Many companies get excited when they see an increase in business and profits. As profits increase, it may be time to add additional staff to handle increases in orders and clients. There are many things to consider before deciding on hiring new employees. The decision to increasing your staff shouldn’t be taken lightly. Take the time to be strategic, and keep these things in mind.
Hidden costs of new hires
On top of the obvious costs of salary, benefits and office space, there are a lot of addition hidden cost. Companies lose money in productivity and time for each job candidate brought into the office to be interviewed. Even after the interview you will lose productivity in training a new hire as other valuable employees spend time away from his or her core job. People want more money when they change jobs, so you may have to pay new employees more than existing ones. New workers take a while to get to full functionality. You’ll still have to pay them their full salary while they get the hang of things.
Timing
New employees can begin to generate revenue for your company, but how quickly can you put new people to work? If the work is not ready, new employees cannot begin the work to generate more revenue. This is good and bad. This allows you time to train the employee, but does not increase your revenue. If you hire too late you may not have enough time to get your new employees up to speed. Therefore, you may not be able to fulfill your promises to clients, which can cause you to lose business. Also, if you’re desperate, you may end up hiring someone who doesn’t mesh with your company’s core values.
Examine your current procedures
Do you need additional employees or more efficiency. If your employees are busy, productive and gross profit is within target, it may be a good time to hire. Are your current employees working overtime or not taking vacations? Overworked employees are at risk for burnout. If employees seem to be busy, but gross profit is too low, they may be inefficient, billing incorrectly or improperly trained. If this is the case invest in training or improve your processes instead of adding additional staff.
Outsourcing options
Billable employees directly generate revenue for top target gross profit percentage. If the additional staff is not billable then you might be better off outsourced to other companies rather than the fixed business costs of permanent employees. Many essential administrative services can be outsourced. Administrative team members are valuable members of your team but they don’t directly bring in revenue. Adding additional employees adds more fixed costs, including benefits, worker’s comp, and additional payroll taxes. Outsourcing can save you these expenses. Take a close look at existing staff to determine if you need to look outside your company for these services.
Are you set up to handle more employees?
Finally, your will needs the processes, procedures, and organization to handle additional employees. They will all need orientation, training, and management. There might be additional federal or state legal requirements should the staff size expand to certain numbers. You may also need additional office space, equipment, and software licenses.
Hiring employees is a big step for your company. Do your homework, consider the implications, and be ready so your company can continue to grow.
