer to talk to Rich, Rich, how do they get a hold of you?

[00:23:37.12] - Rich Veltre

My email is rich@xcxo.net, and that's usually the best way to get me.

[00:23:42.26] - Dan Paulson

And if you prefer to get a hold of me for some reason, you can get a hold of me at dan@xcxo.net. Rich, this has been hopefully fulfilling for some of the people that are listening here, and maybe they will choose to contact us to make wiser decisions on how they spend their talent dollars on getting their work done.

[00:24:02.05] - Rich Veltre

Sounds good.

[00:24:03.03] - Dan Paulson

So we'll now let Bob talk about how great we are, and that will be the end of it. We'll talk to you next week.

[00:24:08.29] - Rich Veltre

All right. Talk to you later.

[00:24:09.20] - Bob

Want to boost your sales and profits but need the talent to help you grow? Xcxo is a one-of-a-kind platform to find skilled fractional executives to help develop your team into a high performance powerhouse. Fractional leadership is a great choice when you consider the average executive level candidate can cost you hundreds of thousands of dollars in salaries, benefits, and incentives. Xcxo finds you the executive and utilizes their talents to build your team's experience, all for a fraction of the cost of a full-time C-suite leader. Contact XCXO today to fill the gaps in your leadership team. Visit xcxo.net to learn more.