Checkout RailsClips and Angular Remote Conf!

 

01:03 - Panelist Experiences With Hiring

03:00 - Hiring Virtual Assistants (VAs)

10:02 - Hiring For Design Work / One-Off Projects

16:23 - Hiring Subcontractors

27:58 - Hiring Employees

Picks

Uber (Reuven)
Consider the Fork: A History of How We Cook and Eat by Bee Wilson (Reuven)
Morgan’s Paradox for Freelancers (Eric)
Marcus Blankenship (Jonathan)
The Mortified Podcast (Jonathan)
Developer On Fire Episode 017 - Charles Max Wood - Get Involved and Try New Things (Chuck)
Elevator Saga (Chuck)

 

Hey everybody and welcome to episode 167 of The Freelancers’ Show. This week on our panel we have Eric Davis.

Hello.

Jonathan Stark.

Hello.

Reuven Lerner.

Hey everyone.

I’m Charles Max Wood from DevChat.tv. Quick reminder: I’m doing Rails stuff at railsclips.com, and I’m also doing Angular stuff at angularremoteconf.com. I’m not going to go into any more detail on that. Go check them out.

This week we’re going to be talking about when and who to hire. So I’m a little curious what everyone’s experience is with hiring folks. My experience is mostly subcontractors and VAs. In fact, that’s all my experience. What are the rest of you clock in on that?

I've hired VAs and designer and the writer, editor – basically people that would help me on my business. I don’t do subbing. I don’t hire people that would end up helping a client. I just – I tell my clients to hire them directly.

Ah. Gotcha.

Pretty similar here. I used to manage people at a software firm – talked about it on the show before, but it’s really – it’s a lot. And it puts a lot of pressure on you to worry about your mortgage and their mortgage. So I prefer to just do what Eric just said, which is I hire people to help me with the business, and when I need extra hands for a project of something, I just – I’m trying to think almost with that exception, have the client hire them directly and I just recommend the people who I want to work with.

Yup.

Yeah. I've had – I actually have a surprisingly great deal of experience hiring people; surprising to me when I think how long it’s been going on. I hired my first person – and I should say I've almost only hired programmers. So they actually do client work, and they do the work under me, and they communicate with clients, and I think I hired my first person probably in 1998, I’m guessing. And basically, I had about 6 people working for me plus the secretary, whereas including a secretary until – I’m sorry – yeah, 1998 – yeah, because then – Eric’s asking in the chat – because then I had 6 people working for me in the year 2000, and I had to fire all of them within 6 months of each other [chuckles] so when the whole internet implosion happened. And that really scarred me.

And so since then, I've had one person, maybe two people work for me at a time doing development, but on a very different basis, and we’ll get into that later. And right now, I have one person working for me.

Got you. So it seems like the most common case is VAs and work on the business, but not working for clients. I’m a little curious; how do you decide what roles to hire them because I've just hired general VAs to this point for that stuff.

There's the standard thing of ‘how long is it going to take me to do this? How much is my time worth? Do I have work to fill that time’ versus ‘how long it takes someone else to do it? How much do they cost?’ – that sort of thing. So if I have – this isn't my rate, but if I charge a hundred dollars an hour and it’d take me an hour to do something, could I hire someone for less than a hundred bucks to do the same task? And that could be someone who’s less efficient but cheaper, or someone who’s more efficient and even more expensive than my rate.

That’s what I use, but the other one I use is just I’m feeling overwhelmed, I’m feeling stressed, I can’t get to important things, burn the business down, I want to run away, ok, I need some help.

Yeah. I've hired assistants in the past and it’s never worked out for me because in the one end of this to my back, I hired someone who’s just a general assistant, and I felt before I hired her, I felt like I had tons of stuff for an assistant to do. And then once I had someone, she basically plowed through the To Do list in 2 days, and I was like ‘ok’ [chuckles]. And I was like under pressured to come up with stuff for her to do, and I was like ‘aaah’.

[Crosstalk] efficient. That was your problem.

I should’ve hired someone who’s much slower, obviously [chuckles]. And then at other times, I've hired VAs to do a very, very specific thing like ‘go to this list of websites and find out who the CEO of this company is, and if possible, get their contact information’, or ‘go around and find a list of colleges who have my iPhone book on one of their class curriculums, and I’m going to go to and pitch a workshop to them’, and it’s never worked out. People just flake and disappear and never even ask to get paid. And other times, it’s just been the data that comes back is like ‘oh man, I asked for the wrong thing’, or the thing that I asked for was – sounded like a good idea on paper, but in actual fact, it wasn’t that useful. So I've never felt like I got a good ROI from any of the VA stuff.

Yeah.

It’s funny. I think we’ve talked about VAs a few months ago, and I remember – or at some point, we had discussion about VAs and I thought ‘you know, this sounds like a great thing. It would save me so much time. I should totally do this’.

And there was a woman who worked for a company that I worked with, so I knew her well, and she started on VA business and it was here in Israel, so the Hebrew English thing would be totally fine, and I called her up and it sounded like things would be good and I said, ‘yeah, yeah, yeah, I’ll speak to you more when I certainly have a better idea of what I want to do’. And then I felt like ‘what do I need an assistant for?’ Really, what I need someone to do is take my paperwork to the accountant.

And so unless – that you can’t do as a virtual assistant; that you actually have to be in the place where you are. And so every time I think about how attractive it would be to have a VA, I backtrack and I say ‘no, actually I don’t see a real need for it in my business at this point’.

Yeah. And see, so I've got virtual assistants, and I think most people on the show have heard me talk about Mandy. And she does all kinds of things, but her primary role is podcast editor. So she edits the podcast, put up the show notes, and posts all the files to the right place on the internet so people can download them and all that stuff. And then, she’s also helping me organize the remote conferences and just other things like that, but the majority of her time is spent on the podcast.

