When to Hire Employees: Why Timing is Everything for Your Business

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<h2>Key Takeaways</h2>
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<li>Understand the business life cycle: This can help foresee challenges, retain cash, build efficient processes, and decide whether to hire generalists or specialists.</li>
<li>Birth: Entrepreneurs often start businesses as technicians with great ideas.</li>
<li>Infancy: The business, typically a one-person venture, faces survival challenges, seeking product-market fit and efficient processes. Cash flow is tight, making recruitment unadvisable. Outsourcing might be a better option.</li>
<li>Toddler: Before hiring, the focus should be on scaling through outsourcing or automating. Recruitment is tricky; there are usually better answers than hiring friends, family, and trainees. Employ generalists who thrive in unstructured environments.</li>
<li>Teenager: Businesses can become overconfident, taking unnecessary risks. Recruitment should be deliberate and focused on setting the right culture.</li>
<li>Young Adult: Optimal stage for recruiting staff due to established cash flow and efficient processes. The focus shifts from generalists to specialists.</li>
<li>Maturity: Growth and profit lead to more cash flow. Recruitment should be monitored against productivity and profitability.</li>
<li>Mid-Life Crisis: Enthusiasm wanes, and recruitment focuses on replacing lost talent. Businesses should ensure staff add value and consider not replacing some roles.</li>
<li>Ageing: Talented employees leave, and denial sets in among those remaining. Turnaround strategies or new management may be necessary to rejuvenate the business.</li>
<li>Death: The business declines as Great Performers leave, possibly surviving only through acquisition.</li>
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An importantSECRET I’d like to share with you is that where your company is in the “business life cycle” heavily influences your recruitment. Recruiting the wrong type of staff at the wrong time can be catastrophic for a business. Therefore, learn to recognise the stage you are in (or about to enter) so that you can predict potential recruitment problems.

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The Business & Recruitment Life Cycle

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Birth

Many businesses are founded by entrepreneurs who start as technicians and hit upon a “great idea” they want to do themselves. Being their own boss is often a big motivation.

The business is born when the owner takes risks, such as leasing an office or investing in products and services. The business quickly transitions to Infancy.

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Infancy

Most businesses in this stage consist of just one person. They may have a company name, but they’re essentially a self-employed individual taking on the same risks as their previous employer. Things can feel overwhelming to that person, and there’s little let-up because when they go on holiday, so does their income!

Recruiting staff during Infancy is rarely the right time. The business often fights for survival to find a product-market fit that creates value customers are willing to pay for. Processes are usually haphazard and inefficient. Most importantly, cash flow is often tight, and the last thing the business owner should worry about is paying staff.

Although outsourcing might be an option, creating an efficient, replicable process almost anyone can follow is essential. (Most business owners overvalue their product and undervalue execution, yet it’s all about execution.)

Infant businesses can’t progress to the next stage until they have a proven and efficient system of creating value customers are willing to pay for.

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Toddler

In the Toddler stage, businesses can get into real trouble, and often, the hardest person to recruit is employee number two. Businesses now have enough cash flow to afford a few inexperienced staff. Unfortunately, this usually means they mistakenly hire friends, family or trainees who want to maintain harmony rather than tell a business owner what they need to hear. And because family and friends are often cheap, they don’t accurately reflect how profitable a business is.

Recruitment at this stage is like putting a magnifying glass on a firm’s weaknesses; adding staff to an organisation with a bad product-market fit and poor processes will only accentuate the problems and quickly create a crisis for businesses.

But if the business is healthy, it can scale by automating, outsourcing, or recruiting.

Generally, a business should only recruit when the owner is so busy it is “painful”. It’s often best to recruit a generalist who can adapt and thrive on “chaos”, rather than a specialist who needs more structure and information to be successful.

As new staff are recruited, the business begins to “walk and talk” by itself, and the owner can “let go” a little.

Hopefully, the business owner can take a short holiday, but when they do, productivity and profits might suffer as there isn’t any management.

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Teenager

“Teenager” is apt because businesses in this category often take unnecessary risks through overconfidence and believing they’re indestructible.

Confidence is often misplaced because cash flow is less of a concern. But this is when most business owners think more staff will generate more value. While “vanity metrics” such as a significant headcount may make you feel good, they may have little impact on long-term success. Remember: the aim is to be efficient and effective, not necessarily big. Big companies go broke (eg. General Motors) and are exponentially more complex (eg. GlaxoSmithKline). Being twice as big doesn’t mean you’re twice as successful. Don’t lose sight of cash flow and margins in the rush to grow a business.

The first few employees are critical because they will set the culture for an extended period, so choose wisely. Even a single mis-hire can have a significant impact at this early stage.

I see a common problem when an organisation tries to recruit one person for two specialist roles. For example, business owners would often contact me looking for an individual to perform marketing and sales. However, these roles require unique skill sets and personalities, and are usually rewarded differently. In this case, I generally recommend they hire marketing first to generate sufficient sales leads which can later be passed on to a salesperson.

