Why You Don’t Want Employees On Payroll


Dear W-2 employee,

It’s not you; it’s me. I’ve been hurt before by people like you and I’m just not ready to do it again. I’m sorry, but not really. I’ve moved on, and I’m keeping the business.

Best regards,


We must buy commitment!

When I did my first full time startup in 2007 I was obsessed with company culture. To my mind, and aided by partners who shared this view, in order to foster loyalty and commitment we simply had to put all of our hires on payroll. We were absolutely convinced that what we were building was too damn important to work with, gasp, contractors.

Fast forward to the end of 2008 and we had eight really talented people on payroll. We were doing top line revenue of just over $40K/month. For the first time in the history of the company I was paying myself (less than the high school kid at the snack bar, but still). We were getting there, baby.

Anyone remember what happened then? It started with “Great” and ended (oh, did it end) with “Recession.” B2B training and development budgets, our life blood, all got cancelled the instant the clock changed to 12:00am on January 1, 2009. It was unreal. We went from $40K/month to $0. For six straight months.

What would you do?

I love this story. Not just because I took a six-figure haircut and burned my friends and family loans to the ground. More so, I love it because it taught me a hell of a lot about what it means to be an entrepreneur. It also makes me a damn good mentor for founders. You know that advice you are ignoring from that mentor with gray hair? Yeah, I was you.

So, ignore advice I did. I refused to believe that each successive month was not an ugly aberration. Certainly this can’t continue… for three years.

I ran out of money, laid off the entire staff, and closed the doors in June 2009, a month before my first son was born. In reality I was lucky. I got a consulting gig the following Monday and started making actual income that persisted through the recession. Many were not so lucky.

So what does this have to do with payroll?

Factors in the failure of this company were varied. We had significant marketing issues and were likely peddling a valuable solution to a problem no one wanted to try to solve when the chips were down. We would likely not have survived 2010 even if we got through 2009. However, we also had one significant operating flaw: too much payroll overhead.

I believe sincerely, and have accumulated proof, that our critical failure was to believe we could not create and deliver an exceptional experience with contract staff. We simply burned too much cash staffing our bench. What’s worse, when that fact was clear and I most definitely should have cut staff, I balked. I took care of people to the detriment of my company, my partners, and my family’s finances. I paid everyone else until the bitter end and left myself with a huge debt load. (I paid, and intend to keep paying, the company’s debt even though it was unsecured.)

Contractors can be blow your mind awesome.

I’m not saying it was really like this; I know everyone on staff was doing their best. But, it often felt like I was killing myself trying to sell enough work to pay everyone else. During the day everyone was in a desk waiting for a gig and during the evening and night I was alone at mine trying to eek out how the hell I was going to make it another week. I got to where I hated getting out of bed to go to work at my own company. That’s a sad place, the kind that makes CEO peer groups and therapists grateful.

Since that very expensive learning experience I have started somewhere around 10 additional companies. Every single one of them has been successful with an exclusively contract workforce. At first I did this begrudgingly. I just couldn’t afford payroll. I paid when the client paid. It didn’t take me long to realize what I had created by accident.

My contractors are bar none the most effective, efficient, and loyal people I’ve ever worked with. (I refuse to say they work for me, always with me.)

How was I so wrong about this? I think it was a fundamental misunderstanding about motivations, incentives, and the entrepreneurial spirit.

Let’s dive into the lesson.

  • I need you hungry. If you want the “security” of payroll we’re not a good fit. I need you to thrive on projects for which I will pay you well and not give you shit about your rate. I need you to starve if we don’t collectively kick ass, and I need you to love it. For that I’ll always pay you and do so before I pay me.
  • I need you to appreciate public feedback as compensation. I started hiring Odesk and Elance contractors shortly after the sites opened. I loved how I could get great talent for projects who worked for their 5 Stars because their top ratings got them more gigs. To me that’s a brilliant alignment of incentives.
  • I need you to own it. I’m a huge proponent of project-based interviewing. You get a gig. If you jive with me and you kick ass, you get another gig. It’s elegant and, again, incentives are aligned.
  • I need you to take my call first. This is why I don’t haggle on rates. I ask a contractor what he or she wants to make and I don’t argue with the answer. If it fits the project, I pay it. If not, I’ll tell the truth, allow for a lower bid at their option, or file their info for the next gig that’s a fit. In exchange, I want to be first. Every time. I don’t care about your other clients. I pay the best, I manage the best, and I bring the best gigs. If you want that then we’re a good fit. I care more about fielding the best team and winning than I do about anything else. My clients demand it and I’m your client, so I demand it.