I have another VA that I hired – it’s virtualstafffinder.com – and he’s in the Philippines, and so far, all I had him doing is putting videos on YouTube. And he is very inexpensive, but he does a lot of work that I just don’t want to do, and it’s stuff that is like data entry that I don’t really want to pay Mandy to do either. So yeah – so he’s been updating the RubyRogues – so what I've done is I exported the RubyRogues episodes as videos with the album art as the video and then he’s been going in and updating all that stuff.

And I also – so I was not a hundred percent accurate when I said it’s just general VAs because I

did hire a video editor and I send him videos every week, and he edits them for Rails Clips. So that’s the virtual staff that I have.

Then, I have a subcontractor/web developer because he works on my stuff too that I've hired out of Argentina, and he’s been working for me for 3 or 4 years, and does a terrific job. So when I have work for him, then he works on client stuff. And when I don’t have work for him, then he works on my stuff, and so he’s been doing all of that kind of thing. But yeah – so as far as VAs go, I work them on a project basis except for Mandy, and with Mandy, it’s just ‘hey, I need this done. Can you make it done?’

I think that's important because when I first hired my first two VAs, it was kind of in the more general – thinking like Jonathan, ‘I have this huge amount of stuff to get done. Can you do it for me? Take it off my plate’. They burn through it, and then I realized it’s going to be part time job getting them work. And at that point, I was like ‘there’s no value for me, and me taking my time and delegating it to you’. The delegation cost is too high.

And I actually found since then hiring specialized – not VA, but specialized contractors, or hiring a VA for a specific project like ‘hey, do research on this one thing. That’s all you're going to do for me’ – that’s actually worked out really good because it’s concise like beginning, middle, end, and then we’re done. And if you can get some people, like you said Chuck, you had a video editor, you had someone doing YouTube, have dedicated people who can do those sort of things, and they have the availability, it’s easy to hire them as you need to ask.

Yeah. And the thing is this general VA that I've hired out of Philippines, he’s still working on the videos on YouTube for RubyRogues, but he’s also been putting the conference talks up on RSS feeds so that people can get them as a podcast. And so I’m working in more and more projects, and I think, eventually, he’ll become a general resource that has enough training and enough of the tools that I use to work he can actually get in and do other things.

But yeah, when you hire a VA, don’t hire one because you think you have this big pile of work. You can hire somebody, but yeah, keep in mind that they may burn through that really quickly. And the other thing is if you have a large project or a large set of projects that are ongoing, then those are prime candidates for the VAs because you can set up systems around what you need them to do, and then they can just basically follow this script every week or every month or every whatever to get stuff done. So if you have images for blog posts or you need formatting on your – or editing on your book or things like that – but even then, you can hire specialists for a lot of that stuff.

Yeah. That’s really the way I've been going lately. And it’s often for design stuff because I’m just so not good at that. It doesn’t matter how much time I put into it, it’s never going to be that great.

As an example, I recently hired a guy named Aaron Mahnke to do the podcast art for the Terrifying Robot Dog podcast I do with Kelli Shaver. And it was just like such a deal and it came out so great. And I don’t know – it’s like it’s super, super specific what he does and it’s like a lot of these productized services that you're seeing more and more of these days where this guy – he’s the jack of all trades, really; he’s just a creative guy, and he does a bunch of design, and he’s got these different packages and you just go and you fill out this form – what you want done, it gets back to you, you just get prices and everything for podcast package, for a logo redesign. It’s like – it makes it so easy as the buyer to be like ‘ah, I've got this need. Oh, maybe Aaron does it’. Go for this list. ‘Yup, here’s the thing right here; 600 bucks; totally worth it’. Boom, boom, boom, fill out the stuff, it gets back to you, ask maybe a couple of follow up questions, send you a payment link. It’s great.

So for one-off stuff like that, I've been really digging that kind of thing. There's some podcast related one – what's it called, Podcast Motor – I don’t know if anybody’s looked at that, but to Chuck’s point about how useful Mandy’s been, since she’s working on something that happens every week, you know you're not going to run out of work. So you’ve got that baseline, and now that – I haven’t hired a VA to help me our weekly podcast, but now that you mentioned it, it just kind of like ‘well, I could very much guarantee a couple of hours a week work on that because it’s going to keep on happening. How much of this stuff that I currently do can I delegate to that person?’ So actually, I had not thought about that, but since it’s a recurrent thing, it makes a little bit more easy to predict how much work I’m going to have. So that might be – I should maybe rethink it.

Yeah, I think – I want to say Rob Walling mission – it’s either in a talk or something, but he says that the order you do when you're delegating anything is do reoccurring stuff, and then second, do one-off task that are very complex or very time consuming, and then third is all the simple stuff.

And the problem I had is I started with the simple stuff and so I guess they burn through it and it wasn’t really reoccurring; it wasn’t worthwhile, and so I had to let these people go.

Yeah, same here.

Yup.

Yeah. I think, Jonathan, your point about what makes for a good candidate project to work on is some of that’s recurring, some of it you have a clear set of goals, and they're not necessarily technical or they're not technical. Because also, I feel like so many of the things that I do for my work are highly technical. It’s just not clear to me where I can get a benefit from a VA right now, although it wouldn’t be surprising in the future if I find a good use for one.

Yeah, but I mean, because you hire a specialized contractor, a developer, or web designer or something like that instead; it’s not just VA that we’re talking about.

That’s true. And I have done that. On a few occasions, I've hired very short term like off of Elance. I've hired a few programmers and designers too. I help with that. I help with various projects and that’s actually been really satisfying to some of what you guys were saying. I just have a really short project. I say I’m going to do X and Y and Z, they work on it, they come back to me, I pay them; it was actually a great feeling.

And they told me that I don’t really don’t want to be the guy hired on Elance, but rather, I want to be the guy hiring on Elance once I saw how it works from the buyer’s perspective. It was actually very eye-opening.

