As a business owner, making the decision to add new staff can be a stressful event. This stress can be exacerbated if it is your first new employee.
It is important that businesses get the timing right when adding new staff. If a business hires someone too soon, profits can decline and cash flow can dry up. But if a business waits too long to bring on new staff, the business’ commitments can outpace their capacity, so unfinished work starts piling up.
A business should add new staff when there is enough work to demand additional help and the financial situation of the business is stable enough to manage the additional cost of the new staff member.
Businesses need to also consider:
A new staff member could be permanent or casual, full time or part time
The hidden cost of adding permanent staff, including health insurance coverage, training program costs and more, and
The time it takes to source and hire someone, since it usually takes eight to ten weeks to hire, and even longer to properly train them.
This article is aimed at supporting the decision making process – providing guidance on where adding a new staff member is appropriate, and the recruitment options available.
When Should Businesses Consider Adding New Staff?
The following factors can help you decide when your business needs to add new staff:
Strong Growth
The first thing to do is to take a look at your business’s financial reporting – both historical and forecast. In particular, examine your business’ revenue and see how it has changed over time. Most importantly, you should ask yourself whether the revenues will continue and whether they are aligned to your forecast. If your business has been steadily growing its revenue over the course of several months and it is in line with your forecast, this is a good sign that your current employees are working efficiently to drive strong growth. This could suggest that in order to continue the pace of growth, you need to scale up your business by adding additional staff.
Limited Employee Capacity
Next, take a look at the capacity of your current staff to evaluate whether it is time to add more support. The best way to understand your staff’s current capacity is to speak with them directly, or talk with managers who oversee the workflow of your staff. If your staff are unable to take on new work or, worse, struggling to manage their current workload, it may be a sign that you need to create a new job position to keep growing your business.
In a startup business, it is quite common for business owners to work excessive hours. This can also be a sign of the need to add extra capacity.
Overtime Increases
In addition to speaking with your staff to better understand their capacity for new work, you can analyse data for clues that your workforce needs to expand. Take a look at how much overtime your staff are clocking and how that number has changed over the span of several months. If your staff needs to work overtime more frequently to handle their workload, that is a early sign that it might be more cost efficient in the long run to add more staff. You can also take into consideration staff morale: if working overtime is leading to more burnout and fatigue among workers, adding additional staff can help your business continue to grow in a sustainable way.
New Opportunities Arise
If your business has the opportunity to offer new services and products to your customers, there is a good chance the business will need to hire new staff to accommodate the expansion of your business. If your business is already busy with current business responsibilities, you will need to take on more staff to help with the increased workload of expanding your product and service offerings for customers.
New Skills Are Needed
If your business is expanding to offer new services in order to grow, you should look at the skills and experiences of your current staff. If your new business offerings require a skill set that is lacking in your current staff, you will need to acquire new workers who are experts in that area, even if you have determined your existing staff may have the capacity to take on new work.
How Do You Know When to Add Additional Staff?
Sometimes, changes to your business operations can indicate that you need to add new staff as soon as possible to keep your business from suffering. Here are some common signs that your business requires additional staff right away:
You Have to Decline New Work
If you have steady demand for your products or services, but you are turning down new opportunities, this is an indication that you are understaffed. In order to take on additional demand, you will likely need to recruit additional staff to help deliver the increased demand.
Your Employees Are Overwhelmed and Overworked
If morale is low within your business, with high staff turnover, increased sick leave and more complaints from workers, that probably means you need to add new workers to lower your staff’s stress levels and make sure they are not working too hard. Staff retention is important if you want to expand your business and offer top-quality service, so make sure you keep your staff happy and healthy.
Customer Delivery Suffers
If your staff are stretched to capacity on the job, there is a good chance that the delivery of your product or services will be impacted – either there are delays in delivery or the quality of the product/service deliver might even be suffering. If you receive more client complaints about your delivery, you should add additional staff to help get the work completed promptly while maintaining high quality.
Experienced Staff Performing Basic Tasks
Take a look at the responsibilities of your staff. If you see that some of your most experienced, more expensive staff are spending a lot of valuable time on menial administrative tasks, you should consider hiring juniors to help manage the workload. That way, your junior hires can spend time on basic tasks and free up your senior staff to focus on top-level projects that have a greater impact on the overall health of your business.
This is a typical issue for the start up business where the business owner is wearing multiple hats. In this situation, many of the menial tasks like book keeping, invoicing, payroll, etc can be done by a suitably skilled resource at a lower cost.
What type of employment should you consider?
Not everyone you bring in to your business needs to be a permanent hire.
If you want extra help but are hesitant making a hiring decision because you are not sure if your business has a lasting need for the capability, hiring temporary staff is a consideration.
Temporary workers are a great solution to short-term staffing needs. You can hire them for specific projects or for a certain period of time, with no obligation to keep them on for the long haul.
Sometimes the decision to hire temporary staff versus taking on a permanent employee is a tough one. If you are struggling to decide what type of position is best for your business, use these three tips to decide what you really need:
1. Determine Ongoing Need
Consider the reason you need to add additional staff. If your business is prone to fluctuations in demand, hiring temporary help may be the best idea, as you do not have to keep them on when things slow down. However, permanent workers could be the best idea if you don not believe business will slow down anytime in the foreseeable future. Hiring workers with specialised skill sets on a temporary basis can also be a wise decision, as you may only have a need for their specific services for a short period of time.
2. Cost
Hiring temporary staff is typically less costly than taking on permanent help. While you will have to pay staffing agency fees, you will not have to pay employee benefits ─ including health insurance, paid time off, and other perks used to entice your permanent staff ─ which can result in significant savings.
3. Hiring Timeframes
If you needed a position filled yesterday, you are going to have to hire someone fast. While this may satisfy an immediate need, it does not help you find the best candidate for the long run. Hiring a temporary worker can be a great way to fill an immediate need, so you can take your time searching for the best person to permanently hold the job.
Summary
As a business grows the pressure is on. The business owner needs to read the signs and then make a decision. While it can be stressful in adding additional staff, a business should add new staff when there is enough work to demand additional help and the financial situation of the business is stable enough to manage the additional cost of the new staff member.
Author: Rod Makin
Rod is a business advisor providing smaller businesses with the necessary skills and processes to deliver their business improvement and turnaround initiatives in the role of advisor and delivery manager. In particular, based on 30 years advising and delivering large and small enterprises on technology projects, Rod has provided guidance and support to businesses on how to use technology to grow or to support the scaling of businesses. For more information refer to www.transcendhcs.com.au.
