How to not overhire

Sifted Summit is around the corner — and Anisah and I have been preparing for our panels on the Startup Life stage. One topic we’ll be addressing is how to ramp up hiring once you’ve hit 50 employees: including what roles you should prioritise and who you need to add to your leadership team.

It got me thinking: while lots of startups want to grow, how can they do so without bloating the business with unnecessary hires they will eventually end up letting go of?

Here, Lena Hackelöer, founder and CEO of Brite Payments — who’ll be speaking on the hiring panel at the Summit — gave her tips for avoiding overhiring.

Assess the ‘people need’ in respective teams

Talk with your managers about the company strategy for the year and how many people they think they will need in their department to meet business goals.

Look at the overall size of each team and assess whether the numbers make sense for the total size of your business. For example: how big should the marketing team be in relation to other departments for a company of 150 people?

Assess how quickly those teams have grown in the past and how much growth that team can handle going forward. For example, in engineering, you can only add so many developers to a team before productivity takes a dip. Since every new developer needs somebody to onboard them and show them the ropes, productivity actually decreases rather than increases in the short to mid term, which has an impact on culture and people’s motivation (people might like to code, but not like to spend all their time trying to teach others). It’s about assessing whether growing the team would be beneficial at this time.

Think about business critical roles

When deciding who to hire, prioritise roles that are required by regulators, and those that directly contribute to growth. Commercial roles are a great example of roles we prioritise for growth reasons; whereas we keep roles in support functions such as finance and customer service — where an increased headcount does not have an immediate impact on growth — as lean as possible.

At Brite, we’re also thinking about which roles AI could fill: for example, in operations and in customer service. If you can get rid of repetitive, simple tasks for employees, leaving them to do more inspiring work, while also keeping the team size the same, it’s a win-win.

Make sure the person is right for the role

Part of not overhiring is being careful about who you hire in the first place. We have structured our recruitment process to assess the person’s professional competence through standard assessments — such as logic and personality tests — which every candidate takes, and tests specific to the role (such as coding tests for developers). This is followed by interviews with multiple team members to establish cultural fit.

We also do six-month trial periods for every employee so that the managers can assess whether the person is right for the role, and the individual can assess whether the role, and Brite Payments, is right for them. If not, then we part ways.

Managers are directed to give the new employee continuous feedback during the trial period so that if they terminate the employee within the trial period, it's not a surprise. From an employer branding perspective, it’s really important to have continuous dialogues about performance with the employee so they don’t feel like they’re being hired and fired on the spot.

Review hiring on a regular basis

Every month, my CFO, director of people and I assess where we’re at with hiring: whether we need to increase or decrease the number of people we’re bringing on in each department and how that might fit into the budget. Things can change from month to month: while we may have planned the marketing department to be X amount of people in June, we may find that we’ve moved faster in expanding to a certain geography and then may need more people — or it could be the opposite and we need to slow down.

We keep a constant dialogue with our managers on whether they need to add people to their teams, and before starting to recruit, we always ask them: do we actually need this person, and do we need them now?

Maintain a healthy talent pipeline

Work on building up a talent pool so you can hire people when you need them.

• Part of this comes down to reviewing applications and interviewing on a rolling basis. If you meet a great candidate and they’re not needed in the business at that time, inform them that you enjoyed speaking to them and that you’d like to keep in touch with them for future opportunities. We’ve rejected candidates in the past that we ended up hiring a year later.
• Ask your employees to keep their eyes peeled for good candidates that they can refer to the HR team.
• Posting the latest jobs on your company’s social media profiles is a great way to showcase them to a wider audience. To take it one step further, encourage your employees to share these posts with their network for an even bigger talent reach.

Create a great candidate experience

If you have growth plans, you need to ensure that every interaction a candidate has with your business is positive as there is a limited talent pool — and you don’t want to get a bad reputation and put off future candidates. For example, it’s important to try to give each candidate you interview good feedback on why they're being rejected. If your HR team doesn’t have the time and resources to give detailed feedback to each employee, the least you can do is send an automated email saying that, due to a high level of applications, you’re unable to get back to them personally, and thank them for making the effort to apply.

On the subject of... overhiring

1. The costs of overhiring — and how to avoid it. Hiring too many employees doesn’t only just impact the bottom line, but employee morale too.

2. What to do when you’ve overhired? Start by reviewing your hiring process.

3. Scaling from 5 to 50 employees. Startup founders and investors weigh in on who to hire when — and the things to watch out for.

4. How to hire during a downturn.