Mm. I’m sure this will make any designer on the audience cringe, but I've had really good luck with Fiverr and Odesk for things like designing iOS app icons and stuff like that. I've definitely had bad luck too, but it’s so low-risk financially that it takes very little of your time. You just run in there, say ‘ah, this guy’s stuff works pretty good. Here’s what I want. Do something. Here’s your 5 bucks’ or if they upsell you a little bit, maybe it’s 25 bucks for a service, you get it, it’s terrible, you give him some feedback, and then 2 iterations later, you spend maybe 75 bucks and you’ve got a really nice icon. I’m not sure how people react to that, but to your point that, yeah, you don’t want to be on one of those sites. You want to be the person hiring someone on those sites and offering something that’s much higher value.

On the difference is too you're not going to go talk to a designer to get a whole contract just to get one icon. That’s an amazing amount of your time spent on setting up the project stuff versus Fiverr, Odesk, or anything like that, or even, like you said earlier, like a service where it’s like ‘go on some certain designer’s site. He has a package of hundred dollars for an iOS icon. I give you these things, you give me a brief, click Add to Cart or Buy, you're done’. Making it easy to buy those sort of things is really nice.

Yeah. And I’ll say that I've gone on Fiverr as well, and I've gotten logos for different things done; I've gotten some really basic stuff done; I've gotten some semi-complicated things done. I've always been happy with what I've gotten. Well, not always, but mostly always. And again, the ones that I wasn’t happy with were the ten-dollar jobbers and it seemed like the person just didn’t care because I didn’t buy enough extras.

Yeah. My kids are all in the scouts which are sort of like Boy Scouts, Girl Scouts except it’s mixed. I think my eldest asked me if my company could be a sponsor for their sweatshirts. I was like ‘sure, that’s great’. She said ‘terrific, I need a logo in my three day’. I said ‘wait, I don’t have a logo [chuckles]’. ‘I don’t have any of that’ she said ‘ok, you have to come up with one’. So I said ‘ahhh’.

So I went to Fiverr and I just hired – what, like 3 people, 4 people and I said, ‘give me a logo’, and it actually worked out in the end. It wasn’t the most beautiful logo, but it was certainly worth what I paid for it.

Yeah. That’s what I did for – what book was it – it was Redmine tips, but I can’t remember. One of my books, I paid like a hundred dollars; had a designer create the book cover, the flat, the 3D, all of those. And what I did is I had a follow-up on those related to it that I went to Fiverr, bought, I think, 4 packages; so 20 bucks total; got 4 different logos; the best one out of that, I did, I think, one revision and that was it. I got the cover, but it was because it was a derivative of the first work and it was good enough and it actually turned out really good. I think the second cover is actually better overall just because it fits a theme.

Yup. So do we want to veer into subcontractors?

Sure.

I can speak to this a little bit. I've had both good and bad experience with subcontractors. The hard thing is that you hire them and you can’t watch them all the time. And so you go review the code, it looks fine, whatever.

So the first subcontractor I've ever hired, he worked great for 6 months, and then he just started phoning it in. And all of a sudden, there were way more bugs than we used to have, and he wouldn’t deliver on time, and I couldn’t get a hold of him. And for what I was paying him, it just – he just wasn’t doing great work. And I don’t know what changed, but sometimes, you just – there's just no way to tell.

Yeah. I hire developers all the time in different capacities. So over the years, I've hired friends to do really specific projects sometimes for clients, sometimes just because I wanted to test a new technology without spending the time to learn the new technology so then I could then have a sense of it, kind of educate myself through them so that I could advice clients about whether or not it was good or not good. So it’s like having someone else stress test a new framework like Amber or Angular for me. And so that work wasn’t actually delivered to any clients, but it was super, super educational and useful. It’s like taking a class by paying someone else to use a framework [chuckles].

Then I've done other stuff [crosstalk] – then I've done other stuff where like right now, my capacity as CTO for Sticky albums, I hire dev teams all the time, and we typically use people who I've known and worked with for a long time that are a particular company called Infinum in Croatia; they do an amazing job on web iOS and Android. And we’ve had all sorts of different arrangements with them over the years with this current company and with the previous companies where sometimes, we just pay them by the hour to work on a specific project, and then other times, we paid them to basically give us 10 ‘use it or lose it’ hours in a week. So we’ve got a task list, we give them access to Basecamp so they can see the To Dos assigned to them, and we – they fork the whatever – probably a dozen code repos on Github, and give them permission to access the ones that they are working on, and they fork them and do the work, and up to the 10 hours, and if they are going to go over, they say ‘hey, we’re going to go over. Do you want us to stop and start again next week, or do you want to go over and pay us outside of a 10 hour amount?’ and so we would make a judgment call. But then they would just send us poll request and then our lead internal developer pulled the poll request, et cetera, et cetera.

So we’ve used a bunch of different models. It really just depends on the volume of work and how fast the project is moving. Is it a bunch of dumb bug cleanup stuff, or is it – do you have a deadline, you get to get the product out the door; is it MVP or whatever. Geez, at the back of my mind, as we’re talking about this, I’m thinking we pay them a lot less than we pay a team in the US. There’s sort of premium for an overseas company, but still, it’s half of what you’d pay for the same work in the US and it’s like – if you like the subtext of this conversation is like people who are listening – it’s like ‘level yourself up a little bit if you need to make US dollars or whatever.

Yeah. I think that’s interesting. I've hired subcontractors in both the US and outside the US. The one guy that I was talking about was from Brazil. I have another guy from Argentina, like I said, and he’s awesome. And then, I've hired a few from the US, and it really depends. The other issues that I've had basically boiled down to – I had one guy basically call one of my clients stupid, and then he wasn’t working on that project anymore [chuckles] –.

Wonder why.

Yeah.