This works for me.

I have a sick team that has joined me, project to project, in some cases for 12 years or more. None of them has ever asked me for a salary or benefits. None of them is hurting for money. We absolutely kick ass together and we bring the goods. More importantly, we work like an all-star team together. We support each other. We have a damn good culture even though we don’t share a shred of durable binding.
It’s awesome, and it’s why I’m done with payroll.

How to Delegate to Get the Best From Your Startup Employees



When you first launch your company, you have to micromanage to some extent – there’s little or no team infrastructure and, since you’re building a company from the ground up, every decision builds and shapes the future of the company. As you scale your business, however, there comes a time when micromanaging actually damages your organization. It also makes running and working in your business a lot less fun.

rsz_incontentad2Assuming you have the right people on the bus in the first place, real growth comes in realizing when to nitpick and when to simply let go and delegate. I believe a dedicated individual delivers far more value performing in an environment of freedom than when someone is continually looking over her/his shoulder. So as my company has grown, I’ve had to learn how to be an efficient boss who lets his employees take the reins and, thus, grow personally and professionally. Doing so leads to happier employees and an overall enhanced team performance.

In my opinion, the most effective management style is summed up in the words of Shunryu Suzuki, a Zen Buddhist expert and author of Zen Mind, Beginner’s Mind. In his book, Suzuki suggests that the best way to control people is to give them a great deal of space, allow them to mess around, and then to just watch them. “To ignore them is not good; that is the worst policy. The second worst is trying to control them. The best one is to watch them; just to watch them, without trying to control them.”

Suzuki’s suggestion may seem oversimplified or silly, but I’ve actually found that it’s dead on. If your employees feel like they have freedom to be themselves and your confidence, all they need to know is that you’re watching them. This, combined with some basic structure, will lead to the best performance.

Here are four strategies we use at my company, HUMAN Healthy Vending, to boost employee productivity without micromanaging:

  1. Create a system to share “crucial results” across the company. Employees and managers must be able to share their daily and weekly goals. First, create a way for your employees (managers, too) to share the most important action items they have for the week and have them list, daily, what they are going to accomplish in order to achieve those weekly goals. This provides a way for employees to be accountable to their own goals, allows managers to see what their direct reports are doing (and provide adequate feedback and guidance), and provides a way for teams to track progress toward shared goals. The key here is to also go over these goals in a quick huddle every day to ensure that the goals chosen for the day and week are actually the most valuable to each department and to the company as a whole. While there are software programs like Asana that make it easy to share goals, I have found that a shared Google spreadsheet works just as well. Each employee at our company is on the same spreadsheet, though for larger companies it may make sense to break it down by department. At the end of each day, employees color-code each daily goal — a green highlight signifies the task has been completed and a red highlight signifies the task was not completed.
  2. Start the morning with a huddle. Morning “huddles” have consistently proven to be a great way for companies to energize their team and make sure everyone is set up for success. Broken down by department, each team member has 30 seconds to list his or her number-one most important objective of the day, share any big wins, and let others know if he or she needs help or guidance on a specific issue or problem. This way, everyone is on the same page and feels aligned, and potential problems are solved much sooner than they otherwise would be.
  3. Conduct weekly “direct report” meetings. Just like professors have “office hours,” managers should have an ongoing timeframe where employees can come to speak to them about specific projects. I have a recurring weekly appointment with each of my direct reports to discuss progress on goals and to provide feedback. This helps cut down emails since my staff knows that they have a recurring appointment to discuss action items, questions and problems in person. I always ensure that I have an agenda for each meeting a day in advance so we make the best use of our time. Recently we’ve been using 15Five software to lead these meetings, and serve as a kick-off point for our conversation together. Having a set template for each meeting, and reviewing action items from last week, is absolutely essential.
  4. Have a company-wide email policy. It is one of my personal policies that email does not dictate my actions or my schedule. Instead, I prefer to use my time to create, rather than react. It would not make sense, however, for me to be the only one with this constrained email policy. So, we are all “mindful emailers.” We do not allow internal emails to the entire team before noon each day. This helps us ensure that the most vital hours for productivity (the morning hours) are reserved for crushing it. This is especially useful for a team with a sales staff, and ensures that people’s crucial results are handled early in the day rather than at the end.

