Overhiring — The Overhired Organization

14 min readJan 22, 2020

Let me ask you if this feels familiar to you?

Does every day in your company feel like firefighting?
Does your company suffer from diminishing productivity?
Do you feel your individual productivity has taken a turn for the worse in the last few months, even though you work harder?
Do the results form the hard work done inside the company are not visible from the outside the company?
It’s hard to pinpoint the reason for all of this, as there are just so many?
Does this intercede with a lot of new hires in the last 1 to 2 years?

I am in an awesome position to have worked with all kinds of growing companies in the last two decades and lucky enough to support multiple companies from their startup phase to market leadership and beyond. The big challenge that all companies have is never ideas or knowhow, these are small ones and easy to fix. The big challenge for all companies at one point is always execution. Either they can’t, or won’t execute any longer. And the reasons why are always pretty unclear to them. Well, that’s why they hire a consultant. Sometimes the root cause is a phase that all growing companies go through at one point: Overhiring.

The impact of overhiring ranges from general frustration, massive loss of execution speed, a complete breakdown of productivity, enormous loss of value to startup killer.

Some examples:

A company with an extremely well-staffed dev department that went from waterfall to Scrum to Kanban and back again in 9 months, without a single release on the core codebase in this timeframe. 2 years later sold for scrapes.
A marketing department that stopped publishing anything to the outside world.
A market-leader who became market-leader because of their innovations stopped innovating at all for two years — losing significant market share to a reinvigorated competition which copied their features.
A massively growing company that stopped communicating with its users. Halting growth in a critical growth phase.
An extremely well-founded media house with massive headcount outsourced all projects. A money sinkhole of what should be a billion-dollar business.
A marketplace that had three versions of its website online (one SEO, one mobile with entirely different logic, and one “our product”), none of them getting any updates in time anymore.
A website relaunch, late four years by now, even though hiring all the “right” people, all the time. Still not relaunched.
A design department that stopped designing.
Two teams with a growth agenda, both in the same company hiring by leaps and bounds without any positive growth impact after months.
A single mid-level dev quitting and a whole dev team that stopped delivering.
A content department tasked with creating unique content, only copy & pasting press releases anymore. Tanking their websites with Google and users.
50% of the dev department walking out the door, only for the company to become much more productive.

All of these companies had different verticals, goals, backgrounds, stories, and in the same way that they were all different, they were similar: an impressive headcount and ongoing hiring, with smart and — at first — motivated people.

Unique Events vs. Patterns

For the individual companies, all the mentioned events above were unique. A challenge, a problem, a crisis that is a unique one-time event.

But even though an event is unique for a company, they are in 99,99% of all cases a reoccurring pattern as soon as you look beyond the individual organization. And overhiring is either the cause or the symptom of their crisis.

Definition Overhiring

Overhiring: Hiring more employees then work available.

Cause of Overhiring

Qualitative overhiring might happen throughout the company, or just in (de)part(ment)s of it. These are the main reasons:

Root cause: Bad math.
Available money.
Low productivity.
Overestimating work to come.
Competing managers.
Hiring opportunities.

Bad math is the root cause of overhiring. The simple calculation goes like this:

X people have in total y output which creates z value.
X*2 people have in total y*2 output which will create z*2 value.

You can also substitute ‘people’ with ‘teams’.

X teams have in total y output which creates z value.
X*2 teams have in total y*2 output which will create z*2 value.

The thing is, it is clear to everybody that this calculation is too simplistic and, therefore, wrong. As soon as we gain first working experience, we realize that our individual productivity grows exponentially if we work with the right (and right amount of) people, declines as soon as we work with too many (or the wrong) people. Whereby we are never able to tell exactly what “too many” is, as it always “depends”.

But our mind likes simple, linear models, and even if we can reason against it, our daily (business) actions fall back on it. If left unchecked — and supported by one of the other factors below — bad math creeps in again.

Another reason for overhiring is available money/investments need to get spent. Founders know that money in itself does not have value; it’s just value storage. It needs to get spent to create value. If money is not a limiting factor (a.k.a.: you have sh*tloads of it, most likely due to investment), hiring is a “logical” choice.