[Chuckles] And I've been in the position where I didn’t get paid for a while for the contract that I had done the work on, and I wound up busting my butt to pay my subcontractors and then getting paid 6 months down the line, which also sucks.

Yeah, I've been there. That’s the worst. So here’s something that I think is a cautionary tale for people. If you are hiring someone by the hour and it’s something that’s new to you, first of all, I think it’s a really good exercise, especially if you bill by the hour, which of course everyone knows I

recommend against, but if you do bill by the hour, it’s an amazing exercise to hire someone by the hour that charges a non-trivial rate and all of a sudden, you're like ‘oh, this is what all my customers feel like. This is what they're talking about when they're talking about the meter running and this is why they want to hear from me every day because –’ story:

so, I was redoing my website, and I thought ‘ah, you know, I just copied Apple.com. Basically, I had

a white background with nice thin text or whatever’, and I was like ‘that’s – I want something that’s more specific; it’s more mobile, centric and cooler, yada yada yada. So I’m going to actually – I’m going to pay somebody to do this’. So I got a recommendation to a web designer, and long story short, a week goes by, we start the project, he’s charging – I can’t remember – it was 3 figures, though, for sure; it was 150 dollars an hour. And we had a good phone call; it seemed like we were on the same page, and he goes off and to do his work. And a week goes by, no big deal; I figure ‘yeah, you know. He’s probably doing’ – I didn’t even think about it, actually. Turned out, he was actually pulling crazy hours on it, and I hadn’t – just my own fault, I hadn’t said ‘look, this needs to max out at X dollars or X number of hours, and then stop’. I guess I just assumed he maybe at the most of 20 hours in a week. And sure enough, I got a bill for 2,500 bucks for the first version of it, which I hated, and I was like ‘uuuhm, you got to be kidding’.

I was just so – I was so burned, and I partially blamed myself, and I partially blamed the guy because the design was like – I mean, everybody’s got an opinion, right, but this particular design was not super impressed with. And so I just begrudgingly paid him his money and said ‘that’s it.

You're done. I’ll just go with this design’.

I could not agree more in terms of it being a useful exercise. The two people that I hired off of the Elance – I guess it was probably about a year ago – I hired them by the hour, and it was fantastic to get updates every day. First of all, we set a maximum. I expect this should take no more than 20 hours. So I figured, ok, it’ll take 20 hours. But really, I got updates every day, they told me what they're working on, they apologized that things were taking longer than we might have expected; it was great. It really actually taught me a lot about, as Jonathan said, what clients expect and how to talk to them.

Yeah. When I failed to do that, it’s hurt me. And it’s the same thing with the subcontractors, right? You have somebody disappear for 2 weeks, and then they come back and say ‘hey, I finished this feature’ and it’s ok, but what did you do? You send in a poll request, and we got to figure out how that integrate what you did with what everybody else did, and the worries over that and the worries over whether or not what they got done is reasonable for the amount of time that they’ll billing out for, and yeah – anyway, it’s just really interesting to me that you have those same struggles. And then you have to communicate that up the line to your client.

Yeah. It’s the same thing. It’s communication and expectation setting. One thing I've been pretty fortunate about is when I hire anyone as a contractor to do work for me, I set budgets up-front and say, ‘here’s your hard limit on hours’ if they're hourly, or ‘here’s your hard limit on budget’, and then ‘give me a checkpoint, we’ll say 70% of that’ just so I know what's going on; I can make sure you're making a good enough progress and try to have regular really frequent communication at first, just like a lot of people complain about with clients do that, but I found that when I talk with my clients every day or a couple of times a day, they feel better; the project goes better, so I’m going to use that exact same strategy with people I hire when I’m the client. And it might be a bit more burdensome. It might actually cause me a bit more just the talking time or that stuff, but that keep surprises to a minimum, and at least we both know we’re on the same page with stuff.

Have you guys ever had situations where you hired a subcontractor or you just encourage a client to hire someone and it was terrible?

Yes.

I did, and I really [inaudible] there and I had to apologize profusely to the client, and it took me a while to get the trust back.

Yeah. I had one where I recommended they hire someone. I didn’t give them the actual referral. They hired someone, and then midway through the project, I’m like ‘yeah, this person’s not that good’, and it ended up amounting to me having to do a lot more work and I was a very, very higher bill rate so the client was unhappy about that. But we delivered the project successfully so they were okay with that. But I could imagine if you made the referral and the referral – referalee – yeah, whatever – drop the ball like that; it’d be pretty bad.

It was very uncomfortable situation. Also, I knew the person I’d referred. I wouldn’t say she’s a friend, but I worked with her in the past and I had a really good experience. And she has also personal stuff going on in her life, which is fine except that there’s a point at which just – it was just bad.

Yeah. I keep a little list of – here’s people you want to hire to help me; another developer compliment me, and I vet those people before I put them on the list, and then I’ll tell the client like ‘look, I've either worked with these people; I vetted them; I've done a little bit, but do your own due diligence. Make sure they fit for you’ because they might be a good fit to work with me, but they might not fit with the client like personality conflicts or schedule conflicts and stuff like that. I try to make it clear to the client like ‘if you don’t hire this person, I don’t care. This is just me trying to tap my network to help you out’.

Yeah. That’s a good way to go. It’s funny that – I try to think of an example where I've had a disaster in this situation, and really, the only one I can think of wasn’t – the only one I can think of was where I recommended a really premium friend of mine to do some work for somebody, and they did it; they were super professional, and the client dug it, but in the back of my mind, I was like – everything was fine, but in the back of my mind, I was like ‘that wasn’t worth the money’. It’s hard to say that because maybe if we had spent half of what we spent, we would’ve had an unprofessional experience, but I don’t think we would’ve.

So I was a little bit – I guess it wasn’t a bad experience, but it was interesting that I was like ‘huh. I feel like we could’ve gotten that from a lot less money’, or to put it another way, I feel like the benefit we got out of that was pretty much identical to the cost, so it was like a wash. You know what I mean? So I guess it was just me; I was a little bit disappointed.

That doesn’t say – maybe because you have experience and knowledge to write that whereas the client couldn’t – doesn’t have the kind of knowledge. Might actually see it as a net benefit, and that’s why it wasn’t an issue with them.

Yeah. That’s fair. That’s fair. It was like I wouldn’t have charged that much for what would be – I was expecting more for the money, and what ended up happening was something I could’ve done myself for the same money. It was like ‘huh, okay’. So yeah, you're right.

Yup. So should we dig in to employees?

Sure.

No, my wife’s an HR. I don’t want employees.

I’m happy to, but I’m going to be very negative about it.

Yeah.

The stories I could tell if we weren’t recording. Oh boy.

Hmm.

[Chuckles] I think it’s David Pogue who still works for the New York Times once had this – gave me this talk where he said, ‘you know how they say when they – the calls maybe recorded?’ He’s like ‘they do record them and they play them back at office parties because the calls are so funny and terrible’, and they called them technical support, so I have a feeling Eric could tell us the things from them; the backwoods of HR that no one’s supposed to know.

My thing is that I look at this and I've had people recommend, for example, that I offer Mandy a full time job. First of all, I don’t have heard doing enough work for full time work, and I guess I could hire her to work 40 hours a week, but the real issue is that I look at it and I immediately get bombarded with the ‘well, you got to withhold taxes, and you got to provide these benefits legally, and you got to – you got to pay unemployment, and you got to do all these other things, jump through all these hoops’, and as a contractor, I just don’t have to worry about any of that stuff. I just pay her for the work she does, and then it gets done, and that’s the extent of what I have to worry about. And I don’t have to worry about any other legal issues because as a contractor, if she’s doing her job, then I’ll keep paying her, and if she’s not, then I won’t.

So my dad hired a dental assistant. He went through several of them and he wind up firing – one of them stole from him; he couldn’t prove it but he fired her. But this girl, she actually got convicted of fraud by claiming an extra half hour during lunch on her time card. So she basically would say I’m not taking lunch, and then she would put it on the time card and he told her over and over and over again ‘you have to take lunch. You have to clock out. You can go do whatever you want. You can hang out here, whatever, but I’m taking lunch, so you're taking lunch’ because he’s the dentist, right? If he’s not working, she’s not working, right? So since that was it basically within the definition of her job was, she couldn’t claim that time on her time card. And so when my dad finally fired her, he took all those time cards and he pressed the issues like – he's like ‘look, you can’t do this’. And he had documented then he had warned her on and on and on. So finally, he had to press charges against her. And so he got her for 27 counts of fraud on her time card.

Can you imagine the emotional strain of just thinking about this on a daily basis and working in a small office with this person?

So here’s the kicker. She went and claimed unemployment and got it after she had been convicted of fraud.

Yeah.

Time card fraud. [Crosstalk]

Unemployment’s pain.

Israel has a law that says that if you are fired from a job after you’ve been working there for a year, then you get severance. And severance is one month of salary for every year you work there. So some works for me for 5 years, and then I fire them, I have to pay them 5 months’ salary. The other way that all companies deal with it then is just every month, they put some money aside into a fund and that’s used. In most places, if you quit, we’ll also give it to you – most decent places.

But I knew someone who had someone who was stealing from the company and they fired him, and he went and went into the labor court and said, ‘oh yeah, I want my severance’ and they had to give it to him.

Yeah. See, that’s ridiculous.

But right – and it might be ridiculous like the labor laws in most countries outside of the US are so much, much, much stronger. I actually had a guy – now that I’m thinking about it – so when I first went to Chicago, I thought – I don’t know why I thought this – I thought I could still somehow run my consulting company remotely from Chicago. And half, people in Israel work on things. I can do the PhD and ok, anyway, so that was laughable.

But he was doing a project for a big company; he was just going there every year. He was doing development every day just outsourced as a contractor. And he – so I get email from the company saying ‘so we’re very sorry to hear that you're not going to be working for us anymore’. I said ‘what?’ [Chuckles] They said ‘oh, he didn’t tell you? He’s done – he told us that he found another job’. So basically, he didn’t tell me. He screwed me over; he went and screwed the client over. In front of me, he said ‘oh yeah, well, I was told by this new job I really, really had to go for it. And oh, by the way, you owe me severance’ [chuckles]. And I was like ‘no way. No out. That’s just not happening. You’ve quit. I have not fired you and I don’t owe you too’ and we went back and forth, and I found out that he had been doing work for other – oh that’s right, I sold my client list when I went to Chicago except for that one to someone else, so legally, I wasn’t supposed to be working on any of their projects, but they turned him privately, so he was working on stuff for them privately from that client’s office where he was supposed to be billing for me [chuckles].

I've forgotten about that. Wow wow wow. This brings back good memories. Ok, they weren’t so good, but – anyway. Yeah, yeah, yeah.

But he was the employee. You got screwed because you can’t do anything about it.

Right.

It sort of gets into the history of working employment a little bit, but just to keep it focused on the topic at hand, which is when to know if you should hire a full time employee, I can’t envision anytime in my future being in a place where I need to hire a full time employee because of – a lot of that paperwork stuff is just – you can outsource it to a payroll company to your lawyer and to all these professionals that would probably already employ. So yeah, it’s definitely annoying and you have to deal with it, at least to hand it off to somebody to make sure their benefits are set up.

But the thing that starts to happen, or at least has happened in my experience is that when you are a practitioner, which I’m sure pretty much everybody listening is a practitioner of some kind; they're either a designer, a developer, or whatever, and they do their craft, as soon as you start hiring employees, your job turns into – or you're doing less of what you love and you're doing more of things like one-on-ones and breaking up employees scuffle – employees who are not getting along, you have to deal with that. You have to start dealing with morale. You have to deal with professional development in addition to all of the legal stuff and the tax stuff and health insurance stuff and all of that. Never mind the pressure of not worrying about two people’s mortgage, not just yours.

So all of a sudden, you get extremely cash flow focused, which is really a bad thing because if you have a dip, if your income is seasonal, then you have dip, all of a sudden you're like ‘ok, I need to take the next client that comes through the door if he’s willing to give me a deposit check because I got to pay Joe’s payroll in 2 days and I haven’t got the money’. So you start taking on bad clients, and that’s just the beginning of a potential debt spiral where bad clients tics from for a long time and causes more trouble than the worth, blah blah blah blah blah.

I guess if I was going to, say – for me hiring a full time employee is just not part of the way I set up my business. But I hasten to add that a lot of people who bill by the hour see hiring full time employees as the only way to ‘scale their business’ because they know they can’t just double their hourly rate or all their clients were on screaming and laughing at them. And so if you're going to slowly increase your rate, maybe 10% your hourly rate, maybe 10% every couple of years, even every year, you're never really going to breakthrough. You're never going to keep up with inflation. You're not going to breakthrough this artificially imposed income limit that stems from the fact that there are only so many hours in a year. So you can never go above the number of hours in a year times your rate.

So to increase your income, you have no choice but to hire junior employees who you can hopefully pay less than you're billing them out for, which creates, in my opinion, a little bit of a – I don’t want to sound like Carl Marx here, but it’s a little bit exploitative. And because you get a

younger developer, doesn’t know how much they're worth, you can pay them 65 bucks an hour, bill on that on a 165, and you keep the hundred, which you also had to pay to deal with project management and all the other administrative stuff.

But if you imagine for a second that there's another way to scale your business, which is to not bill by the hour and bill by the project with fixed bids based on value, the sky is your limit for your income because the way you scale your business is to get bigger and bigger customers. And once you have that revelation, and you realize that there's a way to drastically increase your income without adding headcount, all of a sudden, the notion, at least for me, of hiring full time employees becomes absurd. There's just no benefit to it. And [inaudible]. [Laughter]

Yeah. And that’s why I said I don’t want to hire employees for a client work. I might hire employees for products or maybe productized consulting if it’s the deliverable were fine, but I don’t want to be hiring people and putting them on building on a client. I've seen the insides of companies that do that and I just – that’s not for me. Some of the reasons are as Jonathan said and some of it are just my own.

But I could see hiring full time administrative assistant or full time writer or stuff like that if it’s going to help me on the product side; or maybe even on the generating leads, generating sales – that stuff. I could see that there's a huge hurdle to get over, but that’s a possibility for me. But as far as hiring a technician to work on client projects, that’s a no there for me.

It just triggered something in my mind. If I ever released a SaaS product, I would hire someone full time to do customer service. That’s the one thing that I can think of that I would do. Because if it was popular enough to have enough customers that there were regular requests from customers about ‘there’s this bug’ or ‘could you add this feature’ or whatever, I would definitely hire someone to just handle that and be committed to it so that – and I would probably go with the full time employee if assuming that SaaS is generating some reasonable income flow so that I wouldn’t – maybe a Mandy-type of person would work in this situation too, but I've had so many VAs flake on me that I wouldn’t want to keep retraining them. I want someone who’s really invested in the product and understood the features as well as I did so that when questions came in, they can just handle them. So I guess that’s one exception I can think of.

Yeah. And the other side is if you're doing SaaS or most product businesses, they have maybe not consistent income, but pretty predictable income versus client work which your client can call you up and say ‘we’re done’. Especially if you're billing in with [inaudible] and hourly or weekly or whatever, you can just – you could dry up right away versus a SaaS or a product where you have dozens to hundreds of thousands of customers paying you smaller amounts. One customer leaves its not as big of an impact.

Right. It’s much more predictable. Yeah.

The other thing to think about is – I can’t remember what it’s called, but the idea of if you're working by yourself, you don’t need to tell yourself to do things. Or you do, but it’s not like a – it’s not a huge cost. But if you hire someone else, there's now a communicating line that has to be there, and so if both of you guys are on the call for a client and you both heard the client, you might not have gotten the exact same understanding, but it’s pretty close, but if only one of you are on and now you got spend additional time to summarize or document or write it down. And so there's a time cost. There's probably some expense cost in that too. But then if you hire a second person, there's now – what is it – 3 lines of communication to go through everyone.

And so as you hire people or as you bring more people on – I don’t know if it’s exponential, but the communication lines just start blowing up. And that’s something to keep in mind too if you're trying to hire someone, especially if you're trying to scale and outsource stuff; that can be a problem. That can be a cost, and that can actually make it so the projected return you're going to get is a lot lower than what you actually get.

Yeah. Communication latencies is unbelievable. It really gets – it’s parabolic. So what's the joke? You can’t hire 9 women to have a baby in one month. It’s like just – it gets so crazy so fast that the returns are diminishing immediately.

And that’s not just employees. That’s also contractors. That’s anything – any kind of hiring. I think one big thing – I put it in chat, but one thing that I see or I hear about a lot with employees more as you get larger, then you get some people that have been there a while and some people that are new is you can – it’s easy to get the – some people into an entitlement attitude. ‘Oh, I've been here 5 years. I can say something. I can do whatever I want. I should get better benefits. I should get this’. And it’s something that once it happens, it’s really hard to reverse without letting that person go. The problem is it’s usually your best most senior people that have it. And so, that’s something you really have to be careful with employees.

Contractors, they can get that especially if they're longer term, but it’s less likely because there's more of a loose ties relationship there, and I think underneath, they all understand that whereas – really, in the US, you can fire an employee for pretty much any reason at any time. Most people give you 3 strikes and then they give you warnings and lets you go and pay your unemployment, but really, almost anyone can get fired, and it’s actually a very loose tie relationship, but there's cultural aspects around it. And I know other countries have similar or even more extreme versions of that too.