If you’re running a startup, chances are you have your hands in everything. This is fine, and necessary when you’re in the early stage of your business. But you can only scale your growth if you hire and train employees to take over certain aspects of the business so that you can stick to your high-leverage activities. There’s a fine line between being an engaged manager and a micromanager. The above steps will help you discover where it is.

Sean Kelly is a Johns Hopkins and Columbia-University-trained biomedical engineer and nutrition-focused social entrepreneur who co-founded HUMAN (Helping Unite Mankind And Nutrition) in 2008 to make healthy food more convenient than junk food while turning the $42B vending industry on its head. HUMAN is now the world’s leading socially-responsible franchisor of healthy vending machine businesses and healthy micro-markets with hundreds of franchisees and thousands of machines and markets placed across the United States, Canada and Puerto Rico. Sean has landed on many coveted business lists, including Forbes’ “30 Under 30,” CNN Money’s “Top 10 Generation Next Entrepreneurs,” Business Week’s “Top 25 Young Entrepreneurs” and Mother Nature Network’s “Innovation Generation: 30 Fresh Thinkers Helping Humanity Adapt to What’s Next.” 

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

37 Tips for Motivating Your Startup’s Employees

Inspire me, please!

A good job is hard to find, but every entrepreneur knows a good employee is even harder to keep. As an entrepreneur, one must ensure his or her company is staffed with people who look forward to coming to work every day for more than a paycheck.

Through the years, I found that it was easy to keep employees motivated – all I had to do was provide them with a leader worth following and tasks worth fulfilling. But after almost seven years in business, I still find myself searching for new ways to maintain productivity while providing each individual with the drive they need to perform to the best of their ability.

Here’s how I do it:

