Why Recruit Employees: Weighing Your Options Before Jumping In

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<h2>Key Takeaways</h2>
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<li>Don’t assume that you have to recruit.</li>
<li>Use the Six Tests of Recruitment to decide whether to hire or not: create value, build efficient processes, automate, outsource, develop existing staff, recruit to build value.</li>
<li>Recruit in a way that’s appropriate to your business’s stage in its life cycle: Birth, Infancy, Toddler, Teenager, Young Adult, Maturity, Mid-Life Crisis, Ageing, Death.</li>
<li>During earlier phases be more cautious about recruitment and ensure that it focuses on creating value.</li>
<li>As you move into a new stage, anticipate your future recruitment needs.</li>
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It’s understandable for a business with a staffing gap to want to go full steam ahead and recruit someone as soon as possible. If that sounds like yours, then pause for a minute! Don’t fall into the common trap of recruiting when you don’t need to, and save yourself a lot of time, money and heartache.

Recruitment isn’t the only option open to you and sometimes it can be better not to recruit.

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To Decide Whether or Not to Hire, Use my Six Tests of Recruitment

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Test 1: Is your business adding value for customers? 

• Anything that your business is doing that isn’t adding value is a waste of resources.
• Misguided recruitment efforts often bring in new staff who aren’t doing work that adds real value, but instead adds unnecessary costs and complexity that slow the business down.
• A quick way to identify how productive your existing staff are is to monitor quarter-by-quarter the level of gross profit divided by combined payroll and outsourcing costs:

Gross profit ÷ (payroll + outsourcing costs) = productivity‍

Only hire when you’re sure the new staff will add value for your customers.

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Test 2: Does your business follow efficient, structured processes with Measurable Outcomes? 

• Value creation should be based on an efficient process with Measurable Outcomes.
• To be successful a business needs to convert gross into net profit by using an efficient, predictable process.
• If you recruit staff into a business full of bottlenecks, then your staff may look busy but will deliver little value.‍

Only hire when you’re sure you have the processes in place needed for the new staff to be able to deliver value.

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Test 3: Are some of your roles repetitive and unskilled? 

• It’s often better to automate tasks than to hire new people to do them.
• New technology is making it easier to automate tasks. 
• But there are limits to automation. It’s easier to automate bookkeeping that consists of a standardised set of tasks than client-customer management, which is too complex and open-ended for many technologies to carry out.

‍If you’re thinking of recruiting for a job that will add value but is repetitive, then consider automating it.

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Test 4: Could an external specialist perform some of your roles better?

• It’s often better to outsource non-core functions to specialists with the skills, processes and infrastructure needed to carry out tasks more efficiently.
• If you can’t automate a task, then maybe you can outsource it.
• But be prepared to manage outsourced tasks and hold external contractors accountable. ‍

If you’re thinking of recruiting for a job that involves non-core tasks then consider outsourcing it rather than hiring new staff.

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Test 5: Could your existing staff be further utilised? 

• Could you promote or train an existing member of staff for a job and create a win-win for everyone?
• Where do you need to have some succession planning?‍

‍Rather than take the risk of hiring a complete unknown, consider developing an existing member of staff for the job (but make sure you’re not giving them greater levels of responsibility without paying them properly).

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Test 6: Is your business at the right “life stage” to recruit? 

• External recruitment should enhance a business’s value and resilience, not just make it bigger.
• Recruit only as a last resort and with the aim of building value.
• Take on new staff only when you’re sure that the job has a long-term future. If not, then use temporary staff or reconsider the possibility of outsourcing.‍

Only recruit when you’ve properly ruled out the alternatives given in the first five tests, and make sure it’s appropriate for where your business is in its life cycle.

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Don’t Recruit at the Wrong Time in Your Business’s Life Cycle

It’s important to understand where your business is in its life cycle. Businesses at different stages have different recruitment needs. Recruiting at the wrong time can be very costly.

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Birth

• Businesses are often set up by entrepreneurs who want to be their own boss. As soon as they invest or lease items they move into the stage of infancy.‍

At birth the business has only just been created and won’t be hiring staff.

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Infancy

• The business is still a one-person operation, often with haphazard processes and just starting to create value that customers want. Infant businesses can easily sink.‍

At this stage the priority should not be hiring and having to pay staff, which will eat up limited cash flow, but instead building a predictable value-creating process.

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Toddler

• Now the firm has a bit more cash to play with and may consider hiring staff.
• Often friends or family are introduced and they might not be the best fit for the company. ‍

The business may now want to recruit (often generalists who can operate without too much structure rather than specialists who do best at well-defined tasks). However, extreme caution should be exercised because hiring when processes are still undeveloped may simply magnify a firm’s weaknesses.

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Teenager

• Businesses at this stage have more cash flow and gain in confidence, but like real teenagers can get overconfident and want to get bigger too fast.
• Taking on lots of people without enough of a focus on product-market fit and value creation can lead to an overweight organisation and a Mid-Life Crisis.‍

At this stage recruitment should be done with a focus on value creation rather than growth per se.

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Young Adult

• The business now has a healthy cash flow and robust processes.

The company needs to recruit because the main constraint on the firm’s growth is finding and keeping good people. It may begin hiring specialists rather than generalists.

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Maturity

• At this point the business has more cash flow than it needs for reinvestment.
• It needs to monitor gross profit compared to payroll and outsourcing costs to ensure that its staff are really adding value.

The business needs to find and keep the right staff to bring about sustained growth, otherwise it will suffer a Mid-Life Crisis.

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Mid-Life Crisis

• By this point the excitement of starting and growing a business has dwindled.
• Recruitment often becomes about “backfilling” as Great Performers leave.

The priority must be to ensure that staff are doing things that add value: a simple test of this can be to not replace departing staff. Without a focus on value, the business will start to age.

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Ageing

• At this stage, the best people have left and the rest are “institutionalised” and in denial about the business’s problems.

Ageing companies can be saved, sometimes by bringing in a new management team and removing staff who are no longer adding value. If not, then the company dies.

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Death

• At this point there are no good people left.

The business will have to close or be sold and the remaining staff let go.

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With an understanding of the business life cycle, as you move into a new stage you’ll be able to:

• Foresee problems and anticipate recruitment needs.
• Retain cash because you’re not wasting it unnecessarily by recruiting, while seeing where you can add value for customers.
• Set up value-creating processes whose outputs can be measured, which in turn improves the efficiency of staff.
• Decide whether to hire generalist or specialist employees.
• Determine the right time to recruit a professional management team as your business grows.

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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?
• Artice; Why Recruit Staff - You Might Regret the Next Hire!
• Article; When to Hire Employees: Why Timing is Everything for Your Business.