Perceived low productivity. If the output of a company is not right, it does not fulfill the expectations or projections. Then this needs to get fixed. Hiring more can be a fix — or not.

Overestimating work to come. We suck at estimating how much work something will be. We all do. Especially if its something we have never done before. For personal work, we underestimate. For teamwork, we overestimate. We hire for imagined work to come, instead of for work there is. Which is ok, there just is no real-time hiring pipeline that you always have the exact right amount of people in your organization. The problem arises if you hire for work to come, and then this work does not materialize.

Unaligned competing managers who want to make their mark or defend their turf tend to overhire. They see the number of people in their teams/groups as their own importance in the organization. Hiring becomes a pissing contest (m/f/d) of their unspoken personal agenda. Said that it’s enough if one unaligned manager starts to weaponize hiring to raising their importance. If its a competition situation, it makes sense for the other one to defend their own relative importance on the organization with hiring, too. The competition situation is the real perpetrator, not the individual manager.

Hiring opportunities. Sometimes it is just easy to hire, because of the job market, or because your competition just went bust. Or maybe the organization is just very good at it. You do it because you can.

Impact of overhiring

Overhiring has a massive impact on the organization, and not a single one of them is positive:

Dispossession — the opposite of ownership. Too many people are working on the same thing, splitting responsibility where it does not make sense, or worse not splitting responsibility. And we all know, if we are all responsible, nobody is.

Imagined work. If there is no work, then we start making work up as this imagined work is never meant to reach the outside world. But the outside world is the only place where the inner workings of a company get turned into actual value. Imagined work is without any value. At best, an annoying in-company distraction, at worst, a brake pad that leads real, valuable activity to a full stop. And sometimes this imagined work creates an imagined wall that the whole company crashes against.

Value averseness. Risk averseness ist value averseness. The non-risk takers in an organization are always the majority, as ownership in an overhired organization is already weakened. The value averse non-risk takers will have the upper hand.

Moskito to Elephant. When simple things start not beeing simple anymore, spiraling out of control in work that needs to get done and time required to do it. Hard things can be hard, but simple things must stay simple. If you ad more and more people to a problem, the problem gets bigger, not solved. People with imagined work tend to get in the way.

Whose Job? Not my Job! — “How many Scrum managers do you need to pick up a pencil from the floor? None, that’s not part of the agile process.” One of the strange effects of overhiring is that actual work that needs to get done does not get done. ’Cause it is believed that the real issue is wrong or a lack of processes to put all the employees to perfect use, instead of seeing the sheer number of employees and imagined work as the real challenge. A belief kicks in that the process has any actual value and not the outcome. In the search for the “perfect process on how to do things,” the actual pragmatism to do the work that needs to get done gets lost. If this goes on long enough, you end up in an organization where the only value-creating work gets done by underpaid interns and overpaid external agencies.

Frustration. In an overhired organization, everybody will be frustrated, those who want to take risks, those who are not utilized fully, or waste time on fake work, imagined work, the managers who miss their goals and deadlines… Frustration creates more frustration, and no amount of party or awesome company event will fix it.

A constant state of alert. Firefighting becomes the typical day to day modus operandi. As even small tasks spiral into big messes, the state of alert off all people involved who still want to deliver something rises. Tasks get escalated, and even little sh*t reaches the C level.

Low productivity that does not feel like it. The company stops creating visible — visible to the outside world — output. Even though there is an enormous “busyness” inside the company, it does not lead to any tangible deliverables. And if something is ready to launch, it does not get launched to the outside world due to the general risk averseness of the organization.

Organizational stupidity. The company becomes stupid. As more and more work is made up, lots of information noise gets created, which cancels out the signal of actual useable information. As the organization becomes unbelievable bad at delivering anything, the tasks of knowledge preservation, i.e., documentation, wiki-work get — unspokenly- deprioritized as “there is much more urgent work to do”. Information “stored” in employees is not retrieved in time, as everybody is and is not responsible at the same time.

High turnover. Previous motivated people will leave the company, leading other still productive people to get even more frustrated. As people leave the company; the work is not adequately distributed but seen as a reason to hire even more.

High burn rate. The company loses money, fast.

Reinforcing Overhiring Loop.

The tricky thing that overhiring is a vicious cycle. As soon as overhiring starts, productivity goes down, leading to the logical fallacy that to raise productivity again, you need to ramp up hiring.

The more people you hire, the less productive you become, the more people you hire.

You can even simplify that.

The more people you hire, the more people you hire.

Overhiring vs. a people buffer

Not enough employees are a limiting factor.
Too many employees are a limiting factor.

To grow, you need to hire — at some point. As there is no perfect hiring pipeline, the amount of work to do will not always be equal to the work you have available.

Companies go through phases when

there is too much to do in the business. But not enough employees.
the company wants to do more than they are currently capable of doing.
planned work does not materialize.
there is not enough work for your current employees.
there is not enough work for your current employees.

Systems, in general, are more brittle if there is no buffer. So hiring for a short term people buffer — hiring for work to come — makes sense. The trick is to go the narrow path of necessary hiring, buffer hiring, and to recognize toxic overhiring.

Recognize Overhiring

You can not recognize overhiring with the inner view and logic of the organization.

Things are that way because they got that way, and they got that way because of “reasons”. As these “good” reasons, or the logic that created that kind of reasoning, are still in place, then you will not recognize overhiring. Even if everything makes sense, you still have a problem.

You can not see overhiring from outside the organization without an understanding of the inner workings of the organization.

From the outside, you don’t recognize overhiring, as you can’t easily make a statement of the inner workings of a company. Even VC, investors, and other shareholders, which all have skin-in-the-game and some insights, won’t be able to tell easily. As there might be “need to do it this way”.

Ways to recognize overhiring.
A precondition of overhiring is always that there has been workforce growth in the last two years, or that a significant amount of client-focused work has vanished in the same timeframe. If this is the case, then look for these patterns:

Outside visible output / Inner “So much to do!”

A low productivity organization will achieve even lower productivity, the more you higher. So if people in the organization continuously state: “There is so much work to do.” but can not release anything, it will only get worse over time.

Days of firefighting per month.

An organization that is in constant firefighting mode has overhired. If the numbers where the firefighting occurs is higher than 10% per quarter, it is a poorly managed company and might be suffering from overhiring. Note: 10% per quarter still means that a week and a half of firefighting per quarter is OK! Reoccurring months of firefighting, not so much.

Number of managers with less than 6 reports.

If half of your whatever-managers have less than 6 direct reports, you are overhiring managers. (This includes Scrum-Managers, the masters of imagined work. Don’t even think to burden less than six developers in a team with a scrum manager!).

Revenue / Total number of employees ….. over time.

This one is an easy one, but it also takes the longest time to recognize. If over the last two years, your revenue (or other outside world performance metric) per customer (RPC) showed a constant downwards trend, you are doing it wrong. Sadly recovering after two years of overhiring will be damn hard. If you are a startup, it's probably too late.

Fighting Overhiring

There are two steps on who to effectively fight over hiring. One is the current crisis. The other one is a long term systematical fix.

Solve the current crisis.

The current crisis is most of the time not called “overhiring” but probably a productivity crisis of some kind. But rest assured, the reason quite often is overhiring.

Align the management team. Stop infights or managerial competition of any kind. Define a north star.
Accept that things will get worse before they get better.
Assign everyone top-down ownership. Make them responsible for one at a maximum of two areas. Hardcore minimize overlap between employees, teams, and groups. Overhiring will not solve itself bottom-up or even between peers.
Make sure that everyone knows exactly what their job is. And from whom they are allowed to take tasks. And what to do when tasks from other sources hit them.
This all means you will create silos. Silos are more productive and scale easier, but create contrary innovation. (Company will produce less innovation and even get less innovative compared from where they started.)
Do less. Do the most urgent things with the highest outside visible impact. Prioritize, and keep to this prioritization. This means that you need to accept that you will do less. This will cut down on the majority of imagined work, and to a minor degree of some of the real work. That’s a loss you have to live with.
Do not try to make up work for people that now have nothing to do. They are, for now, your buffer. Send them home, on vacation, training … whatever, but do not invent work for them. A Buffer is, by definition underused stock.
Document your real-world processes. People in charge of an area are now in charge of documenting their processes. All of them. This task can not be postponed.
Remove people from the process. If a process needs lots of peoples and teams, question the process, simplify it, strip it down. Just because it has always been done that way is an argument to do it differently in case of a productivity crisis. The goal is to get people out of the process. Design your ideal processes, but start from the real world.
Stop interference on all levels. You can improve the process, but adding people to it must be seen as a downgrade of process, not an upgrade. Especially let not people in the buffer involve themselves in the process.