  1. Support new ideas. When employees come to you with an idea or a solution to a problem they believe is for the betterment of the company, it’s a sign that they care. Supporting new ideas and giving an individual the chance to ‘run with it’ is motivating, whether or not it works out in the end.
  2. Empower each individual. Every single individual contributes to the bottom line. Empowering them to excel in their role, no matter how large or small, creates a sense of ownership that will lead to meeting and exceeding expectations.
  3. Don’t let them become bored. I get bored easily, so I assume my employees also have a short attention span. Host a cupcake bake-off, plan a happy hour, start a push-up contest in the middle of the office on a Wednesday, or allow a different person to run the weekly meetings to break up the monotony.
  4. Celebrate personal milestones. About seven years ago, as a company of fewer than 10 people, we celebrated each employee’s birthday, work anniversary, engagement, and even personal milestones. Today, as a company of over 100, we still celebrate these milestones. It never gets old.
  5. Acknowledge professional achievement. Everyone wants to be recognized. The acknowledgement of a job well done coming from upper management or the owner of the company will mean more to an employee than you think.
  6. Listen. This is probably the easiest thing you can do for an employee; yet, it can also be the most difficult. Carving out some time each day to listen to anything from concerns to ideas will not only make your employees happy, it will also provide you with much-needed insight on your business from the people who help keep it running.
  7. Encourage friendly competition. A competitive environment is a productive environment. Encouraging employees to participate in competitions or challenges is healthy and may actually lead to increased camaraderie.
  8. Allow pets at work. My two dogs come to the office every day, and all of my employees are welcome to bring their pets to work. Pets make people happy and bring a sense of companionship to the office.
  9. Reward accomplishments. When a pat on the back or a high five just won’t do, monetary incentives always seem to hit the spot.
  10. Create attainable goals. Setting goals are important, but ensuring they aren’t set too loftily by the employer or employee will help determine whether or not the goal is achieved come year-end evaluations.
  11. Be clear with expectations. Don’t leave too much to be determined. Set clear expectations so you can plan for specific results.
  12. Encourage individuality. Everyone is different. Encouraging individual personalities to shine through will not only help create a diverse and dynamic culture, it will also foster an open and accepting work environment. We have a lot of characters here at JBC – the more the merrier.
  13. Be a leader worth following. This point falls in my lap alone. If my employees don’t perceive me as a worthy leader, how can I expect them to believe in our mission and help to achieve it?
  14. Set an example. Or two or three. I can’t expect my employees to do anything that I wouldn’t do. I always ask myself if the expectations that I set for my employees are comparable to the expectations that I would set for myself.
  15. Make things interesting. Shaking things up every now and then is a good way to break up the day-to-day routine of the work schedule.
  16. Encourage learning new skills. Times are changing. Ensuring that every willing employee has the opportunity to learn a new skill or brush up on an old skill will benefit everyone involved.
  17. Foster creativity. A creative environment is a thriving one. Encourage creativity and watch your business flourish as thinking outside of the box becomes the norm.
  18. Give credit where credit is due. Although employees come to work to complete their appointed tasks, it’s still an accomplishment if they do it well. Recognize their hard work by shouting them out to the entire company.
  19. Create a career path. Having an idea of what lies ahead is the ultimate motivation. Employees who have a path set before them that may lead to promotion can work towards a goal. This will lead to increased commitment to their current employer.
  20. Start a tradition. Our annual Thanksgiving potluck is so greatly anticipated that some employees hold off on vacation to participate and attend the event with their work family. Every holiday season, we host a toy drive for a school in the Bronx. Employees from across the U.S. fly in to partake. Start a tradition and keep it going.
  21. Get personal. This one is tricky because there is a fine line that cannot be crossed. However, showing concern and interest in the lives of each employee goes a long way.
  22. Keep an open mind. I’m always open to new ideas and new methods. Anything new is worth exploration and consideration.
  23. Encourage laughter. Laughter is contagious, so help spread the joy.
  24. Embrace change. Fighting change is harder than embracing change. I have practiced this more recently in regards to social media and living in the digital age. I also encourage my employees to do the same.
  25. Stir the pot. It’s not easy to keep things interesting every single day. Every now and then, stirring the pot can help to liven things up. We recently switched from every-other summer Fridays to weekly summer Fridays after a company-wide challenge set earlier in the year. Employees were so elated at the opportunity to start their summer weekends a day early that productivity has risen ever since.
  26. Recognize strengths. Bringing out the best in people is a talent every entrepreneur should strive to master.
  27. Be available. It’s easy to get sucked into a CEO schedule, but it’s just as easy to take a few minutes out of each day to talk to an employee who may not be on your calendar.
  28. Manage everyone individually. Everyone is different, but some are so different that they may require a personalized management style. Knowing your employees on an individual basis is the only way to know how to manage them effectively.
  29. Encourage ownership. The success of a business lies in ownership. When employees feel invested in a company, productivity increases.
  30. Promote unity. As much as each employee needs to be able to stand on his own two feet, he must also be able to work in a team. Promoting unity will help achieve individual and team goals.
  31. Have patience. Entrepreneurs tend only to be interested in results. Patience will prevent you from expecting too much too soon and will allow employees to complete tasks properly.
  32. Be flexible. Things don’t always happen as planned; when employees see that you are open to going with the flow every once in a while, tensions ease up and productivity remains constant.
  33. Offer incentives. Knowing ahead of time that there’s a $500 prize on the line or extra vacation days to be given away will make achieving goals that much more worthwhile.
  34. Provide balance. A lively work environment promises a good time, but balance is just as important to maintain levels of productivity — and the sanity of coworkers.
  35. Welcome new methods. The digital age is changing life as we know it. Embracing, rather than avoiding, new methods will ensure your business and employees stay ahead of the competition.
  36. Cultivate a positive work environment. There is no place for negativity if success is to be achieved. A positive work environment is the result of positive leaders.
  37. Give them a reason to come to work – every day. Showing up to work five days a week, ready to exceed expectations, requires a level of loyalty that can only be achieved if morale is high.

An employee who enjoys coming to work is a worthy investment.

Bryan J. Zaslow is a 38 year-old philanthropist, athlete, lawyer and serial entrepreneur residing in New York City. Bryan is the founder of a family of companies within JBCHoldings NY LLC inclusive of JBCStyle, JBCPlatform, JBCconnect, Project Soulmate, and recently acquired Janou Pakter.

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.


14 Tips for Recruiting the Best Employees for Your Startup


Question: What’s your best tip for attracting top talent to a new startup?



