Why Recruit Staff – You Might Regret the Next Hire!

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<h2>Key Takeaways</h2>
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<li>Six Tests of Recruitment: Check these against your business before you consider recruiting.</li>
<li>Test 1: Value creation for customers: The primary reason for any business activity, including recruitment, should be to create customer value.</li>
<li>Test 2: Efficient and Measurable Outcomes: Businesses should aim for efficient processes with Measurable Outcomes.</li>
<li>Test 3: Automation of repetitive tasks: Consider automating repetitive tasks instead of hiring new staff to do them.</li>
<li>Test 4: Outsourcing non-core tasks: Using specialists can save money and deliver better outcomes.</li>
<li>Test 5: Developing internal staff: Develop and promote existing employees for new roles instead of external hiring.</li>
<li>Test 6: Appropriate recruitment: Ensure the role is necessary and fits the business’s stage in its life cycle.</li>
<li>Productivity measurement: Monitor the ratio of gross profit to payroll and outsourcing costs. Avoid situations where staff are engaged in unproductive tasks.</li>
<li>Four More Rule: For most roles, the focus should be on adding value to the business by selling more to more customers, more often, and for more money.‍</li>
<li>Recruitment as a proactive decision: Recruitment should be a considered decision, not a knee-jerk reaction.‍</li>
<li>Recruitment is a last resort: It should not be the first solution to every business problem. It’s costly and only sometimes effective, especially in small businesses where mis-hires can be disruptive.</li>
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I need to share a SECRET that should be common sense, but it isn’t common practice: you may not need to recruit anyone at all!

I’ve seen lots of organisations recruit when they shouldn’t. I don’t want you to make this mistake, so I’d encourage you to follow my Six Tests of Recruitment before you consider recruiting:

1. A business should only take action to create value for customers.
2. Businesses should follow an efficient process that has Measurable Outcomes.
3. Repetitive processes might be better automated rather than carried out by staff.
4. Non-core tasks should be outsourced to specialists who can deliver more value through the skills, processes, or infrastructure that you lack.
5. Develop internal staff to reduce risk, allow succession planning and create a win-win for everyone.
6. Companies should only recruit at specific stages of the business life cycle.

You should only consider recruitment once your business has examined these six points.

Let’s explore how you test each of these in more detail, using analogies that oversimplify a complex issue but also help illustrate basic principles.

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Use the Six Tests of Recruitment

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Test 1: Is your business adding value for customers?

Good intentions or effort are only sometimes rewarded in business. For example, you might renovate a house to increase its market value but focus on “improvements” that potential purchasers don’t actually like – it’s a waste of time and money.

Similarly, successful businesses are the most productive at converting their (human) assets into customer value. Whether you work for a profit or not-for-profit, you can’t afford to waste resources on activities that don’t add value for your customers.

Recruitment often fails not because new employees can’t do something, but because they’re not doing what customers want. Poor recruitment just adds unnecessary tasks and costs to your business.

Nowhere was this clearer than during the recent recessions of 2008, 2020, and 2023, when some organisations had to reduce their headcount, and simultaneously increased profit! Companies had become overweight and unproductive, with some staff performing tasks that added little value. It shouldn’t have taken a recession for companies to find this out.

Businesses of all sizes make this mistake. Google, Microsoft, Amazon, Meta, Salesforce, and others made nearly 100,000 employees redundant in 2023. They did this not necessarily because they were tech companies or market forces changed, but because employees were performing unproductive tasks and needed to refocus. Don’t get into this situation in the first place.

A quick way to identify how productive your existing staff are is to monitor quarter-by-quarter the level of gross profit divided by combined payroll and outsourcing costs:

Gross profit ÷ (payroll + outsourcing costs) = productivity

For example:

• Quarter 1: Gross profit (£100k) ÷ (payroll £20k + outsourcing £10k) = 3.3 productivity
• Quarter 2: Gross profit (£100k) ÷ (payroll £30k + outsourcing £10k) = 2.5 productivity
• Productivity has dropped from 3.3 to 2.5; you’re paying more and getting less!

You may discover a worrying trend when you try this; you’re making less gross profit despite increasing payroll and outsourcing costs! If so, keep digging into the details because you probably have an issue, such as too many staff or staff doing tasks that add little value.

There may be a few exceptions to this rule. For example, customers may see little value in you chasing outstanding invoices, but getting paid keeps you in business so that you can add value in future.

So, before you do anything, how certain are you that your customers will reward you for your recruitment decision? If you’re unsure, consider piloting your idea using temporary workers to see whether new staff are necessary.

Another way to think of value is the Four More Rule. Nearly everyone’s role is to add more value to the business by doing one or more of the following:

1. Sell more stuff (eg. expanding your product line).
2. To more customers (eg. entering new markets).
3. More often (eg. increasing repeat purchases).
4. For more money (eg. raising prices or offering premium options).

Is your business really adding value for customers at the moment?

• No: There’s no need to recruit! I advise identifying what matters to customers and then giving it to them.
• Yes: Go on to consider Test 2.

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Test 2: Does your business follow efficient, structured processes with Measurable Outcomes?

Imagine renovating a property where you get the interior beautifully decorated and then call in an electrician to install new electrics. It would be a messy and inefficient process. Unfortunately, some businesses operate in the same manner.

