Overhiring: The Mistake You Keep Making

Gabs Ricci
Sep 7, 2018 · 5 min read
Too many cooks in the kitchen.

** I wanna start by saying that I co-wrote this with Johnny Nguyen. He’s a super cool dude working to bring big ideas and creative storytelling to the startup space. A culture changer and chaser, his approach to business strategy is unparalleled.**

Startups are the hub for business mistakes, and in most cases, that’s a good thing. Employees take trips along the learning curve and explore testing methods to drive strategy. Growth is limitless, but mistakes are bound to happen (and some will hurt more than others). One of those mistakes is overhiring. Series A startups are the culprit for this, and it’s costly.

It’s easy to get caught up in hiring after receiving funding. Who wouldn’t? It seems like a logical way to show board members that the company is growing. It probably doesn’t help that there tends to be pressure from investors as well — they’re dropping hints that they expect the company to grow twice the size in half the time. It can be easy to crack under this weight and rely on hiring as a way to give the illusion of growth. If more people work at the company than it’s growing, right? It’s hard being a founder.

Letting that pressure and overwhelming weight push you to overhire is a mistake to avoid. Here’s why:

More employees = more money allocated to paychecks each month = higher burn rate

We wish we could say this is uncommon and only a few startups succumb to the pressure of these outside forces. The truth is that it’s not uncommon at all. We’ve seen it happen. The company is growing, and employees are feeling good about the future. Then, out of nowhere (or so it seems), the company is smaller than it was before funding.

When startups overhire, employees work full-time on a part-time strategy. What exactly does that mean?

At this point in the game, a Series A startup already proved value. The money used from funding is (hopefully) the catalyst for growth. Yet, this only happens when the money is allocated to support the strategy. Without a solid strategy, things fall through the cracks. We’ll talk more about building a solid strategy later. For now, it’s important to note that simply increasing a company’s headcount as a means to grow does nothing.

A Better Way to Hire

How should companies hire? By using their strategy. This is the roadmap, the blueprint, the route to the lost treasure. Essentially, a strategy maps out what each department must do (goals, tasks, KPIs) to help scalably grow the organization.

With the main focus in mind, the hiring method is clear. Companies can see what the next few months have in store and can properly allocate funds to make sure goals are met and potentially exceeded. And, as mentioned earlier, those funds don’t always mean more bodies. It could be a new software that increases efficiency.

Here’s what companies shouldn’t do:

  1. Copy other companies roles to find gaps in their strategy. What does this do? Who cares if the competitor has a Data Scientist? If the role doesn’t provide value and doesn’t factor into the strategy, it’s unnecessary. Companies grow at different rates.
  2. Add more employees to departments with the highest ROI. If more employees aren’t needed, this will bloat the organization. Can the department continue meeting goals with the current employees? Yes? Then don’t add employees.
  3. Hire on premature launches. Don’t hire because you might launch something in half a year. There’s a chance that in three months the course will change. First, prove demand. Did the release of the product bring in more customers and sales? Can you safely say it is time for another person? Gambling with human capital is risky.
  4. Hire based on the conditional success of another department. Again, this is hiring based on the best case scenario. If the Sales Team is trying to reach a sales goal in a new market, don’t hire more Customer Experience members before they reach that goal. See what happens. In a few weeks, the sales team may realize the target demographic was too broad causing inevitable churn. We know what happens when we assume.

Hire for specific needs and goals, not just because there’s money in the bank. Figure out the company strategy and identify gaps in skill sets needed to achieve it.

Human Capital/Task Ratio

Don’t fret; there’s a right way to hire. While hiring may look different for each company, proactive and effective methods will ensure teams are equipped with the right talent (even if that means keeping the current size).

Start by taking inventory of what current employees are doing to fill their 9–5. More importantly, understand the value of a task. If a task produces a higher impact on the company strategy, its value increases. Cut any tasks that don’t provide a measurable impact.

After doing this, add in what tasks are needed to support the “must-haves.” Some current employees might already have the institutionalized knowledge and bandwidth to complete these task. Rather than hiring someone new and burning time and money while they are onboarding — a better alternative is to reinvest in an existing employee that may be up for the challenge. Ask them before choosing to hire someone new, but this gives you an option to grow at a fraction of the cost.

Companies may find that none of the current employees have the bandwidth or the knowledge to take on something new. That doesn’t mean there’s a need for a full-time hire — freelance employees are GAME CHANGERS. Working with freelancers allow companies to hire for one specific task, without a long-term commitment. View the strategy from an objective standpoint because freelancers are more invested in their work than the company itself.

Working with a close-knit group can be scary; but lean, agile teams work. Teams can complete tasks faster and communicate with ease. With fewer people to approve ideas and edit Google Docs, startups can test til the cows come home! More importantly, employees get the chance to access their true potential.

In our experience, agile teams can outperform their overcrowded counterparts. The key ingredients? Ownership, accountability, and trust. Small teams must vibe well. Once the groundwork is set, a level of mutual understanding flows between each member. Knowing one another helps folks show up and get shit done.

It’s important to note that strong leadership for smaller teams is crucial. Because work is divided between limited members, department heads must know the skill set of each individual. Leaders that know how to lead will cultivate teams that know how to perform.

So, do the math and stop wasting hard-earned money on overhiring.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade