Hiring Strategically In A Small Business
INTRODUCTION
Who do you hire next? In small teams, this is a big question. It represents a significant expense to your business and with each new hire you take on new risk. Who to hire might not be the best question; a better question for small teams is what type of hire is most needed right now.
In my experience, there are two basic types of hires; NET PROFIT hires and SYSTEM SUPPORT hires. Both are important to a growing business, but they must be strategically balanced.
NET PROFIT HIRES
Net profit hires are simply those that contribute to additional net profit. Their position has a direct clear line to new business. They have direct contact with your customer, are the primary position responsible to deliver on the promise you are making to your customers. They either make the sale or deliver the results (or both). Adding more of these types of hires adds more capacity to serve more customers. For the sake of this discussion we will call them “+ hires”. In a moment we will discuss how this influences our HIRING MATH.
SYSTEM SUPPORT HIRES
System Support hires are the team members that provide the systems and support structure to keep your business moving. They tend to be in management roles and support roles. Think Executive Assistants, managers, supervisors, HR, bookkeeping, Office Managers and the like. These employees help to maintain the consistent systematic delivery within your team. They solve problems within the organization and ensure that everyone has the tools and information they need to serve your clients and customers. Adding more of these types of employees increase or maintain the efficiency of the current systems you use to operate your business. Within the organization, and for the sake of our HIRING MATH, they are “- hires”. This is not a statement of their value, it is merely a weighting in the HIRING MATH process.
THE TEMPTATION
As the hiring manager the temptation is to solve your felt need and satisfy the squeakiest wheel….which is why you are hiring. Don’t get me wrong, you should hire to your pain point but not without first considering the strategic impact of that hire.
Here is what I mean.
Let’s unpack the HIRING MATH process.
THE FIRST STEP
The first step is to consider your current team. List each person on your payroll on a spreadsheet in column A. For each employee, next to their name (in column B) list a +1 or -1. If an employee works less than 15 hours a week, combine them with another employee to formulate a FTE (full time equivalent). If they work more than 15 hours per week, do not combine them with another employee.
You will have some employees that wear more than one hat in your organization. For example, they may manage a team but also be responsible for new business (they write proposals and estimates), or they may also work on the front line of your business fulfilling deliverables for your customers. In this case, you need to consider what type of they do more than 50% of the time. If spend 51% of their typical week in a NET PROFIT duties, they are a given a +1 value. If they spend 51% of their time supporting other employees they are given a -1 value.
For managers, always err on the side of SYSTEM SUPPORT. As much as we want to believe they are NET PROFIT hires because of their ability to create profit, good managers do their best work supporting the performance of the team. Only in very unique situations should they be listed as +1.
Service Business Example (Table1):
Preschool Example (Table 2):
HIRING MATH
Now that you’ve assigned values to each member of your team, add all of the values in column B. This total begins to give you a sense of the balance in your organization. In the example above, Table 1 = +2, Table 2 = -1.
If you are in the 0 to +3 range, your small business is healthy and balanced.
A negative number indicates you have overstated the SYSTEM SUPPORT side of your organization.
Any final total that scores above +4, indicates you may not be able to sustain a good customer experience.
For small business with multiple locations, this is calculated both for a single location, as well as for the business as a whole. Both the location and the entire business must fall in the 0-3 range.
LOPSIDED INFLATION
When you overload on either type of hire, you tend to inflate and lopsided your organization. The NET PROFIT hires can bring in new work and capacity for more customers but your deliverables suffer because SYSTEM SUPPORT cannot keep up with the demands of the team. This, again, is indicated by your HIRING MATH being in the 4+ range. You likely won’t feel the financial pressure of this bloat but your customer satisfaction and retention will begin to suffer.
You will need to pay close attention to how often support and management tasks are falling through the cracks. This will also show up in the employee satisfaction of your SYSTEM SUPPORT staff. As an owner it will also be important to pay attention to your customer experience in a handful of areas:
Online reviews
Customer retention
Customer complaints and meaningful resolutions
Vendor relationships
Timeliness of business health reporting (eg. P&L, Balance Sheet)
If you over inflate the SUPPORT SYSTEM side of your organization you tend to feel the financial discomfort of more staffing overhead without an increased capacity for revenue. Your systems will be operating at a high capacity, but your NET PROFIT hires will feel the need to follow through more on SUPPORT SYSTEM expectations than they do generate new revenue.
If your SUPPORT SYSTEM employees are asking for more hires, the first place you should look is operational efficiencies. Make improvements to the systems and processes inside of your organization to free up more capacity for your existing team. Then consider the HIRING MATH and whether or not a SUPPORT SYSTEM hire is justified.
CONCLUSION
Whenever you feel the need to hire, ensure that the new hire does not over inflate one side of the organization. A balanced small business allows you to stay nimble and reactive to market conditions, while also ensuring that both sides of the organization are effectively and efficiently producing results.