Yeah. We definitely saw that when I was running a dev shop. We had, depending on the time of the year, we had 10 or 15 full time employees, and we bill up by the hour; we billed them all out by the hour. I think – I don’t know – the rate was like 150 at the time, and they would – and I do one-onones with them, and they would – some of them would be like ‘well, you're billing me out on $150 an hour and your only paying me X, so I’m only making $50 an hour because of my salary or whatever’ – I’m just making up numbers, but – and they start to get their nose all out of joint as if they could just go solo and be making the same money that we were billing them out.

No concept of the overhead of multiple offices, multiple server rooms, flying people to conferences, flying people to customer sites just absolutely no consideration for any of that, and just be like ‘oh, I work this many hours a year’; just no concept of overhead or marketing or travel expenses or the health insurance cause that we were eating; it’s just so – and maybe this is a personality flaw of mine, but it was really annoying. And it kind of soured me on the experience, but entitlement is the perfect summary of that.

Yeah. People – a lot of employees don’t understand that their gross salary, easily 50% sometimes too – sometimes even 3 times that is what the cost of the business the employee is, and when the employees asking for, say, a $5,000 raise, that actually might end up being a 15, 20, 30, maybe even a 50,000 extra cost just due to all of the stuff the employee is using and consuming.

And so, as business people, we can look at that and be objectively ‘no you're not worth that’, but the employee says ‘well, it’s only 5 grand. I’m not worth 5 grand to you, fine, I’m leaving’. And it’s a hard attitude because people equate their job and salary and all that with the value of themselves.

It’s not separated from their self as the concept, so it gets really, really hard to do.

I definitely had employees come to me and say exactly what you were saying Jonathan, ‘you're billing me out at 3 times my billing rate, twice my billing rate; that’s not fair’. And truth be told, it didn’t annoy me. It made me feel terrible. I was like ‘wow’. Maybe I’m just like quite a pushover, but like ‘wow, it’s terrible’. And then I actually look into it, and I found out actually that’s the way consulting companies work, accounting company works, law firms work, and so I was able to go back and say ‘you might not like it, but exactly’ – it took me a while to come to the conclusion that you mentioned Jonathan like these are business expenses, and someone’s going to be footing the bill, and if you go out on your own and you do it, you're going to be paying them basically for yourself. And that’s just sort of the way it works. It’s not because I'm being pig-ish, but because that’s the way the business has to work.

And there's another thing that’s related to that which is a lot of people think ‘oh, if I have – if I’m just billing out for myself, then I get X. If I bill out for me plus someone else, then I’ll get 2X’, but it’s not at all the case because first of all, you're not going to be billing them out the same rate as you are almost certainly. And second of all, your time will now contract. You'll have less time to work on the actual thing you want to do because you are managing them, and managing takes time.

So it’s not – yes, it allows you to scale up the knots. While I hired my first employee years and years ago, I had more work than I could handle, and I said, ‘well, if I want to scale up, scale out, I’d hire some people’. And so I started off very small. I hired someone on a part time basis and as I mentioned before, I got to the point where I had 5, 6 people working for me in the year 2000. And exactly what Jonathan was saying happened to me. I was responsible for these people’s mortgages and salaries, and on and on and on, and the bottom dropped out of market. And I was totally stuck because I – and I felt terrible, and basically, over the course of 6 months, I had to lay them all off and I incurred some debt so that I could pay their salaries, which of course, never supposed to happen in a consulting company. But I didn’t want to just – I felt responsible for these people and I said, ‘well, maybe we’ll something’ and the month during which we’re looking for work, I still had to pay their salary. And so after that whole ordeal, I swore I would never hire an employee on a salary basis again. And that’s what I've done since then.

So since then, everyone I've hired has been on an hourly basis where basically, if I’m billing by the hour for a project, which I do – I still do certainly the development projects that my people work on, or my guy works on now bill by the hour and my people get a very large percentage of that. And I do that whether they're subcontractors or employees. And the idea of having an employee is I get more loyalty and I first dibs on what they're – on their time. Even though I know they're working on other things, that’s totally fine with me. So it’s like a glorified with benefits subcontractor relationship. And that’s [crosstalk] well, but with certain people who are very independent who are looking for work and are like ‘don’t need my day-to-day management. I can talk to clients also’.

Yeah. Those are your worth the wait and gold. So I guess I would say thinking back on it for me, if I

was going to get back into the business of hiring employees, it’s like you have to ask yourself, you think – first, you think ‘I'm ready to hire a full time employee’, but the corollary to that is you also have to say to yourself ‘and if need be, I’m ready to say the words ‘I don’t have your salary this month’ or ‘you're fired’’. So if you're not ready to say either one of those two second things, you're not ready to hire a full time employee.

Definitely.

Yes. Definitely, definitely, definitely. You will have to say one or both of those at some point.

Eventually, yeah.

Yeah. Look, I, as everyone knows in this podcast knows, I've been moving more and more into doing training, and I would say now a good 80 and 90% of my work is doing training. And so having an employee who’s doing day-to-day development lets me – granted I’m still making something off of the mobile, it’s not that much, but it allows me to then be involved in a project as a CTO of the company when I have more day-to-day control over how the development goes. And I've been very happy with that as it happens.

If for whatever reason – I hope this doesn’t happen – if we were not to have that project, that does raise the question whether I need my employee anymore and whether he and I still need each other. For now, I expect the projects are going to continue for quite some time. We’re all happy with each other. But I think it’s definitely the special combination of he’s an amazing guy, I have a very hands-off management style, which is great for his personality, he knows how to talk to the client directly, and they love his work. I get the benefit of I get to be more involved with the project and I make some money off of his work as well.

