Staffing is always a difficult nut to crack: Having too many people adds unnecessary costs and nicks your profits; too few and crucial things like customer service start to suffer. You want that magic number of sufficient, competent employees. For any owner, it’s a balancing act.
Here are the questions to consider:
1. What are your goals? Your investors are likely to be focused on short-term profits or conserving cash. Your customers are pushing for speedy, capable service. You have to walk the tightrope between the two.
2. What is your positioning? If you’re the price leader, your job is to cut costs wherever possible. Think like Walmart. If you’re more interested in customer service, then you must hire and train people to deliver top-notch service. Zappos.com should be your model.
3. How can you track your personnel needs? At Blinds.com, we use a personnel predictor that’s built into our phone system. It matches historical customer service trends on a day-to-day and hourly basis versus what we think we’ll need. We factor in an acceptable level of Average Speed to Answer and an acceptable Lost-Call rate. The software calculates how many people we’ll need based upon the service level we want to offer. Your business may not require such a system—but you should have some kind of a system.
4. How hard are your employees willing to work? Again, it’s not a simple question. People like overtime pay, at least in the short term, so it can be an effective way to temporarily meet increased demand. But people eventually burn out. And there’s ample evidence that people perform better when they work less. When your people work constantly, with no real break, they don’t have time for training, so they never get better at their jobs.
5. How do you pay people? I think it’s smart to make payroll as much as a variable cost as possible, so you can hire more people, but pay on performance—in other words, when they sell, provide service, etc. Your payroll costs never get (too much) higher than revenue dictates.
6. Are you willing to share the profits? If profit-sharing is a part of people’s bonuses, they’ll perform more efficiently. They understand that the more people you hire, the smaller their share of the profit pie. So they’ll work harder (read “smarter”) to prove their worth. At my company, at the end of the year we take a percentage of profits and divide it up equally among all the employees. The more we make, the more everyone gets, but the system incentivizes employees to make the most with the fewest number of people.
7. How long does it take to train and on-board people? If people aren’t moving through your training program and becoming productive quickly, put more resources into training to shorten that time. The more complex your business, the more likely it is that you’ll need to hire ahead of anticipated demand. If, on the other hand, you can outsource your peak calls, then you simply need to have that reservoir ready when demand dictates.
To hire or not to hire is not just one question: It’s at least seven—and probably even more. What questions do you consider before you decide to staff up?