It’s a common question for managers of growing companies. Increasing staff numbers is a scary prospect, and one that no manager wants to get wrong.
So how do you, as manager, approach the question?
You can’t just guess. You can’t do what you’ve done in the past because you’ve never been at this point before. There’s no rule for what role to hire at each point in a firm’s growth and every firm is different. What works for some will be wrong for others so you can’t just ask a friend. You must think about the possible jobs in their contexts and determine which job or jobs solves the problem. There are many different ways of re-organising and you can craft many different jobs to solve your problem.
And it all becomes particularly difficult when deciding on support roles like marketing, facilities, IT, certifications and finance. Recruiting the right people to these roles can help a small firm make the jump to light speed by taking on critical improvement projects like building market presence and gaining certification to standards. But support roles are seldom fee-earning. They are generally indirect, increasing overheads and reducing net profit. It’s a tough call.
To make sense of the benefits of re-organising and recruiting, you need a model of your firm.
There are several different models that will do the job. The simplest is to use your firm’s P&L account. It shows the top line turnover, the expenses (including salaries) and the resulting net profit. So, you could sit with your management team and run the numbers – estimate the effect of each new job on the resulting profit.
As you speculate on the various jobs, you’ll need to describe the expected outcome. For example, hiring a marketer could build market presence, letting more clients know of your goods and services. Hiring a new sales person for a new market could grow a whole new segment. Such new activity will build the business for years to come. And systematising the firm and gaining a certification like ISO9001 will change the nature of the clients the firm can win, perhaps increasing gross margin. But increasing direct heads like surveyors, lawyers and sales people will allow more turnover to be won and serviced.
Using the P&L on its own lacks sophistication. And it’s difficult to re-run scenarios in the months to come. You need more sophisticated modelling methods.
Company as a system
Modelling starts with a clear statement of strategy. Richard Rumelt, in his book Good Strategy/Bad Strategy gives a neat approach. He advocates a simple long sentence in which a manager sets out his or her target market, the problem the firm addresses, how it addresses it and the outcomes expected. This can be expanded to fit with the thinking espoused by Kaplan and Norton in their balanced scorecard approach. But either way, you need a strategy to guide the modelling.
Strategy gives the ‘why’ – why the firm exists. Always start with ‘why’.
Modelling tells the ‘what’ – it answers the question ‘with what organisation will you meet the strategy?’
There are many approaches to modelling but all consider the firm as a system. A system (company) is defined as an assembly of components (functions), connected in an organised way that does something (managed). Each component is affected by being in the system and the behaviour (performance) of the system is affected if any component leaves (works below par) – and of course, a system is of interest to someone (the owners and other stakeholders).
In the case in hand, we are talking of adding components, or jobs, rather than taking them out. As a result, we expect to see improved performance and outcomes.
A firm is a dynamic system and hence the field of systems dynamics gives the best tools for modelling. Causal loops, influence models and concept models are highly useful. But whatever is used, it must describe the whole operation of the firm in its context.
The exact system modelling approach and tools selected and used will depend on the nature of the firm and the problem to hand. Reynolds and Holwell’s collection of methods from various authors in the book Systems Approaches to Managing Change: a practical guide is particularly useful.
Once you have a comprehensive model of the firm and its functions, you can start planning. Planning gives the ‘how’.
There are five plans that are now useful.
The Balanced Scorecard details the financial objectives year by year and the market, operational and human resource actions needed to achieve the financial aims.
The Manpower Plan sets out the various roles, jobs and effort needed to meet the financial aims. There are various techniques for determining how much effort is needed in each role. This plan would also determine the roles that are done by employees and which are sub-contracted.
Job Descriptions (and Person Specifications)
The Job Descriptions convert functions defined in the model into roles. Roles are then aggregated to yield jobs to be recruited to.
Culture is defined as “the way we do things around here”. The Desired Culture is a statement of the culture that the directors consider appropriate to achieve the aims with the staff and strategy specified.
Given the strategy, financial objectives, process plans, market plans, manpower plans, job description and person specification and culture, there is an appropriate hiring process to ensure that the right person is recruited to the various roles. This is the hiring process you'll adopt to fill the jobs.
Oportunity for change
Replacing people who leave is easy. They were doing a job for you and that job still needs to be done – so you’ll hire the same again. That would, of course, be a lost opportunity, but that apart, hiring more of the same is straightforward.
But managers are seldom in that position. Most need to make change – to bring in new people to take responsibility for roles like marketing, facilities, IT, certifications and other highly valuable indirect functions. Most of these roles will have been balled up in senior staff jobs and will likely not have been done adequately. Most will have been competing for time with direct activities and generally direct activities win.
So, when you are faced with change, you must model the options and compare each possibility with the firm’s strategy and desirable outcomes. There’s no other way.
Modelling is complex but straightforward to do. And you can do it time and again as your business evolves. You can use the modelling described here to determine any role – direct or indirect – and to determine the roles you recruit to next.
If you'd like to know more about modelling to determine hiring options in your firm, call us.
- In some firms, sales people are considered ‘direct’ because an hour of their time leads to more business. Others consider them ‘indirect’ since they are not actually servicing orders.