By the way, my accountant thinks that I’m totally nuts [chuckles]. My accountant says like ‘you need to pay your people way, way, way less’, and then benefits in Israel – Chuck, you're mentioning benefits in the US – benefits in Israel are way, way, way, way higher than they are in the US. So my accountant thinks I’m crazy for having this agreement with someone. Of course, he also complained to me that all of his staff leaves because they are not paid enough. So, I don’t know if he’s the right guy to be giving me business advice on such things [chuckles].

Yeah. It’s like where do you want your work: in employee churn or just making less of a profit off of them?

Yup. Alright, any other aspects of this we should dig into before we go to picks?

I think just one thing, which is – just as Jonathan, you said you're going to eventually have to say this to someone you can’t pay your salary or they're fired, the other thing you should be ready for is at some point, they will come to you and say ‘I’m out of here’.

Or ‘I want a raise, sir’.

Or ‘I want a raise’. Right. Right, right, right. The way I've done it with employees for years now is I just give them a large proportion of whatever we’re billing. So we have a mutual interest in raising their billing rates. But I've had a number of people over the years say ‘this has been great’. Some of them said it was terrible; the most is ‘I was great, and I’m going to move on’. In some ways, I

thought if it’s like graduate school where you got the person at the top with the name brand like the professor, the advisor, the consultant, and you’ve got people under them learning the trade. And after a few years, they say ‘I could do this too and I could be making that money’.

Not everyone is cut out for that. Not everyone wants to do that, but they do, and so they leave. And that means if you had someone working on client work and they leave, you are responsible and it is your name and you’d better then be able to step in and work on it, or find someone else who can because you won’t have the client for much longer if you leave them high and dry.

Alright, well, let’s go ahead and go to the picks. Reuven, do you want to start us off with picks?

Sure. So let’s see. The two picks I guess for this week; one is – I’m probably the last person listening to this podcast to have done this, but I tried Uber for the first time in everyone’s favorite Uber city which is Shanghai. Basically, I just get a ride – I found it very hard to get a cab on the street, and someone said ‘oh, you mean you're not using an app to call a taxi? No wonder you won’t find any’. And that explains the gesture that the guy made as he drove by me, which I guess was not telling me to do something unpleasant, but rather telling me to call for a taxi.

So anyway, in Shanghai, I used Uber and it was fantastic. I was really quite impressed by the app, by the interface, by the availability; everything’s terrific. So that’s pick number one to try them out even though I think they're a terrible company; they treat people terribly, and I had a great experience with the driver. I asked him what he thinks of it, and he was like ‘oh, it’s terrible’. And so then second is a – but he’s still doing it, I guess.

The second thing is a book that I got that I read while I was in China called Consider the Fork, and it’s all about the history of kitchen technologies, many of which we take for granted like egg beaters and forks and spoons and different types and on and on and on. So if you're into cooking and into technology and into the evolution of these things – I find it kind of fast and I think the book is definitely amusing and interesting, and also shows you – for instance, egg beaters. We think of that as like a very standard thing, but about a hundred years ago, this tremendous, tremendous competition who could come up with a commercially viable egg beater. And there were all these crazy ideas thrown out until someone probably finally managed to do it. Anyway, those are my picks for this week.

Alright. Eric, do you have some picks for us?

Yes. Since I get the song beat out of my head. Ok, this pick is from the Creative Class; it’s called Morgan’s paradox. It’s by Philip Morgan who’s been on the show a while ago. It’s an interesting take on positioning. I’m not going to spoil it for you. It’s really good to read, but basically, it comes along of what I've been saying for a while is you really don’t need that many clients. It’s probably not as many as you actually think. So if you're thinking about positioning or you're scared about getting into too small of a positioning ditch, read this, deal over the research Philip suggests, and see if your fear is unfounded or it’s actually legit.

Alright. Jonathan, what are your picks?

I've got two this week. The first is just the fun one; it is called the Mortified Podcast, which is getmortified.com, and it is – I've only listened to one episode so far, but my wife recommended it to me, and I’m telling you this is the most laughed-out-loud funny podcast I've ever heard. It’s basically people going on stage in front of an audience reading their diaries from when they were little kids [laughter] and it is a scream so I won’t even spoil it. There's just a million – I've read – I've listened to one; it was completely hilarious. I was sore from laughing. And the other titles of the different episodes sound equally hilarious. So you're obviously a podcast listener, so check it out.

The other one is a service available from Marcus Blankenship who’s going to be a guest on the show, I think, in October. And if you are planning to hire people, he helps technical teams improve their people management skills. So if you're a developer and you're thinking about hiring someone for whatever reason, he can walk you through that transition from going to be – from going from a person who does the work to someone who manages people who do the work. And like I said, it’s specifically oriented to technical firm type of people, so I’m sure it would be of interest to the folks that listen to the show. And that’s it.

Alright. I've got a couple of picks. The first one is I was interviewed on a podcast called Developer on Fire and I talked a lot about the podcast and my experience as a developer and offer some advice. I talked about giving jobs and a bunch of other things – freelancing. So if you're interested in that, I’ll put the link in the show notes.

And then the other one is a programming exercise that I've been playing with for the last little while called Elevator Saga, and so I’ll put a link to that in the show notes as well, but it’s just a – you basically start out with one elevator, and so you have to come up with an algorithm that will get – it’ll serve, I guess, 20 people in 60 seconds or less, and then they get progressively harder. I’m on challenge number 4 right now, and that’s transport 28 people in 60 seconds and you have 2 elevator cars. So you have to then start figuring out ‘ok, when do I call in the second car’, or what algorithm will get it through the fastest and all that stuff. So anyway, it’s a lot of fun and it’s kind of a progressive build on what you did last time. So those are my picks.

Well, it was a fun discussion. Hopefully, some people who are considering hiring and how and when and who, that’ll help them out. Alright, well, we’ll wrap up the show.