Build A Focused Firm with Hector Garcia, CPA

Learn how to transform your firm into the place accounting and bookkeeping professionals want to join.

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Thank you to our sponsor, Avalara! Avalara’s award-winning tax automation solutions help accounting practitioners of all sizes, from sole proprietors to Top 100 firms. Avalara simplifies sales tax compliance with real-time rates, automated returns filing, registrations, tax research and automated tax solutions for specialized tax areas. We live and breathe tax so you don’t have to. Learn more at Avalara.com/Accountants.

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  • (00:00) - Introduction and thank you to our sponsor, Avalara
  • (01:55) - Attracting and retaining talent
  • (03:47) - Separation rates (retention)
  • (09:58) - Cost of replacement and why employees quit
  • (17:48) - Thank you to our sponsor, Avalara
  • (19:05) - Attracting talent
  • (21:09) - The Golden Rule of hiring
  • (25:38) - How do you get a lot of candidates to choose from?
  • (32:13) - The importance of your BRAND
  • (34:16) - Positioning statement
  • (36:57) - The role of technology in attracting talent
  • (42:08) - Culture and brand
  • (45:42) - Hiring for talent and hard and soft skills
  • (49:05) - Context and habits
  • (52:58) - How to filter candidates
  • (59:57) - Compensation
  • (01:08:59) - Annual performance evalutations vs AAR
  • (01:12:28) - What about salary increases?
  • (01:14:23) - Wrap up and how to earn FREE CPE and where to find our next stream
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Join the Focused Firm email list to get notified of future streams and CPE courses:
https://go.earmarkcpe.com/the-focused-firm

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Get free CPE for listening to this podcast:
https://app.earmarkcpe.com/?course_id=11d08a91-988a-4465-8e0c-e974240b637d

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Connect with Hector Garcia, CPA:
Website: http://hectorgarcia.com
LinkedIn: https://www.linkedin.com/in/hectormgarciacpa/

Connect with Blake Oliver, CPA:
LinkedIn: https://www.linkedin.com/in/blaketoliver
Twitter: https://twitter.com/blaketoliver/

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Download the Earmark CPE App:
Apple: https://apps.apple.com/us/app/earmark-cpe/id1562599728
Android: https://play.google.com/store/apps/details?id=com.earmarkcpe.app

Creators & Guests

Host
Blake Oliver
Certified Public Accountant. Co-host of @cloudacctpod. Founder of @earmarkcpe. I have approximate knowledge of many things.
Host
Hector Garcia, CPA
Quick Bookkeeping & Accounting LLC. QuickBooks® Training Services. Business Consulting. Tax Planning. My e-mail: hector@garciacpa.com / office: 954-414-1524

What is Build A Focused Firm with Hector Garcia, CPA?

If you want to build an accounting or bookkeeping firm that gives you joy, you need to stop, and focus. Learn strategies and best practices for practice management and earn FREE CPE while you're at it!

Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Blake Oliver: [00:00:00] Hello and welcome to our series Building a focused firm with Hector Garcia, CPA. I'm Blake Oliver, your moderator for today's episode. This is the sixth installment in an eight part series, all about how to build an accounting or bookkeeping firm that gives you joy by focusing on what matters. We'll be going live for the next few Tuesdays at 11 a.m. Pacific, 2:00 pm Eastern. If you're on our email list for this series, you'll get an email with the link to each live stream If you aren't on that email list. Please go sign up so you get notified when we go live. You can do that at earmark CPE G-Accon numfocus. Thanks to our sponsor Avalara for making this series possible. Avalara is award winning tax automation solutions help accounting practitioners of all sizes, from sole proprietors to top 100 firms. Avalara simplifies sales tax compliance with real time rates, automated returns, filing registrations, tax research and automated tax solutions for specialized tax areas. We live and breathe tax so you don't have to. Learn more at avalara.com/accountants. Thanks to everyone who has joined us as we record live. Please chat with us and we'll answer any questions you have. Let us know what you think. We're eager to hear from you. Now let's talk about CPE. You can earn CPE for joining us today. This is a live stream and not a webinar, so it works a bit different. So pay attention. You're going to get an email after this live stream with a link to the course on the Earmark CPE app. If you don't have the app, you can download that on the App store. You'll click the link to the course, take a quick quiz and get your CPE certificate. Again, be sure to sign up to our email list to make sure that you get the link to the course when it is available. Now with that out of the way, let's get to our topic today, which is attracting and retaining talent. Welcome back to our host, to our host with the most, Hector Garcia, CPA.

Hector Garcia: [00:02:06] Thank you, Blake. We're going to share my screen, please, so we can go through the slides. So welcome to Build a Focus Firm. And this is part six of an eight part series. Today, we're going to talk about attracting and retaining talent. And if you've been following along, you've already heard or watched the first five. And this is a really important one because if you have a great firm with great clients and great pricing and you don't have any employees to do the work, then you really don't have anything, anything really, right? So that's a really important piece. You got to be able to attract and retain talent to be able to scale. So we're going to split this into three parts. First, Blake, I'm going to give you some statistics to understand where we are now and you can we can discuss some of them. And also it gives you a sort of an idea to like just how complex this area is of of attracting talent and, and, and having employees stay in your firm and that sort of thing. And then the second piece, we're going to split strictly talk about techniques on how to attract talented employees, how to attract people to come work in your firm. And then lastly, the hardest thing, which is to retain them and believe it or not, the retaining part is going to be pretty short because once you attract the right talent and hire, right, all you have to do is kind of just ride the wave, so to speak, because you've done everything right at that point.

Hector Garcia: [00:03:34] You just have to put a couple of really finishing touches at the end to maintain those employees happy, engaged and growing with your firm. So let's start with some stats. And Blake, you're going to find some of these pretty interesting. So according to the Bureau of Labor Statistics, business and Professional Services, which is the closest sort of general industry classification that accounting firms live in, had an average of 6,463% separation rate per year in the last couple of years. Separation rate means how many employees you lose or whether you fire them or they quit as a percentage of the net new employees that you hire. So can you imagine being in a place where out of every hundred new employees you you, you hire, you lose 63 of them. So that's just a really staggering statistic on how difficult it is to for people to retain employees just in that one year time span. Now, that doesn't speak to the average tenure. We're going to discuss average tenure. But just to give you a general idea of how speedy the churn is in in our industry generally, now, this business and professional services does cover a lot more things beyond accounting. And and statistically speaking, the more seasoned and more committed to a single sort of trait the employee is, the less of a churn there will be because people don't tend to jump ship from medical to legal to accounting and that sort of thing. Although there might be a small exception to the rule on the super high tech and super unicorn type of employees, that that jump from accounting to technology or to coding or to software development that we've seen in the last couple of years.

Hector Garcia: [00:05:22] And that could have been a COVID thing. This stuff, it might normalize in the next couple of years or it might get worse with AI and that sort of thing. So the past doesn't really indicate the future, but it gives you a general idea to where we are now. Now from some for some perspective, what that 63% means is that the the industry with the best retention per se or the lowest churn and the lowest separation rate is government at 19%. That means that only 19% of net new employees are lost in a government scenario. Now that could be because there really isn't that many other governments to choose from versus private private firms. So obviously there's less of a supply and usually people tend to be more. Um, sort of don't want to say content, but they just tend to just stay at that job longer per se. Now the worst is leisure and hospitality. Who's had the worst separation rate at 80%. So really difficult to retain someone and the national average is 46%. My contention is that accounting should be better than national average. So if you are somewhere in that 63% separation rate, that's going to be a really big issue. You should be in 40 around there. So you should not be losing more than four employees for every ten employees that you hire. You have any comments on that? Blake?