Most importantly, be careful about trying to mature quickly by seeking additional investment because you may need a better product-market fit or capability to maximise delivery. It’s also tempting to show money has been “invested” by building a large headcount, but this can lead to a business becoming overweight and on a fast track to a Mid-Life Crisis.

For example, I had an office with WeWork and would often witness new start-ups rent relatively large offices, fill the desks with staff (and office dogs), and then go into liquidation a few months later. Had they (and their investors) been more patient, they could have developed a robust business that would eventually justify the office and headcount.

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Young Adult

At this point, the business transitions from being in a stage of optimisation to one of maximisation.

The Young Adult stage is an excellent time to consider recruiting staff because the business now has cash flow, efficient processes, and measurements to track progress. The biggest constraint on growth may be recruiting and retaining good staff.

The business may also transition from recruiting generalists to specialists. There might even be a cultural rebirth, as staff suited to a start-up may not be suitable for developing the business further. But the company must be careful and employ staff that are right for the business now. It must also avoid being too aspirational in an often naive hope of continued growth.

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Maturity

At this stage, sales and profits are growing, creating more cash flow than is required for re-investment.

To ensure the correct quantity and quality of recruitment, continue monitoring staff productivity by tracking gross profit against total payroll and outsourcing costs. If this trend gets worse, then you’ve got a problem.

The business may slip into a Mid-Life Crisis unless it can attract and retain key staff who can deliver sustained growth.

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Mid-Life Crisis

In a Mid-Life Crisis, enthusiasm and excitement begin to wane, particularly as professional managers hold employees accountable.

Recruitment is now mainly “backfilling” existing roles as the business loses great staff. However, companies need to ensure that when someone resigns, replacing them isn’t a knee-jerk reaction. I sometimes recommend a simple but risky way to find out if a role adds value, which is not to replace staff who leave! For example, I met the HR director of a council in the North of England who had to make over 50% of their workforce redundant. I empathised with their situation and was shocked to hear, “Oh, don’t worry, we never really noticed they’d gone!”

Failure to take control of the situation takes a business into the next stage of the life cycle.

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Ageing

Many talented employees are beginning to leave, often because they’re blamed for the business’s woes. Those who remain are in denial and refuse to recognise the problems – they’ve become “institutionalised”.

Though it may appear hopeless, an Ageing business can be rejuvenated with a new management team or a turnaround situation that removes a lot of “deadwood”. For example, I recently helped a board of directors relinquish control from the founder/chairman, aged 84. This transition promoted fresh ideas and action, resulting in a fantastic change in fortune.

Failure to change means Ageing continues and can lead to Death.

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Death

Sadly, no talented employees are left; often, the business will only survive through acquisition.

(So we don’t finish on a downer, this isn’t inevitable: Sean’s Bar in Athlone, Ireland, opened in 900 AD and is still going strong!)

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Understanding the business life cycle helps your recruitment

When you better understand where your business is going, you’ll be able to:

• Foresee potential issues and anticipate the future.
• Retain cash while you identify where you can add value customers are willing to pay for.
• Build efficient processes that are easy to replicate and can be measured.
• Consider whether you need to hire a generalist or a specialist.
• Appreciate how the team dynamic changes as your business’s culture evolves.
• Recruit a professional management team and give them authority as cash flow grows.

When you come up against a problem, you’ll know whether it’s normal or abnormal for your stage. For example, it’s normal for a baby to suck from a bottle of milk, but not for a 40-year-old! Similarly, in a start-up, it’s usual for the owner to recruit generalists, but it is much less likely in a large corporation.

<span class="grey-callout"><span class="text-color-purple">Take Action:</span>  Take a moment to ask yourself:<ul><li>“What stage in the business life cycle are we in?”</li><li>“How should that influence my recruitment decisions?”</li><li>“What will likely happen to recruitment as I enter the next stage?”</li></ul></span>

<span class="grey-callout"><span class="text-color-purple">Important:</span> A lot of my advice is geared towards organisations with a great product-market fit, outsourcing and automating where possible, and having efficient processes and measurements in place. Continuing the analogy, these businesses are at a minimum in the Toddler stage, and ideally Young Adult.<p></p>If you’ve decided recruitment is a valuable investment for your business, let’s see how to take action.<p></p>However, if you’re not quite ready yet, I’d advise you to return when you are.</span>

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Additional Resources

• Recruitment Book; The Secrets of Great Recruitment: How to Recruit Great Employees.
• Downloadable PDF guide; The Six Tests Every Hiring Manager Should Use Before Recruiting: Is Your Business Ready?
• Article; Why Recruit Employees: Weight Your Options Before Jumping In.
• Article; Why Recruit Staff - You Might Regret the Next Hire!