Why Recruit Staff – Why You Might Regret The Next Hire!
I’ve seen lots of organisations recruit when they shouldn’t. Recruitment can be a costly distraction because taking on new staff is expensive and isn’t foolproof. When it goes wrong, it can be seriously disruptive for a small business. Think also of the employees who join a company in good faith, then discover that they’re a poor fit and quickly find themselves looking for another job. It’s a lose-lose situation.
I don’t want you to make this mistake, so I’d encourage you to follow my Six Tests of Recruitment. Understand that recruitment isn’t the only option and isn’t always necessary.
- The only reason a business should do anything is to create value for customers.
- Businesses should create value with an efficient process that has Measurable Outcomes.
- Repetitive processes might be better automated rather than carried out with new staff.
- Non-core tasks should be outsourced to specialists who can deliver more value through skills, processes or infrastructure that you don’t have.
- Develop internal staff to reduce risk, allow succession planning and create a win-win for everyone.
- Recruit externally to build a valuable and resilient business, not an overweight one.
Notice that only once you’ve passed the initial five tests should you consider recruitment.
Let’s explore each of these in more detail.
Use the Six Tests of Recruitment
1. The only reason a business should undertake any work is to add more value for customers
We’re not rewarded for good intentions or effort alone. Successful businesses are the ones that are most productive at converting their (human) assets into value for their customers. Regardless of whether you work for a profit or not-for-profit, you can’t afford to waste resources on activities that don’t add value for your customer.
Recruitment often fails not because new employees can’t do something, but because they’re not doing the things that customers actually want. Poor recruitment just adds unnecessary tasks and layers to your business. Understanding this is more important than recruiting staff and hoping they’ll somehow add value to your business just by being there.
Nowhere was this clearer than during recent recessions of 2008 and 2020 when some organisations reduced their headcount while increasing their profit. Companies had become overweight and unproductive with some staff performing tasks that added little value. It shouldn’t have taken a recession for companies to find this out.
Businesses of all sizes make this mistake. Google, Microsoft, Amazon, Meta, Salesforce and others made nearly 100,000 employees redundant in 2023. They did this not necessarily because they were tech companies or market forces changed, but because they had employees doing unproductive tasks and they needed to refocus. Doing so often rewards companies with significant and immediate increases in share prices because investors gain confidence that they will deliver higher returns.
Don’t get into this situation in the first place.
A quick way to find out how productive your existing staff are is to monitor month-by-month the level of gross profit divided by combined payroll and outsourcing costs.
<p><span class="pull-out-box">Gross profit ÷ (payroll + outsourcing costs) = efficiency</span></p>
You may discover a worrying trend where you’re making less gross profit despite payroll and outsourcing costs increasing! If so, keep digging into the details because you probably have an issue, such as too many staff or staff doing tasks that add little value.
I accept that there may be a few exceptions to this rule. For example, customers may see little value in you chasing outstanding invoices, but getting paid keeps you in business so that you can add value in future. Before you do anything, how certain are you that you’ll be rewarded for your recruitment decision by your customers? If you’re unsure, consider piloting your idea, perhaps by using temporary workers for a time to see whether it pays off.
Another way to think of it is the Four More Rule. Unless you’re in accounts, everyone’s role is to add more value by doing one or more of the following:
- Sell more stuff.
- To more customers.
- More often.
- For more money.
2. Create more value with an efficient process that has Measurable Outcomes
Valuable work should follow an efficient process that delivers a predictable outcome. Ultimately, you want to be more efficient at converting gross profit into net profit. This means streamlining tasks and removing bottlenecks.
If you recruit regardless of this test, you’ll often find that your staff look busy but deliver very little. They may become frustrated with inefficient processes and constant impediments. Likewise, you’ll probably end up busier, more stressed out and poorer.
3. Automate repetitive tasks
Technology is disrupting business so much that who knows if your job will even exist in the future? This isn’t just about advanced artificial intelligence like ChatGPT: just look at how receptionists are being replaced by clever phone systems and direct dials, and how recurring card payments and direct debits have reduced the need for credit controllers.
If you have a role to fill that efficiently delivers value but is repetitive, then consider automating it. You shouldn’t hire talent people to do this type of work and there’s lots of great software and machinery already available.
The fantastic thing about automating is that you can scale and increase your profits massively. But be careful not to go too far. For example, it’s difficult to automate a client-customer relationship, as current chatbots have shown. It’s easier to automate a bookkeeper, because they follow regular standardised tasks, than it is a cleaner.
4. Outsource non-core tasks to a specialist who can deliver more value
If a task can’t be automated, could it be outsourced?
It’s common sense and common practice to outsource tasks to people who can do them more efficiently than we can. This “division of labour” is one of the reasons we don’t all grow our own food and build our own houses. Though you’ll still need to manage the outsourcing process and hold external contractors accountable, I’d recommend you consider outsourcing tasks that aren’t core to your business.
Especially in times of low unemployment or when there’s a fierce war for talent, outsourcing may be your most effective way to deliver value.
An IT development company that I assisted outsourced all their call answering to a virtual receptionist. This meant they could concentrate on “deep work” and allowed them to be really focused and productive. A simple and cheap bit of outsourcing made them extraordinary amounts of money by removing distractions.
What could you outsource? Simple first steps include telephone answering and virtual assistants.
5. Develop internal staff
Who do you already have who could be trained, promoted or moved laterally within your organisation to add more value? Where is it important for you to have some succession planning?
Often this saves resources and time, and shows that you invest in people. Promotion is also sometimes less risky than hiring an unknown quantity. Best of all, it’s a win-win because the employee learns and gets a more varied role. And with a fewer people looking for a job, it may be your only way of addressing your recruitment needs. In 2023 it even got a trendy name: “quiet hiring”!
However, a big criticism from employees has been that they’ve been asked to do more without being paid more. Therefore, ensure that employees are fairly compensated for the additional responsibilities that they are asked to undertake.
6. Recruit externally to build a valuable and resilient business, not an overweight one
Only recruit as a last resort and when appropriate to your stage in the business life cycle. Even then, you should be confident that the role has a long-term future, otherwise it may be better to outsource or use temporary workers.
It’s also important that an organisation is resilient and will not be damaged if a Great Performer were to suddenly leave.
Realise that recruitment is not your only option
The central message of my six rules is that recruitment should be a proactive, considered decision. But so often I see a business lose an employee or win a new contract, and the knee-jerk reaction is to recruit. Taking the time to reflect on your decision can save you a lot of wasted time, energy and emotion!
If you’re just about to recruit, take the time now to think: Where else could their wages be better spent to deliver more value?