Many companies have made the mistake of hiring too early. For start-ups and smaller businesses, it can be the last mistake you make. People are the most expensive overhead in companies so adding more of them absolutely must have the right ROI or you’re throwing money away. Timing is key.
Let’s Explore the Problem
You start a new project or launch a new product plan.
You know you will need operations people, salespeople, engineers and marketing people.
On paper, you believe, to hit your optimistic targets you need 5 new staff in each team.
So you hire all 15 people as quickly as you can, because that will allow you to hit all your targets faster, right?
Wrong. (Most of the time.)
Hiring all of these people before the project has started means that your ‘on paper’ estimations have a good chance of being very wrong. If you don’t build your product fast enough, then sales and marketing are sitting around wasting time. If you haven’t tried and tested selling with one person, how will you know how to train five people? If you haven’t tested several marketing channels before building out the team, the reality is you’re about to throw a lot of money down a marketing black hole as you ‘test’ with 5 times the speed and 5 times the cost. It’s moments like this where you may discover you needed to hire an SEO specialist, when in fact you hired a print media specialist, who makes beautiful content that no one ever sees.
The ‘More Heads’ Myth
I’ve seen many other reasons for companies over hiring. They include:
- The belief that simply adding more heads will increase sales/productivity proportionally;
- Promises to managers that you’ll “build a team around them” so they can grow a high-performance team; and
- Too much work for the current number of staff.
These may be all good reasons in their own right to hire more heads, but without the right structure in place prior to hiring, you are burning money while you figure it out. Labour is one of the costliest expenses to a business, so adding a new person should be taken with a great deal of care.
How to Add the Structure and Not Burn Money
1. Document the Job Description as a Proper Process
If you believe adding a new person or people will increase productivity, make sure that you have all the productive tasks they would do documented and their ROI to the business established before you start the hiring process.
This builds their job description and creates a budget at the same time.
2. Create Teams in Line with Your KPIs
If you think a manager wants more people because they feel the idea of having a team working with them is important for their own career ambitions, have them create the list of things that new people would do, and what value each of these things would bring to the business.
From this exercise, I’ve often had great people turn to me and say “let’s hold fire on that until we’ve nailed these new roles, then I’ll add people at a pace that I can support and grow them.”
3. Keep in Mind Training and Onboarding Time
A manager can become less effective if he has to recruit and train people. Do you have the capacity to lose some of their productivity for 3 months? How long before you see a return on the investment for the time invested in hiring and training new employees? Would you have been better off waiting to hit a milestone before slowing the teams’ output for a period of time?
4. Reduce Wasteful Work
Too much workload for the current staff is obviously a good reason to make a change, but is that change always to increase costs by adding more people? More often than not, the answer is ‘no’.
You can do the more sensible thing by evaluating the work currently being done by your team and reduce the inefficiencies. It’s often cheaper to reduce the workload that brings little value than to hire more people to help with work that didn’t bring in a great return in the first place.
I’ve seen both ends of this problem when consulting a couple of years ago. The business owner had looked at the problem on paper and hired all the required staff prior to opening. With a business that felt like it was performing well but not making a great deal of profit, I recommended reducing the labour cost (by not using contractors rather than summarily firing full-time staff).
My recommendation was met with some concern, as the general feeling amongst the team was that they were already working at their maximum capacity. They wanted to hire more people to assist with the workload. Working with each team member one by one, I assessed their workload and actually reduced the wasteful work, cutting labour costs in half. Not only did labour costs go down for the business as a result of the team being smaller and easier to manage, but the productivity of that team went up.
5. Hire at the Right Time
As a general rule, the right time is when you can quantify the business value in terms of ROI, you have a proven measurable return and a channel of growth that individuals can apply themselves too. Until you can generate a return from a particular path with your current team, don’t start bringing in new people to do work.
Understand Your Business’s Needs & Optimise Your Workforce
In summation, be reluctant to hire as a means to solve problems. Hire carefully, after evaluating your team’s needs and optimising their output. Always follow your KPIs and never hire as a reflex to relieve stretched teams. If your business is healthy and growing, the time for hiring will come. Good things come to those who wait.
Read more of my thoughts on business and gain valuable insights on start-ups and scale-ups by following Bamboo Orchard on LinkedIn.
This article first appeared on Medium as Don’t hire to solve problems. Key things to think about before growing your team.
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