Blake Oliver: [00:06:49] I'm just really surprised at how different the separation rates are, right. Between government and leisure and hospitality. It's it's crazy. Um, but I feel like we could do better than that as professional services firms.

Hector Garcia: [00:07:04] Yeah, it was a funny statistic. So what I was doing the research on this is doing 2020 leisure hospitality had over 100% separation rate. That means that we're losing more employees that they could hire. And obviously we know and understand the reasons for that. But that just gives you an idea of how the numbers, you know, just just kind of confirm the truth that you're feeling about particular thing that you're observing in the real world. Now, another interesting statistic, it's also by the Bureau of Labor Statistics is that employees in management or professional occupations, this is more very much more specific to where we are and more of the more of the mid-level sort of senior employees have an average tenure of 6.2 years Now that's great. I mean, I think generally speaking, being able to keep an employee for six years plus, it's actually a really good thing. I actually happen to have two employees as well. More complex than that. But have I have two partners have been with me for over ten years, but I have two employees that have been with me for over six years. And I can truly tell you that the level of efficiency and productiveness from someone that's been there six years and ten years is night and day from someone that just got there. I mean, this is just naturally how things work. Now, employees in service occupations, we're talking about industry, you're talking about occupations mostly like sort of client facing type, just sort of customer service, that sort of thing. Have an average tenure of 2.8.

Hector Garcia: [00:08:33] So we can start inferring to, you know, the more you promote your employee, of course, the more you bring them up to management and the more you professionalize or bring up their, their, their position, their responsibility, the more they're probable to stay with you or they're going to stay with you longer. Another interesting. Statistic by Pew Research is that in average, 44% of employees between 18 and 34, and in accounting, we don't hire many 18 to 25 year olds per se, because we're waiting for people to graduate and that sort of thing. But this is a this is this is sort of the young professional crowd, but only 44% have an average tenure of three years or more specifically, specifically the 25 to 34 age, which is a prime young professional age. You know, just after college, just after a master's degree, whatever you want to call it, have an average tenure of 2.8 years. And I personally think that if you knew for a fact that this employee you're going to hire who's going to be a key employee is only going to be with you for. Three years or less, would you even hire that person? So even if you didn't know the future, you couldn't tell the future? Statistically speaking, a 25 to a 34 year old is really highly probable that they won't be with you past past that three year mark, which is really, really important. Now, according to a Gallup estimate, replacing an employee can cost you anywhere between half of that employee salary all the way to two times that employee salary.

Hector Garcia: [00:10:10] And I know that variability probably changes deeply across industries. But even just half the employee salary, if you think about it, you hire a $50,000 a year employee and they don't last you more than a year, That employee is really going to cost you $75,000 for that year. So it's not going to cost. It's only going to just going to cost you the 50,000 you pay them, but also that additional half, which could be training, retraining, whatever, you know, fixing their messes, picking up after the slack, whatever. Some states require you to pay, you know, whatever number of weeks or whatever if you if you get rid of someone. So those are basically the accumulated estimated costs for replacing an employee half to two times the employee salary. Now, according to multiple studies of the US Chamber of Commerce, the four top reasons why employees quit and this is in order is number one, is compensation. Obviously, most people want to go to another job to make more money, but lack of advancement, that's what I read between the lines. If I look at the research, it's not just not getting promoted, it's just not having the opportunity to be to be promoted. And that's a really important one because that we can control, you know, maybe we can't promote everyone, but we can create a system and an environment to make people feel that there is a process in place to get promoted or to get advanced. The second one is schedule flexibility. And obviously, you know, post-COVID, this this, this change quite a bit where people more and more people are demanding to be able to work from home or having work life balance, that sort of thing.

Hector Garcia: [00:11:43] The third reason is company culture, just like not feeling like they belong there. And that's a really important piece. And we're going to talk about corporate culture quite a bit because that to me is really important. And the last one is the relationship with your management leadership. Like just not having a good boss, someone one of one of these famous sayings or quotes, I don't know who attribute that to, says that people don't leave bad jobs, people just leave bad bosses. And that's very true. Like if you if people don't have a connection to their boss, leadership management supervisors, if they don't feel that that that that leader is adding to them, mentoring them, helping them grow or building them, they're just not going to feel a connection. And the only thing they're going to see is the negative stuff. You got to you got to stay extra hours. You got to fix this. You got to redo this. You got to talk to this client. That's a pain in the butt. But I still need you to do it because someone needs to talk to that client, that sort of thing. So that's a really important one to think about. So if you put those four reasons into context, then you start thinking, you know, as a, as a business, as a firm, what am I strategically building in order to balance these out? You know, so there is a system in place for advancement.

Hector Garcia: [00:13:01] So there is work life balance or schedule flexibility. There is strong corporate culture and hire the employees that feel that they belong or create a sense of belonging and building strong relationships between the employees and their supervisors. Now, what do all these statistics tell us? Well, definitely we can aim to be better than 64% separation rate. So and again, probably even aim for better than average, like, you know, under 40. And, you know, if government can do 19%, why can't we? I mean, government has to be like one of the worst places to work at. Again, maybe, you know, the grass isn't always greener. Maybe, you know, maybe that's true. Maybe it's awesome to be a government employee. Who knows? Maybe it's just tons of job security. But also, you know, do we want to be in an industry that that creates job security for the sake of job security? And that's kind of what what government does or you want to be in an industry that creates job security because, you know, you're a valued member of of the organization, you're a valued member of society, and you create value for the outside world through that person that you work with. And that's that's kind of the flip side of, of, of, um, of job security that I want you to think about. The other thing that I think this statistic tells us is the secret to having tenured employees is to track them into managerial or professional bass roles versus a more service based job.

Hector Garcia: [00:14:26] So like your service, more service based people are going to churn a lot more if you're not promoting them or putting them in a path for promotion. We definitely need as an industry, you need to have a sound strategy to keep people for more than. Three years or it will be very costly for us. And definitely this 25 to 34 generation or not technically not a generation, but this cohort is the hardest to to keep in. So we have to keep a strong mind. What is this 25 to 34 year old crowd want? I'm not sure. Is that the millennial? Would that be the millennials? Technically, you know, 25 to 34 year old today. So that being said, assuming they are the millennials, you know, I don't subscribe too much to millennials or this and millennials are that. And millennials are different than boomers versus this or Generation X. I don't subscribe to typecasting generations, but I think you do need to understand that they have that they could have a fundamentally different upbringing and point of view of the world that you could. I'm a generation X, so somewhere strangely between, you know, the people that that dominate this industry, which are the boomers, which are going to retire very soon, you know, according to statistics and the new comers, which are the millennials. So I'm strangely sandwiched in between. But it's important to to understand all the points of view. If you want to retain both the young and the tenured employees. Have any comments on that? Blake Yeah.

