Updated: Jun 23
When is the right time to hire more staff ? Recent layoffs particularly in the tech sector have largely been a result of over hiring and expectations of ambitious growth. There's no running away unexpected events that come along once or twice a lifetime, however there are some things you can consider when deciding whether now is the right moment to hire or to stay lean.
Hiring often feels chicken and egg - we need the talent and extra capacity to drive growth. At the same time, if growth does not eventuate, or external market factors change - we are in the costly and hugely disappointing position of having to let talent go.
Recent tech lay-offs are a case in point, according to experts .The intersection of the hiring in the latter stage of the pandemic (which favoured online services), rising costs and interest rates, an uncertain global economy and a war in Europe. Tech stock prices have been on the decline since Q1 2022, with Netflix, Meta and Amazon at time of writing hovering around May 2020 price levels however such business tend to play a long-term game avoiding short-term moves in investor sentiment.
So when is the right time to invest in more capacity or to keep it lean?
Assess existing talent
First I would think about the talent you have now before hiring more people.
Take time to regularly assess their productivity or output and fit with your company culture and behaviours. Are they high on both? These are your A-players.
One A-player may be able to replace 3 or 4 C-players. A-players are high on both results and culture or alignment with your firm values.
C-players may be high on skill but may have low value/behaviour alignment and weaken your culture. Bringing everyone’s motivation and performance down.
D players should have never been hired (in all possibility a fast mishire or shareholder relative). Too many C and D players? Your A-players will eventually leave. Which limits your ability to attract new A-players and sends you into a talent death spiral.
This exercise of understand who your A, B and C players if assessed regularly, will free up space for more A players in your team and overall, your costs and efficiency is likely to improve.
How many A-players should you aim for?
Run a quick exercise - how many A, B, C and D players do you have today in your business? Chances are it's below 90%. Ensuring the leadership or executive team is developing towards 100% A-players and should be a top priority (and KPI!) for the CEO. (If you don't believe it's possible check out these brief cases). Hiring A-players is a skill every CEO should learn how to master.
With more A-players, you will likely attracts and recruit more A-players at all levels of the organisation. Performance of your business will improve and likely improve your cost base.
Time for New Hires?
Before jumping into approving new hires, ensure your hiring talent is truly across trends in your economy, industry and market.
Are there signs this is trending down? e.g. customers putting off new expenditure, contract renewal delays, economic indices like inflation or interest rates creeping up consecutively? Perhaps it's time to invest in process innovation that improves effciencies like output and return on funds invested in marketing and sales, rather than hiring.
If you are certain the trends are in your favour, consider your stage of growth. In this current market, where funding is tight, if you are not yet cashflow positive, you may want to run as lean as you can for as long as you can for now. And focus on ways to improve current cashflow position such as pricing, margin and addressing payment terms.
Confidence is backed by data - so if you are less sure, run some small scale tests before investing in the whole exercise. Or do you have strong validation points from your customers that revenue, returns and cashflow is trending up based on today's activities?
Once you are satisfied you have funding for growth and a in place, this would normally be the time to invest in building capacity for growth, but naturally be mindful of the impact on your burn rate and run-way.
In a high-growth scaling business a good yardstick to go by is to bring on one new talent at the executive level no less than every 4-6 months, provided growth continues period on period.
In a slower growth business every 9-12 months. It takes about 12 months sometimes for new talent n to have returned their salary in positive cashflow (not revenue), so be mindful about bringing on too many senior managements too quickly.
Employees vs. Automation?
Another aspect of your growth strategy is deciding how efficiently to grow, not only how quickly. It’s one thing to grow a business simply by adding headcount or investing in more marketing and sales. It’s another thing to scale. Scaling is different from growing. During scaling the firm is able to grow and serve customers at a declining costs or unit of effort to the previously earned revenue. Each new unit of revenue or acquire customer cohort is brought on and served at a declining unit cost than the last.
So rather than blankly hiring more sales or production/delivery staff, it’s good to first think about automation or technology that may reduce need for future additional headcount as you scale your customer base. This may mean reducing or accelerating the ‘human’ part of the process such as deployment time, reporting, or customer facing time through CRM and marketing automation in the sales process.
Doing the right things?
Be aware of whether your people are doing the right things. This is another great exercise which sounds simple, but is sometimes overlooked for fear of feeling like a ‘helicopter ceo’. How?
In every weekly meeting. "What is your number one priority this week?"
This helps you to hear, week on week, what people are focusing on.
You will spot the trends and immediately get them back on track with the firm's top priorities if they may not be focussing on the right things.
As a leadership team take the time to 'audit' how you spend your time in your next monthly or quarterly meeting.
Each individual take 10-15 mins to go back over their calendar and review what the week looks like. How much of your time is spent on big rocks and priorities versus nice to have projects, low impact activities, admin and reporting.
I bet there are one or two things that people are doing that they no longer need to be or could outsource. Actively look for activities to help your team let go of. It tends to gather junk like the top drawer in the kitchen and once in a while needs to be cleared out to make time for priorities and big rocks.
Recommended Action list!
Review your current talent in a 2 x 2 matrix according to Values and Talent/skills/productivity (High vs Low). How many A players do you have?
Run an SWT (Strengths, Weakness, Trends) exercise and look for signals from customers and industry/economic environment ahead of planning headcount.
Train yourself and your team to master hiring A-players and make this your top KPI as CEO.
Challenge your hiring managers to suggest alternatives to hiring such as automation and process innovation or to reassess how they spend their time today regularly to avoid over-hiring.
Ask your team about their top No. 1 priority in every daily and weekly to ensure you have the right people in the right roles doing the right things.
If you would like any help with educating your team to implement these actions, then please book a call with me here.