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When is it Time to Hire More Employees?


The declining economy creates many complexities that dictate staffing levels. One common reaction when searching for ways to control costs is the elimination of staff. In an overzealous attempt to achieve financial austerity, some managers may cut too deeply -- while others may lag in hiring enough staff to leverage profit opportunities. How can a manager or business owner interpret the cues and take the most appropriate staffing actions? Some obvious factors to consider include existing revenue, inventories, and cash flow. Other factors are more elusive and complicate the staffing decision. To determine your SRQ (Staffing Readiness Quotient), answer the questions below and assess whether now is the time to add or subtract from your workforce.

1. In the past sixty days, how frequently have you needed to extend deadlines, defer product deliveries, or revise schedules to meet commitments made to customers or employees?

1. Never
2. Once a month
3. Weekly
4. Almost Daily

Analysis: The most obvious indication of appropriate staffing levels is the ability to meet deadlines. If recently projects have been extended, if products have not been delivered on time, or if more leeway has been given to development or service requirements, then it is likely that a contributing factor is the number of individuals on staff. Although many businesses rationalize that factors unrelated to the number of employees can cause changes in deliveries or schedules, lack of people is usually the primary reason. On the other hand, if everything is done on time or early - watch out, you may be overstaffed!

2. Employees express complaints about working conditions:

1. Almost never
2. Weekly
3. Almost Daily
4. I don? t know

Analysis: An unusual number of employee complaints in comparison to historical norms - either on a casual basis or through a formal grievance system - is clear indication of dissatisfaction that may be a result of overwork or inadequate staff. If you? ve overheard employees objecting to working conditions, or if people have actually brought to your attention more issues than usual, they may be experiencing stress induced on the job. Make sure you know the pulse of your employees. Answering ? I don? t know? means that you need to get closer to the frontline.

3. The incidence of health insurance claims for the company has recently:

1. Been reduced
2. Stabilized
3. Increased
4. Increased significantly

Analysis: Some employees choose not to express their dissatisfaction verbally, but rather to internalize their malcontent. Employees may be subjected to stress or psychosomatic illness induced by working too hard, or working in areas beyond their knowledge or skill levels. The result can manifest itself in a suspicious increase in the prevalence of employee health care claims, damaging to both the individual? s health and the company? s financial results.

4. How long has it been since the company used recent funding or accessed its credit line?

1. Within the past month
2. Less than 2 months ago
3. 2-4 months ago
4. More than four months ago

Analysis: The company that does not have time to access financial resources is probably too busy doing other things, or is lacking in strategic talent. You might not have adequate talent to know what to do with the money! These untapped financial resources can impede progress of the organization. Consider using those funding dollars to recruit the right mix of employees.

5. What percentage of the employee population works on a consulting or temporary basis?

1. Less than 2%
2. 2-5%
3. 5-10%
4. More than 10%

Analysis: Although using consultants and temps can be a wise strategic staffing move for many companies, over-reliance on consultants is commonly a signal of understaffing. It is important to determine if transient workers are working on projects of a recurring or specialized nature. If consultants are working on repetitive tasks or projects that last more than 6 months, not only may the company be understaffed, but may also potentially be in violation of IRS regulations for contractual employees.

6. The amount of funds allocated towards training expenses recently has:

1. Been reduced
2. Is stable
3. Increased
4. Increased significantly

Analysis: Deviation from normal training patterns by spending significantly more money for training resources, or noticeably less than usual, is another cue that staffing levels may be inappropriate. Although training can be indicative of a company? s developmental focus, it can also be an acknowledgement of missing skills within the company. Conversely, lack of spending on gaining new skills can be a function of time availability of staff. Employee development is often sacrificed to meet the short-term needs of production.

7. Overtime costs, or the number of employees working through lunches and/or late into the night in the past few months has:

1. Decreased
2. Stabilized
3. Increased
4. Increased significantly

Analysis: If a baseline for overtime has been established and significant deviation is occurring, your company is probably understaffed. Similarly, if employees regularly work through lunch periods, stay late, and/or arrive early, more help is probably needed. Conversely, if employees enjoy the luxury of regular luncheons, a cavalier attitude towards punctuality, and/or early departures they may not have an adequate workload to justify their position.

8. The number of employees with issues related to declining job performance has:

1. Decreased
2. Remains constant
3. Grown
4. Increased significantly

Analysis: A common metric to determine the effectiveness of staff is how many employees need counseling to improve performance. Since performance deficiencies can result from a variety of situations, in-depth analysis is necessary to determine whether an increase in work performance issues is actually a result of lack of skill. Often, limited staff or working in unfamiliar areas is the culprit. It is also possible that employees with idle time may become complacent and expect co-workers to complete available tasks since they give the perception of having so much time available.

9. What percentage of your staff requests or is required to defer, carryover or forfeit their paid time off?

1. Less than 20%
2. 50-20%
3. More than 50%
4. Almost All

Analysis: Paid time off or vacation that is carried over, forfeited, delayed or cancelled is a clear sign of inadequate or unqualified staff. Don? t lose sight of the need for individuals to determine their own work/life balance. If employees choose to defer time off because they perceive the needs of the business to be greater than their personal considerations, then you are probably understaffed. If employees are always out of the office, they might need more responsibilities to keep them at work -- an indication of overstaffing.

10. How frequently are new solutions, methods, technologies or workflow enhancements embraced by the workplace?

1. On a regular basis
2. Occasionally
3. Regularly
4. Frequently

Analysis: If productivity enhancements have plateaued from historical levels, then workers may be overwhelmed. New methods to increase work efficiency may have stalled because people are focused on routine tasks and don? t have time for process improvement. Investigate to see if people are distracted from implementing new methods or are just not interested based on a focus towards production. A lack of time or interest is likely standing in the way of making things better.

No single staffing cue is indicative of the need to change staffing levels. Collectively, if you detect more than three or four of these issues in your workplace, then a staffing problem likely exists. Multiple symptoms of inappropriate staffing levels can be detrimental to the overall success of your business. Overstaffing leads to unnecessary costs, understaffing to frustration and burnout on the part of your employees. Calculate and regularly monitor your SRQ as a key success factor, and integrate this metric with your other business success metrics.

QUICK HR TIP: An easy overall metric to determine staffing levels can be staff/sales ratio. Take a close look at the relationship between the number of employees and revenue: is it constant or increasing? Benchmark industry and individual targets and work towards the appropriate ratio. Keeping on track will ensure consistency with corporate objectives. To a large degree, the sales/staffing ratio is a good predictor of potential income.

About the Author: Bob Hoffman and HR specialize in organizational diagnostics to help businesses determine appropriate staffing levels by business size, industry, and objectives.

Copyright © 2001 HR and Bob Hoffman. All rights reserved.

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