Blake Oliver: [00:15:52] I think the I'm 39, so that puts me on the bleeding edge of the millennial generation, one of the elder millennials. So the youngest are about, you know, 20, right? So even though in the press you hear Gen Z, Gen Z entering the workforce, really the people still entering the workforce are still technically part of that millennial generation. And I think one thing that defines us was. A lot of us grew up in the Great Recession, and we we saw our parents who had very what we thought were very secure jobs get laid off and no loyalty from the companies that they were serving for ten, 20 years. And so for us, the idea of working somewhere for life is not the same as it used to be. We're happy to change jobs. We don't have the same loyalty. And that's what you're seeing here in this data.

Hector Garcia: [00:16:51] Yeah, I think that before the millennials what most possibly, you know, some of the Gen Xers and some of the boomers work gave them purpose, you know, So the job that you had gave them purpose and the younger generation, I believe that something else gives them purpose. Maybe their purpose gives them purpose, which is a really complicated meta meta meta comment, a meta question, but their purpose gives them purpose and the job might just be a means to an end for them to be able to sustain themselves while pursuing their purpose. And that that fundamentally changes what your role as an employer is. It's just something to think about. That's not a place where I can tell you I definitely have an answer in, but I think this is something not discussed as often as it should. All right. So we're going to move on to attracting talent. But Blake, go ahead and let's give a shout out to Avalara. Yes.

Blake Oliver: [00:17:49] Thank you so much to Avalara for making this show possible with our financial support. Did you know that 52% of accounting practitioners from small to large still rely on spreadsheets and manual processes for sales tax compliance? It's time to stop and focus on automation. The Avalara for Accountants Suite empowers even the smallest practitioner to support clients tax compliance needs. All firms can benefit from their referral program. Simply refer clients to avalara and let them assist on your behalf for practices that offer direct compliance services. Use Avalara for accountants award winning tools to help you start or grow a tax compliance or CAS service expressly designed for accounting service providers with multiple clients. Solutions include real time rates, automated returns, filing registrations, tax research and automated tax solutions for specialized tax areas. Partner with avalara and grow your practice with efficient and accurate sales tax compliance while reducing risks for you and your clients. To learn more, contact Avalara at accountants at aba-liga.com or visit them at aba-liga.com Slash accountants. Back to you, Hector.

Hector Garcia: [00:19:02] Thank you. I want to share my screen again. Perfect. Thank you. So let's talk about attracting talent. So this is going to be the bulk of of of the presentation and the discussion today. And this is the most difficult thing for most owners of accounting firms. If you were to ask them, what have you struggled the most in the last couple of years, it has been this particular area of attracting talent. I would say that retaining talent is is a close second or possibly maybe retaining talent a little bit more than attracting talent. But I would say based on that 64% or 63% churn rate, I would say that retaining might be a even a bigger issue because you can attract talent by over promising. I mean, like any like I think most of you listening to this might have been in a situation where you've been over promised something by someone that pays you. And what I mean by someone that pays you. I'm going to say either a family member that asks you to borrow some money and they over promise on how quickly they were going to pay and how much interest they were going to pay, or maybe a client that over promise on referring you more clients or over promise on being easy or over promised on whatever or over promise on on, on actually paying, you know, and not even paying or of course an employer over promising about how much you were going to grow and learn and be amazed at the opportunities inside the organization and then quickly realize that it's not and sometimes maybe not quickly, maybe that 2.8 years average that we that we talked about earlier, which is kind of the average tenure of these 25 to 34 year olds or 25 to 34 year olds.

Hector Garcia: [00:20:44] So that being said, you could, you know, hack the attracting talent crisis by just over promising, but you're not going to retain them. And based on the fact that how much more it costs you to replace them, that's not going to be a good idea anyway. So we should attract the right talent. You know, fairly at the right amount, you know, with the right amount of promises, Right. So let's dive deep into this. First of all, the golden rule of hiring is a new employee can either add or subtract value from your firm. It's almost never I would say never is a neutral effect. So either add value where they produce more than what they cost. And this might be a year or two into their tenure, right? Or they subtract value where they cost more that that they produce. And this could be the first couple of years of their tenure. So and this could be whether they're a good hire or a bad hire. But at any point in time, your employee is only adding or subtracting to the value of your firm.

Hector Garcia: [00:21:46] So that's a really important sort of dichotomy to to to just keep in mind. But what this tells us is hiring, right, or not hiring at all, it's more important that just hiring to fill the positions. I think it's better not to hire at all and even reduce the number of clients or reduce the amount of scope for your current clients versus bringing in a bad hire. So I think that's I think that's a better, wiser decision than to just fill the position. A bad hire could cost you or other employees to work twice. You have to fix, you know what? They screwed up. A bad hire is harder and more frustrating to train, which could be time consuming to, you know, for team members in charge of having to train that person and you're taking away from product, you know, productive time, that hire can create a negative customer service that you might only be able to solve by by refunding. And because sometimes you really can't even get back from a really negative interaction. And finally, the worst is a bad hire can even expose you to to a lawsuit. So that being said, I don't want to scare you, but bad hires are more problematic than good hires. You know how they say, you know, two wrongs don't make a right, that type of thing.

Hector Garcia: [00:23:09] Yeah. So so you can have you know, I would say you can have three good hires and one bad hire can even take those three down. So like I would say, you know, there is there is a number of good hires that can absorb a bad hire or that can quickly oust the bad hire. But generally, you know, one bad hire in a small group, it could have a really big negative impact. So what this means is hire slow fire, fast, higher, slow fire fast. If you think not, being able to find an employee for your firm is costing you money, wait until you find out how much it will cost you to have a bad employee that you can't fire or replace because in some states you can just fire anyone. But in some cases you might be stuck with that person because they're managing a piece, a book of business that you that if you. Get rid of the employee. No one can manage. You have to lose the clients. You don't want to lose the clients, and you're sort of stuck in. It's like a necessary evil to keep that person, but it's a lot more costly to you in the long term. Not just monetary, just anxiety. And culturally, to have to keep a bad employee or a bad hire that you can't you can't replace.

Hector Garcia: [00:24:22] Now, what if you can't afford to, quote, hire slow people? Tell me. Oh, Hector, that's a that's a nice sounding quote. Hire slow fire fast. But I can't I can't afford that. I don't have six months to to filter someone and to and to just be very precise with the hiring. I need I need to fill that spot fast. Well, there's two things I would recommend. If you do want to somehow be able to hire fast, let's call it and correctly. The first one is you need to have a lot of candidates to choose from so you can essentially get your pick of the litter right. The second one is to have a great filtering system to get through them fast, because in this environment where it's hard to hire people, if you take, I would say three weeks after you interview someone to offer a job, you're like way behind. Like in this, sometimes you have to interview and literally offer the job on the spot. So if you don't have a good filtering system, by the time you already interviewed that person, if you have liked them because the interview was okay but you didn't filter them good enough, you might find yourself with a bad hire. I mean, it was a great interview, but it ended up being a bad hire because you didn't apply enough filters. So we'll talk about both of these things.

