Growth is a continual driver for business owners, but how are you supposed to know when and what to grow and what will work best for you?
Right now a key issue among my peers who run businesses is that of headcount and hiring. Protecting it, maintaining it, reviewing it and keeping it, and of course replacing it.
This in a climate where we are continually being told this year is going to be challenging. The banking sector is quietly laying off thousands of jobs, creating instability and distractions for business, families and trade.
In the midst of this, many small businesses are battling to survive and facing tough decisions – some say tougher than 2008 in the GFC period. The mortgage (the usual cashflow line is at max) and the fight for good skills seem harder than ever. For many, the decisions are whether to continue, retract or grow as companies are struggling to come to terms with diminished profitability.
In times such as these, the first thing we look at is strategic direction and being fiscally cautious. Should we continue to grow, change the model, retract and/or re-look at costs. Do we take on more overheads or is it better to be cautious, cut back and stay lean? In all of these decisions, headcount becomes a major factor.
The state of the economy is such that for many, caution is perhaps a more prominent driver. In Australia right now, job security is low, the talent pool provides challenges, consumer spending is minimal and interest rate cuts by the RBA are not being passed on in full by the banks. This year has a fairly bleak outlook, with unemployment at 5.1 percent, the lowest in six months.
As an increase in unemployment rates reduces consumer spending which in turn contributes to further spikes in unemployment, many business owners are doing their utmost just to hang on to headcount and honour current contracts.
As someone said to me once small businesses small problems, big business big problems. But in the same way as our sector is nimble enough to see bad times through, so we have the ability to be nimble and flexible in our headcount and resourcing decisions. In this year of innovation and renewal, for many the big decision will be whether or not to hire more people or to use more nimble and flexible operating models, or both.
Cut back or recruit and engage?
For some business owners, the very action of taking on staff will be their biggest decision to date. The entrepreneurial characteristic that leads us to build a business are also the same characteristics that strive to control all facets of an operation directly. Sometimes, the inability for entrepreneurs to let go, becomes their own barrier to success and growth.
This ‘’closed’’ attempt at management hinders the ability for businesses to function best, as growth competes with the desire for control. With this in mind, we have to recognise the benefits generated through trusting operating activities to others, even a third party, allowing for the effectively allocation of one of our main limited commodities, time!
Having said this, we may find it also prudent to question whether a ‘one-man band’ attempt at business is ever a viable option over a delegated approach available to small businesses. As Wai Hong Fong, owner of the eCommerce business OzHut can attest to, incremental growth is the ultimate desire of a business as uncontrollable growth significantly detracts from personal enjoyment and can destabilise a small business when ideal management structures are still being identified. The ability to let go of control over all aspects of the business and use your skills where they will be most beneficial is one of the main rules of business success.
Trusting and delegating
There is a big sigh of relief in my peers when they delegate significant responsibilities to others. Sixteen years ago, the decision to hire my first personnel was perhaps one of the most significant steps I have ever taken. These days it is par for the course. However, recruiting that first headcount in a start-up phase in business surely takes the most energy and courage. It is almost symbolically the first signal of being a ‘’real business’’.
So if you do make the decision to expand, do you grow through casual employment, contracting, part-time or full-time? The trend is moving more to contracted labour to reduce costs and offer maximum flexibility. The controversy continues about outsourcing and off shoring, but for sustained development committed full-time employees would seem more reliable and rewarding.
There is a large jump from sole trader to a small business to an SME in terms of the resourcing necessary to succeed and there seem to be no magic formulas, or are there?
How many staff are enough?
So what is the right headcount? Too few employees is the flip side of a bitter pill of spiralling costs. Whereas admitting more hands are necessary is essential for increasing turnover and driving and implementing innovation. It’s certainly worth looking at the benchmarks in your industry – and talking to peers to learn about their experiences.
Primarily the engagement of new people leads to the introduction of fresh eyes to issues, new experience, new energy and sometimes an objective view.
New blood, fresh perspective
New blood can introduce innovation and change to a business but these ideas have to be aligned with strategy; the desires and goal of the business owner to work. Otherwise new hires can result in short term success and long-term disappointment.
In any business looking towards the future is essential – however that future looks. The role that headcount and resources plays within this element is that they are the facilitators from which we can gauge the strength that this movement will travel.
Just remember, there are many businesses with fewer than 30 staff making a difference.
Hiring Top Tips:
- Decide whether you really need to hire in difficult times
- Look at implementing productivity measures – if you can’t measure it you can’t manage it
- Do you have real loyalty in the business?
- Who is settled?
- Who may move?
- What is critical, what could you live without?
- Where is the risk associated with people leaving?