Congrats, you have now created a siloed organization — that can execute again but is as innovative as a rock. Siloed organizations are much, much, much simpler than any flat, matrixed, distributed, … organizations. To scale up, you sometimes need to radical simplify first.

Solve systematic overhiring.

The best hire is no hire. Establish this rule to find other solutions to a challenge than hiring. Only when there is no other feasible solution for the long term goal, hire.
Don’t hire for work that needs doing; hire for a job that needs to be done. If there is just predefined work to get done, outsource. If there is a job that includes yet undefined work, hire.
Keep hiring standards absolute. Employees have a negative value for the first three months. Bad hires for longer. Do not lower your hiring standards.
Job description. Every person gets one. And must adhere to it. They might write it themselves and then review it with their managers. Every person needs to be able to tell you what their actual job is.
OKRs. Every group, team, employees. Outline dependencies. No exception. Ever.
Get commitment to these OKRs from everyone — leadership, managers, individual contributors.
Outline the expected results over the next quarter, and the work you need to do to reach it. Yes, you can plan work. Separate between well-defined work that can be outsourced, jobs that need doing, and things that should get automated. Automate, outsource, hire — in this order.
Hire means also to “hire” people from your buffer. Do not treat them preferred than pot. new hires. Do not redistribute employees just because you can, shifting the overhiring problem from one part of the company to another part. But yeah, use your buffer. You already know if they are a team fit or not, which is one of the most important hiring criteria. (If they are in the buffer, and also a known not-team-fit, fire.)
Monitor overall productivity. Monitor individual productivity. Do not apply “more hiring” as a 1st level solution to low productivity. It’s a third level solution after automating and outsourcing.
Envision the work for over one year. Plan your hiring pipeline. “Everything, now!” is the opposite of a plan.
Hiring milestones. Do things in batches — Reevaluate after each milestone.
Hard goals, hard decisions. OKRs must have consequences, positive and negative ones. Results without impact on the person responsible for the result is a contradiction.
Fire or work on termination by mutual agreement. Be helpful and supportive. They are your future network. (“Fire” is not an evil word or thing to do. They can not fulfill their full potential in the organization, and the organization not with them.)

End result: a company that can execute again — in silos. Without hiring that spins out of control (and the company out of control). As the Nr. 1 problem has now been solved, Nr 2. gets a promotion. How to become innovative again. Time to break open those silos again. Expect some resistance to this, as “things are now finally so much better”. Innovate-ability is something that is not on top of our daily business minds, and loss of innovate-ability takes a long time to be recognizable. But still, it needs to get done. But that’s another article…

If you are not in an overhired organization but want to prevent the overhiring trap:

1st level: Automate
2n level: Outsource
3rd level: Hire

And keep hiring standards absolute. Some things are simple if done right from the start.

About the Author

Franz Enzenhofer changes the internet since 1998. Over his career he worked with startups, market leaders, startups then market leaders, market leaders that reinvented themselves as startups, state-owned companies, freelancers, concert halls, cities, political parties, betting companies, NGOs, economic chambers, TV stations, family-owned small businesses, Fintechs, old school banks, national and international newspapers and news agencies, media houses, media conglomerates, sport teams and more. He worked with organizations in the US, UK, D.A.CH, Ireland, India, Thailand, Peru, Colombia, Spain, Portugal, Poland, Netherlands, Italy, Germany, Switzerland, Croatia, Hungary, Bulgaria, Gibraltar, Sweden, Cyprus and more. He cares about systems growth.

fe /at/ f19n dot com

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