Hector Garcia: [00:25:33] So lots of candidates to choose from and having a great filtering system. So how do you get a lot of candidates to choose from, so to speak? So the first thing I think you need is you need a great ad and you need a great job description. So a great ad and a great job description. That's sort of obvious that way. You attract the the, the the right people. And of course, quote unquote. And this is I kind of dislike this term sometimes a competitive salary, you got to have a competitive salary, something that feels like it's it's fair and it's it's to part with the job and the responsibilities, etcetera. So so having a competitive salary and benefits and we'll talk about, quote, what competitive salary means. We'll go back to that in a second. But beyond all that, what you need is a strong brand that candidates want to be associated with. You need a strong brand that candidates want to be associated with. I want to take a step back for a second. Okay. Assuming you're in a dinner party and you meet someone brand new, you haven't talked to that person and you ask them, hey, what do you do? Some people, If you've ever met someone that works for Google or Facebook or one of those big brands, they don't tell you what they do. They just say, I work for Google and they stop there and they know that you don't really have to explain much.

Hector Garcia: [00:26:53] And for most people it's like, Oh, cool, you work for Google and that's it. Nothing else really matters because they're associated with such a great brand. Okay. Similar to like going to a big school, you know, like Harvard or Northwestern or Stanford or whatever. Most people at what school you went to, I went to Harvard. What you major on becomes less relevant than or what your grades are, for that matter, become less relevant because you're you come with brand association so you might want to do as a firm is you might want to create the type of brand that people want to be associated with when they work there. So if you're a no name brand firm, you're Garcia and company and nobody knows you except for your clients and that's it. Like no one, there's no marketplace value to working for Garcia and company. Then I have to compensate with salary, benefits, flexibility, all the other aspects of it, and of course, a corporate culture. But the corporate culture is something you really live and understand once you work there or it it's implied with the corporate brand. So, for example, if, if if someone wants to work in a creative environment, like someone wants to say, Hey, I'm a creative person and I want to be challenged creatively, they're not going to work for, you know, Miami design company where they really don't know what that means.

Hector Garcia: [00:28:17] It's a generic name. But but even if Miami Design Company were to offer, let's say, 80,000 a year, but Disney whatever, it doesn't really matter what what what position in Disney, you could be a custodian in a park for 40,000 that person because they want that brand association and they want to by osmosis learn from the environment that they're in. They might choose for less compensation a company with a stronger brand. And I think that might explain why all these millennials, right, leave college. These are, you know, the high purpose, the high work life balance. Millennials, they leave college and they go straight to one of the big firms and they work $80,000 a year. And they don't really get paid that much when you really mean sorry, they work 80 hours a week and they really don't get paid that much. And when you kind of calculate, you know, the hourly rate versus some other local accounting firm, you you realize that they're not really getting paid that much, but they're doing it in exchange for the brand association that I worked there. Okay. And then and then these and these big firms, the they have no issues attracting talent. But they have tons of issue retaining it. So so they are they are attracting talent with high compensation.

Hector Garcia: [00:29:39] But this high compensation and reality ends up not being high compensation because of the hours that they work. So it's actually low compensation, high brand value, but not strong internal culture or corporate culture to to retain them. So the other thing I want you to think about and Disney is a is a company I like to use as an example because, you know, I think we all understand what Disney means if you're an engineer, right. And you think, well, this is more of a creative thing, not so much an engineering thing, but if you're an engineer and you look at all these engineering companies and you read their models, you know, building buildings of the 20th century, and you look at another model, that's another model that says building green buildings. And you look at all these company mottos and slogans and you're deciding based on brand, which is the best choice for you. But then you go to a company like Disney where, you know, Walt Disney literally told the Imagineers, if you could dream it, you could build it. Think about the difference that that does to that person's spirit, heart and connection with their purpose. If you can dream it, you can build it. Imagine what you're saying with a simple with a simple slogan like, I'm going to empower you to use the full extent of your imagination, conscious and subconscious, because you're dreaming it.

Hector Garcia: [00:31:01] And and I believe in you that you can build whatever it's inside your mind. So imagine what if you can. Uh, if you could dream it, you can build it. If you can imagine it, you can build it. Imagine what that type of slogan could do. A similar thing to that for our profession could do to attract talent. Okay. So, you know, balance books, balance life, you know, something like that. You know, we have the balance, you know, that we essentially own as a profession. But many of our colleagues and other accounting firms do not really subtract, subscribe to work life balance. So we love balancing things on paper, but we don't like balancing things or humans in the real world. So think about, you know, taking back some of these terms and expressions that we use and we understand and using them to, to reframe what it is to feel, to work for an accounting firm or for your accounting firm in particular. So I think that brand association is going to be a big component of attracting talent. Now, a lot of people think that brands are solely used to attract customers, and I want you to think about it like this, right? It's kind of a vicious cycle. Talented employees will bring in great customers. That's how it works, right? So great customers are going to buy from great salespeople, from from high confidence people, from people that know what they're doing and they're knowledgeable and they can prove that that that that they can bring in results.

Hector Garcia: [00:32:39] So they're going to bring great customers and then great customers attract talented employees because you as a as an employee want to work for a firm that has cool, innovative type customers to work with so you can learn from them, right? So if you are a high techie person, you want to work for an accounting firm that focuses on low tech type companies, you're not going to be excited about that. Like, you're just you're just not. Okay. So you also want to take a look at your brand positioning in terms of attracting customers and the type of people that want to serve those customers because you want to attract the right ones. So you don't want to bring a whole bunch of non-tech people when all your customers are e-commerce and and technology developers, they're going to be using tons of apps and and technologies to to want to communicate with you or share back with you or experiment in their or whatever it happens to be. And if you have low tech people, they're just not going to be able to keep up. And it works. It works similarly the other way, right? Because if your employees want to use all this tech and your and your customers don't, they're just not going to be a connection there.

Hector Garcia: [00:33:50] So the brand positioning for attracting customers needs to be congruent with the brand positioning to attract talent. And it works also. Vice versa. Bad employees will bring bad customers, bad customers will attract bad employees. So all that stuff is basically in sync. So what is this positioning mean in terms of employees or attracting employees? So we talked about positioning on the very first episode of this series, and we used a different examples to explain what positioning means. So for example, one of the positioning statements that we made to illustrate what great positioning means is we help growing orthodontists improve their cash flow through a real time accounting operating system so they can focus on helping their clients create beautiful smiles. That's a great positioning statement for customers. You're saying the type of customer that you want to improve. You're saying what type of things you improve, cash flow. You say how you do it, real time operating system, and then you say why the customers do what they do, which which in terms sort of connects with your own purpose, which is helping their clients, their patients create beautiful smiles. Okay? Because that's what orthodontists do. They fix people's teeth so people have the confidence to smile instead of keeping their mouth shut. If you ever had braces before, what you're listening and watching to this, you know exactly what that means and you know exactly the value that orthodontists bring to the world of individual people's self-confidence.

Hector Garcia: [00:35:24] So a great positioning statement and and encompasses all that to attract these orthodontist type clients in assuming this is going to be your niche. Now, what would this look like on building a positioning statement to attract employees? You would you would write or rewrite the positioning statement to communicate to that talent you want to bring in. So you would write something like, Our team is comprised of focused and forward thinking accounting professionals that work hard, but with flexible schedules to deliver outside the box accounting solution to our orthodontist customers that are passionate about building self esteem for their patients. See you. You frame up to your target employee. This is who you are. And if that Target employee is the right one, the one that maybe understands that orthodontists give their customers or their patients self esteem through the work that they do, if they are forward thinking, if they want to work hard while having a flexible schedule, if they want to be creative outside the box solutions, whatever buzzword you use in there that attracts that key person, you're going to bring in the right people. So again, right positioning statement to get the right customers, right employee positioning statement to bring the right talent. To bring the right talent. Okay. Any questions so far, Blake? Or comments.