Cultivate Future Leaders

“Highlight the experience your company can offer. Don’t focus on recruiting top talent by offering all the perks in the world; instead, make cultivating talent, who will eventually become leaders, a priority. It should be about the prospect’s passion for what your company is doing, not the daily catered meals (though I’m sure that’s nice, too).”


Understand What Makes Them Tick

“Everyone wants to be heard, and certainly understood. We’re a very strengths-based organization and we start from the day we begin recruiting or courting new talent. If you take the time to get to know what someone is looking for and what drives them, you not only can qualify if they’re the right fit for your team, but customize their role and your offer to what’s most important to them. Win-win!” Follow @laurenperkins

LAUREN PERKINS Perks Consulting

Sell the Vision

“We pay less. We work harder. We work longer hours. The only reason to join our team is because you want to be a part of what we are building. The best people want to be a part of big visions, so sell the vision. “


Be Aggressive and Relentless

“Anybody that’s any good, especially in a city like San Francisco or NYC, is going to be looking at a dozen or more offers. In order to close him, besides being generous with compensation, you have to be aggressive, getting your investors to call him on your behalf. Relentlessly follow up. Even more important, be organized with your interview process and move quickly without delay. Follow @sitepointmatt

MATT MICKIEWICZ Flippa and 99designs

Get Great Press

“Aside from selling the mission and vision of your startup, a great tip for reeling in awesome talent for your firm is to attract great media attention. Press is a wonderful conduit for getting more exposure to your business. Being able to share your mission with a broader audience means that your startup will get more eyeballs, and that extra reader may be your next best team member.”


Empower Them With Ownership

“Empower them with ownership and the opportunity to make decisions. People drawn to startups are disillusioned by big corporate structures and weary of working in an environment where they have no voice. If you tie the talent to the success of the company, everybody wins. Moreover, allow them to exercise the skills they enjoy employing. Retention skyrockets when talent is empowered and impassioned.”


Discover a Shared Passion

“Share your vision for your startup and what you hope to accomplish. Trying to lure top talent with perks, pay or other options may get their attention, but the people you should really be seeking are the ones interested in finding a role where they can have a meaningful contribution to something exciting. Plus, someone who isn’t passionate about what you are doing won’t be a great fit.”

BRANT BUKOWSKY Veterans United Home Loans

Network at Conferences

“We have found it helpful to attend industry-related conferences and casually chat with people who are attending or speaking to spread the word regarding available opportunities. If the person likes us, they will like working with or for us and/or recommend us to others who they think would be a good culture fit. Finding the right culture fit is more important to us than the depth of their skills.”


Take Your Time

“If you’ve set your company culture the way you want it, take your time during the hiring process. The culture will attract better people instantly. I’ve been known to conduct as many as five one-on-one interviews before hiring new personnel. That’s on top of several phone interviews with the prospect and other staff. I need to be absolutely sure the talent is where I want it. “

BRIAN MORAN Get 10,000 Fans

Be Transparent

“I’m always transparent with potential new hires. I show them our progress, but I also want them to see the warts. This is important for two reasons: 1) They’ll know exactly where the company stands. 2) It builds trust. Sharing the bad with the good shows employees that they can trust you to tell it like it is. Transparency sets an important standard for any company.”


Don’t Sell

“Conventional wisdom is to sell potential recruits on the company, vision, perks, etc. Don’t. Just tell them what you are and, more importantly, what you aren’t. You may lose some “rock stars” along the way, but you’ll build a loyal group of employees who know exactly what they signed up for.”


Show Off Company Talent

“A-players want to work with other A-players. So, it’s critical to showcase just how talented your current team is to a prospective employee. Besides making the recruit feel special, it also makes your team feel special to know that you value and respect their talents and abilities.” Follow @4collegeparents

SARAH SCHUPP UniversityParent

Hire Non-Local Talent

“Recruit people to your company and to your city. Santa Monica sells itself. When people relocate for a job, their commitment level is high, and their external social distractions are low. It’s an ideal circumstance for a startup where hours are often unreasonable.”


Emphasize Culture Fit

“Our company doesn’t necessarily look for “top talent” so much as it looks for high-character people with a good work ethic and technical aptitude. We look for people who are a fit for our culture, which is more important on a long-term basis for the good of the team.”

JOE BARTON Barton Publishing

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.