Valuable work should follow an efficient process that delivers a predictable outcome that you can measure. Ultimately, you want to be more efficient at converting gross profit into net profit by streamlining tasks and removing bottlenecks.

If you recruit and ignore this test, you’ll often find your staff look busy but deliver very little. Employees may become frustrated with inefficient processes and constant impediments. Likewise, you’ll probably end up busier, more stressed, and poorer.

Does your business follow efficient and structured processes at the moment?

• No: There’s no need to recruit just yet! My advice is to decide on Measurable Outcomes for your staff and develop efficient processes to achieve them.
• Yes: Go on to consider Test 3.

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Test 3: Are some of your roles repetitive and unskilled?

Using a dishwasher automates the repetitive task of washing dishes and frees you up to focus on other activities. Similarly, technology is disrupting business (who knows if your job will even exist in the future!). Don’t just think about artificial intelligence like ChatGPT; look at how simple phone systems and direct dials are replacing receptionists and how recurring card payments and direct debits have reduced the need for credit controllers.

Automate repetitive tasks where possible. You shouldn’t employ talented people to do this work; lots of great software and machinery are already available. 

The fantastic thing about automating is that you can massively scale and increase your profits. 

But be careful not to go too far. For example, it’s difficult to automate a client-customer relationship, as current chatbots have shown.

Are some of your roles repetitive and unskilled at the moment?

• Yes: There may be no need to recruit! I suggest automating if appropriate.
• No: Go on to consider Test 4.

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Test 4: Could an external specialist perform some of your roles better?

If you’ve hired a gardener or cleaner, it’s not because you can’t learn to do these tasks but because you feel your time and money are better spent elsewhere. This “division of labour” is one of the reasons we don’t all grow our food and build our own houses. 

It’s common sense and practice to outsource tasks to specialists who can do them better and more efficiently than we can. Outsourcing may be your most effective way to deliver value, especially during low unemployment or a fierce talent war.

A few words of warning: you’ll still need to manage the outsourcing process and hold external contractors accountable – you can’t abdicate complete responsibility. Additionally, be careful about outsourcing core tasks, otherwise it will be hard to justify your existence!

For example, an IT development company that I assisted outsourced all their call answering to a virtual receptionist. Fewer interruptions allowed them to concentrate on “deep work”. This simple and cheap bit of outsourcing made them more productive and profitable by removing distractions.

Could an external specialist better perform some of your roles at the moment?

• Yes: There’s no need to recruit! My advice is to start carefully outsourcing.
• No: Go on to consider Test 5.

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Test 5: Could your existing staff be further utilised?

When renovating a house, using what you already have may make sense. You can develop as your needs grow; it is less disruptive than starting from scratch, and it can be more cost-effective. There is a similar argument for developing your existing staff.

Who do you already have that could be trained, promoted, or moved laterally within your organisation to add more value? Where is it important for you to have succession planning?

Often, this saves resources and time, and shows that you are investing in your employees. Promotion is a win-win because the business reduces risk by hiring a known quantity, and an employee continues to grow in a more varied role.

During times of low unemployment, promotion may be the only way to address recruitment needs.

However, employees often criticise being asked to do more without being paid more. Therefore, ensure promoted employees are fairly compensated.

Could your existing staff be further utilised at the moment?

• Yes: There’s no need to recruit! I advise offering staff training and promotions, a subject I discuss in chapter 19 of my recruitment book.
• No: Go on to consider Test 6.

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Test 6: Is your business at the right “life stage” to recruit?

Just as you’d only decide to move to a larger house when your circumstances require, only recruit when appropriate to your stage in the business life cycle .

For example, new businesses might not have a suitable product-market fit, cashflow or efficient processes to recruit. Growing businesses may require generalists to work in an unstructured environment. Established businesses may require management and specialists.

Once you’ve read the about the business life cycle, you’ll be able to answer the question: Is your business at the right life stage to be recruiting now?

• No: There’s no need to recruit! I advise you to continue working hard to take your business to the next stage, where it will benefit from employees.
• Yes: Go ahead and recruit! Follow The Great Recruitment Method to bring Great Performers into your business!

Even after reaching Test 6, you should be confident that a new role that you want to recruit for has a long-term future. Otherwise, it may be better to hire temporary workers.

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Recruitment is Not Your Only Option

The central message of my six tests is that recruitment should be a proactive, considered decision. All too often, recruitment is a knee-jerk reaction in response to an employee resigning or a company winning a new contract. Taking the time to reflect on your decision can save a lot of wasted time, energy, and emotion!

As an example, I received a call from a property maintenance company that wanted an administrator. The business owner’s voice sounded panicked, and the background noise made it seem chaotic. I recommended he give it a couple of days to think properly about the underlying issues and what he needed to achieve. Three days later, he called me back, thanking me for “talking him down” as the situation had been resolved.

If you’re just about to recruit, take the time now to think: where else could their wages be better spent to deliver more value?

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Additional Resources

• Recruitment Book; The Secrets of Great Recruitment: How to Recruit Great Employees.
• Downloadable PDF guide; The Six Tests Every Hiring Manager Should Use Before Recruiting: Is Your Business Ready?
• Article; Why Recruit Employees: Weight Your Options Before Jumping In.
• Article; When to Hire Employees: Why Timing is Everything for Your Business.