Blake Oliver: [00:36:57] What do you think about the role of technology? Could we dig into that more in attracting and retaining talent?

Hector Garcia: [00:37:05] I think that many, many employees want to be. Tech heavy, right where they want to. They want to feel that they're not doing repetitive and mundane work that can be replaced by computer software and, dare I say, artificial intelligence. I believe that more and more employees, especially on that younger range, that 25 to 34, are going to be all on board of that. Okay. However, however, I think that. There is already so much technology all around our personal lives already. I mean, there's already so much, you know, with our phones and iPads and our computers, and we're doing so much with technology that sometimes work could be that escape, that escape from just being always on your phone and always staring at your phone like I can I can attest to that. It is more likely that my employees in my office that spent eight hours in my office will spend less time on their phone and social media and that sort of thing because they're working versus what they're not working. And in many ways work could be an escape from that. So if you have a type of work environment where where human to human interaction is, it's available. You know, sometimes there's zoom and slack and there's technology. You can't you can't escape it. But in a work environment where where it feels more human than techie, that could also come to your advantage. So I don't have a strong feeling towards one or the other.

Hector Garcia: [00:38:38] All I'm going to say is. Whatever technology you use, bring employees that would embrace that. Whatever technology you think you might use in the next 3 to 5 years, bring the employees that will tell you on the interview that they're more likely to embrace that. But also, you know, technology is a really important thing. But since technology is replacing a lot of the work that we used to do, then what's left is our creativity, our capacity to think, our capacity to solve problems, our capacity to improvise. I think technology is not really that good at improvising. Technology is great at doing something that's preprogramed to do. A friend of mine said AI is a bunch of nested if statements and you have to be an Excel nerd to understand what that means. But it's all preconditioned, you know, code. It says if this happens, do that. If this happens, do that. If this happens, do that. In improvization, there's never a if then type of thing. It just happens on the spot. And you have to use, you know, immediate reaction and judgment and and human like instincts to to to solve something. So I think that when employees go to someone and say, I want to be challenged and my friend Michael Lee told me that that's one of the biggest questions that that or the biggest comments that he gets from people that he that he he interviews is, you know, my ex employer wasn't challenging me enough.

Hector Garcia: [00:40:07] And this concept of challenging could come in multiple ways, shape or form. I think that challenging someone by just giving them new technology every day to learn it's not it's not the type of challenge that people want. I mean, I think they want some of it. I think the challenge is learn the right tool to leverage the right tool so then you can enhance your thinking. But when people say, I want to be challenged, I think they mean they want to be I want my creative juices to be challenged. I want my opinion to be challenged. I want my opinion to be heard. I want I want debate. I want my point of view to be challenged with another intellectual point of view. And I want my mind to be changed. And I want to I want to want my mind to be changed, not coerced into my mind being changed. And too much technology can work against that. That's that's what I think. Okay. So moving on to this concept of big brands. Okay. So if you go to Glassdoor, which is a website where employees and ex-employees report their experience with their their employer, and you look at and you filter and you filter by culture and values, you're going to see companies that we're all familiar with, like SAP, Intuit, Adobe LinkedIn, Bain and Company. And I know employees that work in every one of those companies, and I've literally called every single one of them and said, Hey, what is it that you love so much about SAP or Intuit or Adobe or LinkedIn or Bain and Company? And there's more than just the ones that I actually know, people that work there, and everybody tells me, Oh, it's the culture is a great place to work in.

Hector Garcia: [00:41:44] And I didn't cue that up. So, so if people say that that and these are all great people, people I would I would hire if I can afford them. You know, if people say I stay in a company because of their culture or I go work in a company because of their culture, then that tells you that we need to invest heavily in building culture. Right? So that's, that's, that's right there, set in stone. This is not just conjecture. This is real. So culture and brand, it's what working for a company means after you take away salary and benefits, after you take away salary and benefits, what does culture and brand mean? So, for example, if. Someone. If you had a company with great culture and the CEO would come along and say, Hey, we're going through a financial crunch and we. Are about 85% confident that if we can keep all of our employees working for two weeks without pay or we can keep 90% of employees working with two weeks without pay, and you just we all make the sacrifice. We can push through and keep this great company going.

Hector Garcia: [00:42:52] A company with a great culture would probably be able to survive that. I mean, it's I know it's difficult to to imagine, but I think absolutely would be would be something that's totally imaginable. And I will tell you why. Because during the pandemic, during the pandemic, I know so many of my customers where their employees said, don't worry, don't pay me, I'll work from home. This is Big Four like PPP. And all this craziness started. This is before like money actually started funding. You know what I'm saying, right? When, you know, people started freaking out and they said, Hey. Shut down and and the companies were already not getting any any customers. Many of their employees said, hey, you know, whatever you need, you know, let's just get through it. I mean, most people thought it was going to be a two week thing, like the pandemic was going to be a two week thing. But I'm saying just just hearing that and seeing that and even my own employees, half of them told me, Hector, even if you can't pay me, you have to shut down the office. Don't worry. Whatever you need, we'll be here for our customers. That tells you that there's great culture. So that's what culture is, is when you take away salaries and benefits and all that. How do people feel about working for that company now? Can small firms have corporate culture? I understand that it's very difficult if you're only two, 3 or 4 people.

Hector Garcia: [00:44:13] Very hard to have corporate culture. But the advantages that a smaller firm can always be more nimble and can can move more quickly and the owner or the ownership group can lead by example and shape into that culture. And if you don't have a brand yet, you know, both the owners and those key employees at the beginning are the ones that are going to create that culture in the first place. Remember, the bigger the firm, the harder it is to to sort of maintain all those moving parts to to create and build a culture. Now, I'm going to give you a couple of tips. I'll give you eight tips on how to create and maintain a corporate culture. One is hire right from the get go. Nuff said have a clear and easy to understand set of values clear Mission, Vision, Purpose Statement three Lead by example. I mean, it's very difficult, especially in a small firm, to have a great culture when you're golfing and taking a vacation and you're apparently not doing much anyway. Four is always make time for social events and person to person interactions. Five is encourage teamwork and collaboration. Six is create an environment for work life balance. Seven Provide actionable and specific feedback plus request feedback. And the most important one when you do lose, people learn from the people that leave you because that's the best learning experience you have.

Hector Garcia: [00:45:40] Have really great exit interviews. Now when you're when you're interviewing people, when you're hiring people and attracting people, there are five key things that that that I recommend or talents per se that you try to discern before hiring. We have culture or personality, hard skills, soft skills, context and habits and adaptability. So let me explain those. Culture and personality, essentially someone that you hire can actually create or elevate your corporate culture. This is what we call management material. Someone that you hire could be just a fit to the current culture. So they're sort of net neutral or like neutral plus. But someone that you hire that's bad corporate fit can destroy your culture from within, very negative hire. So you immediately want to when you interview someone like just for a second, forget about the hard skills, about the experience, about the just focus. Is this person going to create elevate culture? Are they're just going to fit into the culture or are they going to destroy the culture from within? Now, the hard skills, which is the most the most typical things we look at are things like the technical knowledge, the technical experience that they have. Do they know how to use QuickBooks? Do they know how to use Avalara? Do they know how to use Bill.com? Those sort of things, You know, can they hit the ground running right away? The other thing you might want to look at, even if you don't have those hard skills, is do they have other relevant hard skills that can make it easy to quickly learn the specific hard skills that you need them to have? So, for example, let's say someone has worked in restaurant management their whole life, never worked in accounting, but then they went back into school and got an accounting degree.

Hector Garcia: [00:47:22] And you are a firm that serves mostly restaurants. And I'll tell you something, you can teach debits and credits fairly quick, very difficult to teach that understanding that know how how restaurants work so that that other relevant skill can make it really easy for you for them to learn restaurant accounting per se. And some people come with zero hard skills, right? They have no technical knowledge, no understanding of the job that you will give them. So it could take them 1 or 2 years to get it up to speed. So you want to rate that person. So now we rated them on on culture, then we rated them on hard skills. Now soft skills are harder to teach now. I think that all technical skills or hard skills can be taught because no one learns how to balance a checkbook, right? I mean, no one is born balancing a checkbook. They learn that as they go. They learn that as as they get a bank account, they learn that as they learn a little bit of personal finances, no one's born knowing debits and credits. They learn that in school.

Hector Garcia: [00:48:19] But the thing that's very difficult for you to teach someone is manners, because this stuff comes from. From childhood. Right? Manners, demeanor, that sort of thing. So you also you want to rate someone on soft skills. Do they already have customer service skills or they already have communication skills? Are they well spoken? Are they great listeners? Sometimes you have someone with no self skills. This is typically people with great attitude, but very young, with no experience. But they're open to learn. But the most important thing is if you know someone off the bat that has great hard skills, it feels like they can solve your problem right away. But they have bad bedside manner and they're very unlikable in general. That's very hard to fix. If not, I think, impossible to fix. The other trait here is context. And context just means relevant industry experience. Some people come with high context and we'll discuss where that could be a negative. Some people could have some tangential experience. So for example, if they worked in real estate and you're going to hire someone to to do like, let's say, mortgage accounting or something like that, you know, they might have already some some connection to the industry that would make it easy. And then some people may come with zero context. And I got to tell you something, only experience can teach context. Context is not something you can teach in books or you can teach in university or you can teach in a training program.

Hector Garcia: [00:49:41] Context is something that's built in into your psyche at least 3 to 5 years in. So if you can find someone that already has some context, context within the group of customers or the value you're creating in the marketplace, even if they don't have the hard skills, that's going to help you quite a bit. Now, sometimes context or experience brings habits, and habits are, you know, the specific ways that people do things. So some someone might already come with a specific way of how to do things and it might be better than yours. And that's a good thing, right? And that's great. But if it's not as good as yours or if it's wrong, it's wrong. Wrong because there's, you know, there's wrong and there's wrong wrong. You just have to know whether or not they're going to be open or to change or adapt to another system, because bad habits are also very difficult to shake off. Just the main red flags, I think, in hiring is, you know, when somebody does things wrong and they're excuses, we've always done it that way and there's like no understanding as to why. Okay. It's a very common thing. And to when they just have a bedside, bad bedside manners, if they can't be charming during an interview when they're trying to sell themselves, you know, how rude are they going to be to your customers? Think, think, think about that now.

Hector Garcia: [00:51:04] When do you know someone is a great potential culture fit versus a low culture fit? High culture fit is going to be someone that's asking you questions during the interview process. This is why it's so important that interviewers ask the potential employees. What questions do you have for me now? Do you have any questions for me? Never say, Do you have any questions for me? Say, what questions do you have for me? Because you need to know. They need to ask at least some questions. If their questions are something like what's the work environment like? You know, what are the learning opportunities? What tools do you use for the job? Who are my coworkers? You know, Who are my leaders? Who are the people in my team? What kind of training programs are there? You know, what are the office days for us to go to the office for team meetings? More like, you know, more like encouraged to go meet people and collaborate, you know, what type of clients do we work with? What are the company's values? You know, who are the leaders, You know, are there mentorship opportunities when they ask any questions like that? You know, they're going to be a high culture fit and you're going to cue it up. You're going to say, what questions do you have for me? Or, you know, one thing you can say is at the end of each interview, I ask all my candidates to ask us three questions.

Hector Garcia: [00:52:17] I'll give you some time. What are the three questions you want to ask us? And that way you force them to ask a question, right? A low culture fit will ask questions like What are the work hours? You know, how how often do I get to work from home? How often do I get pay increase? How often are there reviews? What are the you know, what are the benefits and benefits are? You can always clarify benefits, but more like people trying to figure out what all the little things that they can get. How often do people get promoted? You know who is my boss or supervisor? And they use a word like boss or supervisor, not leader, that sort of thing. Right. So so those are the two sort of indicators of high culture and low culture. Now, some of the things that I recommend to filter these candidates prior, prior to the interview is prepare a small list of tasks for them to require to set up the interview, such as sending a resume or a cover letter through a specific page or portal, not just email through a specific page or portal. So at least we know they're tech savvy enough to access the portal, create an account, that sort of thing. Second one is I like I like to have them take a quick quiz right before setting up setting up the interview. So. So a quick case could have ten questions or less.

Hector Garcia: [00:53:35] And these ten questions could be pertaining to having a faster interview. So think about it. If you had if you had the capability of of of asking ten of the questions you're going to ask during the interview prior and you have the answers, then it could drive the discussion to the specific place you want to go. And it can make the interviews much shorter. And also you filter them because if they don't take the time to answer the questions, then you know, they're probably not going to, you know, be good and they're not probably not even going to show up to the interview. So, I mean, some people like to have them do a two minute video, do a two minute video, you know, send me a two minute video, you know, prior to the interview. That way you can check for whether they're tech savvy enough to create a video. And I get it. Maybe some other candidates don't have a laptop. That makes things more complicated. And that could also be questionable, you know, in terms of, you know, how good that person's going to be if they don't even own a laptop, if they don't know how to do video. And I get it. Not everybody. It's a YouTuber like me. But create the video instructions, create a video explaining how to do a Zoom recording, how to do a Zoom recording, whatever happens to be.

Hector Garcia: [00:54:42] And if they can't follow instructions from a video, it's going to be very challenging for you to train that person or for that person to self train. Some pre-interview questions Out of these ten question ideas that we had, you can ask things like do you prefer to work alone or in teams? Again, it's just to build the conversation during the interview. This is this doesn't have a right answer or a wrong answer. Another question I'd like to ask is, do you want to be told exactly how to do things and follow directions? Or do you want to be told what are the desired results and you figure out how to do it? And again, you can infer whatever you want from that question, but that becomes a topic of discussion. You can ask an open ended question like what is the role of your manager, supervisor or leader? Use the term that you use in your company. Another question you can ask is do you prefer to talk to customers or team members in person over the phone or video conference? Again, whatever answer they give you that sparks a conversation. What is the proper when is it proper to shift the conversation from text or email to phone Zoom or in person? That's a great question to ask to kind of get them thinking about how to escalate, if you want to call that escalation. But how do you decide what is the text and what gets over the phone? Another fun question you can ask is you prefer Excel or Google Sheets and why? It's a very simple question.

Hector Garcia: [00:56:04] In accounting, I think people should know both, but this could tell you a lot about the person. The type of answer that they give you could tell you a lot of the person. So just come up with whatever ten questions you want. Now, when you're doing a Zoom call or a video conference call and you have to assume that your that your employees will also be doing Zoom calls with their with their employees. I mean with with the with your customers. Um, some of the things you want to filter for is do they have a messy background or an unblurred background like they're not even techie enough to unblur their background. Right. To to, to sorry, blur the background. Right. So if they have an unblurred background and it's messy, it can tell a lot about that person, how much they value the background of their of their, of their, of their environment to be part of the professionalism that they bring in. If there's background noise and I get it, some people's houses are loud and not everybody has noise reduction microphones. But if they're unaware of that noise, like if they go, if they don't tell you, oh, sorry, my dogs is barking, that means they're hearing the dog, the dog bark and they don't know that the person on the other side can hear the dog bark.

Hector Garcia: [00:57:13] And that's a big issue. That's a big issue. And if you ever called customer service and you hear like roosters in the background and that sort of thing, it's just really embarrassing, honestly. And the people that are listening to this know exactly what company does this a lot. Um, then you can ask during the zoom call, you can ask people to mute and unmute themselves and say, Hey, let me just test something mute and unmute yourself or can you turn off and on your camera real quick or can you use the chat to test it or can you share your screen so you can? Um, this is sort of a Trojan horse question. All you're doing is determining the tech savviness. If they're sitting there going, Uh, how do I mute, uh, how do I then again, depending on the type of employee you want, but that might be an indication that that employee might not be as tech savvy as you want. Now, I'm going to move on for a second to job description. So posting a job description, a great job ad is going to be key to hiring the right people. The number one job description tip I can give you and I think this is a wonderful one and I learned this from Simon Sinek, which is a traditional job posting with lead, with heart skill, experience and pay. So a traditional job posting would say something like looking for an experienced bookkeeper with three years of tax firm experience.

Hector Garcia: [00:58:29] Competitive salary. That sounds about what the average job posting in our industry looks like. What the assignment says is flip it on its head and start with the cultural type questions and the soft skills. So, for example, that same posting would say something like, If you like working for a team where people take care of each other, constantly improve and think outside the box, we may have a great job for you. If you're an experienced bookkeeper with three years of tax firm experience, please apply. So it starts with a Y. The same start with a Y concept that Simon Sinek talks about, but do it for job postings. Now I'm going to give you this other one that's a really important one. This is really for your top, top talent, which is instead of just doing the standard Zoom in-person interview, bring the interview outside of the office. So do an interview in person or invite them for coffee or for lunch and then observe things like how they dress, how they groom themselves. Right? So you're looking for professionalism again, how courteous they are to the wait waitstaff. That could be an indicator of the person's personality, their table manners, their other social interactions. So by by bringing it outside of the traditional phone Zoom and an in-person interview with this sort of lunch and coffee type of interview, final interview could be a good one.

Hector Garcia: [00:59:56] Now compensation and this is kind of the last piece of attracting talent is compensation. Now, under compensating will cause an employee to feel they didn't get a good deal in the first place. Most candidates will find it really hard to believe that they can jump 20%, you know, from their current salary in the same business. So they already check out and they get the idea that the only way to progress is to go somewhere else. And you all know that within a single employer, it's very hard at any point in time to get a 20% or more salary increase or promotion, even if you under compensated with the purpose of like making up for it six months later or a year later. That's not the right way to do it unless it's specifically stated or contractually written and planned for that's going to cause that issue. Now, I think compensation needs to be competitive, yes, but it should be just right. Not too low. Not too high. Your compensation ladder should be clear. So how employees understand the opportunities inside your organization are put together for them to make more in the future and how they earn that, how they pass those thresholds need to be very, very clear. Now. I believe bonuses should never be arbitrary. They should always be tied to either an individual or a team achievement that can be objective, objectively measured, because almost always a bonus is going to seem.

Hector Garcia: [01:01:27] Unfair the year that you gave, less than the year that you gave more. That's always going to happen. So make sure that you also frame up the value of your benefits of the benefits as part of the compensation. So never say, hey, there's more benefits. Just say, hey, we're trying to increase our compensation through benefits. Here's the benefit that we're adding. So make sure that you communicate properly. The benefits are part of the compensation. And remember that work hours, like, you know, flexibility or non flexibility, work life balance, pay time off. It's part of compensation from the employees point of view, even though it doesn't change the number of the salary that you put in in the in the in the payroll software, It is part of compensation. Okay. So like, you know, having a high number, but also a lot of hours, it sort of nets out and people know this. Another challenge with under compensation is if you do give a big boost to an employee that you under compensated and then you sort of made up for it a year later. So let's say you started them with 40,000, but you really wanted them to make 60. So a year later you you bump them up to 60 and you kind of you kind of even out or fair up, you know, the fact that you under compensated, remember that at some point in their employment history they had a 50% increase in their salary nowhere no never again in the future they're going to get this type of increase.

Hector Garcia: [01:02:57] And unfortunately, people just have selective memory. And the fact that the last time I got promoted, I went from 40 to 60. So my salary went up by 20, you know, which is 50% more or 20,000 more. If your next promotion doesn't bump you up $20,000 or 50%, it's just not going to feel right. So no matter what you it could cause some sense of disappointment now over compensation can have a similar issue. And again, we're talking about retaining talent. So this is all part of the whole retaining talent portion. Retaining talent mean overcompensating will make it hard to create reasonable increases in the future. So it's got the opposite effect. So when you go increase your salary, you know, you already pay them so much at the beginning that you can only increase very little and then it feels like they're not progressing very much. It could also cause jealousy across other team members that make less but feel that they do more. And let me tell you something, no matter how much you try to make this secret, how much people make gets out. So you have to be almost you almost have to be ready to pay someone as if it was public information. So think and think about it. If you're going to compensate people, imagine if you knew for a fact that this information was going to get out.

Hector Garcia: [01:04:14] How would you think about compensation knowing that it was going to get out? Okay, Now, if you overcompensate, it can create a financial strain in your business which will lead you to put more pressure in that individual to produce so you can get your return on investment, so to speak. And it could potentially turn a great employee into a bad one. So let's wrap up with retaining talent. So the other really important anecdote and quote I heard about developing and retaining talent is a business owner turns to a management consultant. That is suggesting that they should spend more resources on developing their employees so they can be more effective. And that business owner asks the consultant, What if I spend all this time and money to develop these employees and they leave? And the consultant thinks for a minute and fires back and says, What if you do not invest anything to develop these employees and they stay. And that's just such an important point because like, do you want stale, uneducated, unadvanced employees in your firm? Probably not. So it comes hand in hand. Now, if you individually as a professional where to invest in yourself, you could probably agree that you need to spend at least 10% of your productive time to invest in yourself in, let's say, things like education to become successful. I think you would agree, Blake, as well, that at least at least 10%. Okay. As an employee. As a professional employee.

Blake Oliver: [01:05:52] Yes, 100%. If not more. If not more. Yeah.

Hector Garcia: [01:05:56] Intrapreneurs tend to think that number is higher. So successful entrepreneurs and this could be professional entrepreneurs. Both would agree that they need to invest more they need to do up to, you know, numbers like 20% of the productive time so they can be successful. And this is not just education. Once you're an entrepreneur, you also need to invest some of this time in physical and mental health. Okay. So most professionals are employed with be in the 10% mark and most entrepreneurs would be in this 20% mark. If you subscribe to this concept, if you if you believe in this concept. As an employer, especially if you think there's a strong correlation between their education and health to their productiveness. As an employer, you need to be investing at least half. You know how Social Security and Medicare, your employer pays half. Employee pays half. Employers should always have half of that commitment or whatever the investment is. Half of the commitment because the employee should put their part, too. So if you based on these percentages, 5 to 10%, that means that at least 5 to 10% of that employee's annual salary should be an additional investment that you make into that person's health and education. Now, how do you invest in health and education? Well, if you have a $100,000 employee, you would have this 5 to $10,000 allocated to both their paid time off because you could always connect paid time off with health. Right. So they're taking time off. They're they're resting. That's health because you can't really do much of the health other than giving them health insurance and that sort of thing. But beyond the health insurance, the time off is part of that health education.

Hector Garcia: [01:07:35] But I'm sorry, the health budget. But the education budget is critical. So if you're not spending five grand a year on a $100,000 employee, you're you're wasting an opportunity to invest in that employee. Now, in my firm, I'll give you a specific example. In my firm, Hector Garcia's firm, we have an education budget of 5250. Now, why that random number is? Because that's the maximum that the IRS allows us to take as a deduction without creating taxable compensation to the employee. Now, this kicks in after a year. So it's, you know, short tenure and they can spend it in anything that's directly related to their job, including conferences. And we pay most of the travel. We have let's say we pay about 75% of the travel piece. In addition, as part of our cafeteria plan, we have a $50 a month stipend for gym memberships, physical therapy or mental health. It doesn't really matter which one it is as long as you you have a receipt. We pay for it. Know that that's where it is. It's a reimbursement. And the last thing that we do is we reimburse all of our employees if they elect a supplemental insurance such as Aflac. We do it all through payroll, we pay the taxes or whatever. And next year we're going to bring in life insurance. So all these things, I think, are these sort of out of the box benefits that do complement that person's education and health investment.

Hector Garcia: [01:08:59] Now to wrap things up, let's talk about how we keep those those talent employees engaged. Okay. Most companies have these annual performance evaluation where once a year they sit down with the employee and they tell them, you know, from a scale from 1 to 5 or whatever, how good they did on, you know, this 3 or 4 areas of. Of of observation. And then based on those numbers, there's a direct connection to the percentage that your salary will increase or not increase. Okay. The problem with annual evaluations is generally they're just there to catch up with inflation. And honestly, if you would just make inflation adjustments every year, that's probably better than performance evaluations anyway, because performance evaluations end up being very objective, subjective at the end of the day. But the big challenge I see with that is it creates a lot of stress for the employee. And if they feel that they didn't do great on it, like it didn't prepare for it or didn't answer the right questions or whatever happens to be, they lost the opportunity and they have to wait another year. And that creates a lot of anxiety. Second, I think it's too late to correct a problem that happened months ago. You know, memory and details about a particular issue becomes fuzzy over time. Plus, one of the worst things about the performance evaluation is typically you mostly look at what happened in the last month or two because that's what you remember and you're sort of neglecting the rest of the ten months of the year.

Hector Garcia: [01:10:30] So this annual performance evaluation just tends to be extremely ineffective. The best replacement to that is something that the military created called an after action review, which I learned from Ron Baker. Who's who's a leader in our profession, which essentially means that you meet with the employees after a major project or a major important client interaction, and you discuss three main things What went well? Well, we could have done better. And how are we going to prevent the issue if there's an issue in the future? That's that's it's an after action review. What went well? What could have done better and how could we prevent the issue if there was an issue in the future? Now, I'd like to add two extra bonus things to the after action review. That's how I do it. I ask ask management or leadership. Could we have done something different to make this better? So could we have, you know, maybe our pricing, maybe our sales process, maybe, you know, whatever it happens to be? Could we have done something better to improve this process? And then I ask a direct question to the person, which is, are you missing any tools or infrastructure to do your job correctly? Because as management or leaders, we have to give people tools and infrastructure to do their job.

Hector Garcia: [01:11:40] Now you can conduct after action reviews individually or in a group setting, but I think that at least the individual ones need to be done as often as four times a year, once a quarter, because one year is just not enough and once a quarter is it's it's the bare minimum. If you can do one a month, that'd probably be best. But due to the cyclical quarterly nature of our industry, once a quarter might be the best one to use. And then these should be independent of compensation, salary increases and promotions. These are strictly knowledge building inside building systems. You should not after action reviews are not tied to compensation. So what about compensation? How do I increase compensation if I can't use annual performance reviews and replace them with after action reviews? So how in the world would I do salary increase? So what I think what I think the opportunity is for salary increases is doing it merit based, do it based on some sort of achievement. So something like number of clients you can consistently close per month and you can create a threshold, create a system that goes, Hey, it looks like you can do 15 a month. If you can get to 20, I can give you this salary or this bonus. If you get to 50, I can give you this salary or this bonus and you can basically measure it, you know, sort of through two, three months worth of six months worth and measure if that they can maintain the type of performance.

Hector Garcia: [01:13:03] Now, another merit based increase you can make is based on the average revenue of the book of business that that person manages. That's also above a certain satisfaction rating four and above or whatever happens to be maybe based on the number of five star reviews generated by customers in that book of business. So if you can get a verified review from a customer and the book of business in Google or whatever you want, your reviews, maybe you can even pay them a bonus for those reviews because you want that. That's gold. That's that's marketing. You want that for sure. You can also tie them to licenses and certifications and other educational related achievements because that goes hand in hand with their productivity. You could probably tie it to the number of team members that they can mentor and help promote. So if you have an employee that's consistently producing whatever another type of key employee, then you can compensate people based on that. Or maybe based on specific this is this would be very, very objective, specific tasks and responsibilities that that employee has been able to completely take away from any employees that are above them or their managers and that sort of thing. So that's it. That's that's the way to that's the way I think it's it's the best technique to attract and retain talent. Blake Take it, Take it away.

Blake Oliver: [01:14:23] Thanks so much, Hector, and thank you, everyone, for listening or watching today. As a reminder, if you'd like to get notified of Future Streams in this series, please go to Earmark Wcpo.com Slash focus. Subscribe to the email list. We will send you a link to the CPE course when it is available, as well as a recording of today's session. You can go back and listen to all eight sessions when we're done at your convenience. Hector, great talking to you and I'll see you again here next week on Tuesday at 11 a.m. Pacific, 1 p.m. Eastern or know 2 p.m. Eastern, right?

Hector Garcia: [01:15:06] Yeah, 2 p.m. Eastern. That's right.

Blake Oliver: [01:15:08] All right. Thanks, everyone. Bye bye.