Hiring: Why?

I have concluded the first part of this series, covering self management. It is time to start talking about one of the core responsibilities of managers: hiring. This will probably be a 3-5 posts mini-series.

Why hire?

Each person you bring into your company decreases the company’s profit. This is a fact. This person is getting paid for their time, hence reducing the company’s profit. Profit and free cash flows are the life blood for company’s. As a result the best company in the world would bring in revenue and be profitable without any human being paid.

This is unrealistic. We know companies do hire people, so the question here is why? Obviously, the reason is to increase profit. It is clear that in certain circumstances it is worth bringing in people to do work, as it increases profit.

Why are you hiring

As we established the fact there are some circumstances hiring does make sense, we need to figure out and ask ourselves, what are those scenarios.

My rule of thumb is: Hire only if the person joining the team will multiple the team’s output by at least 2. Let me explain. The main goal of a company is turn profit, if you are going to bring a person that doesn’t multiple the team’s output by 2, the net outcome of the hire is negative, since the salary, the time spent on trying to improve the performance of that person, and eventually firing the person, will cost more than the company gained.

Only hire if you must

As a result of the previous paragraph, it is clear we would like to avoid bad hires, and error on not hiring. However, not hiring when you must hire is a higher profit risk than hiring in most cases. This depends of course on the company’s stage, and the financial situation. But as a guiding thought, it is mostly true.

If you actually identified you must hire, by all means, hire. But make sure you hire s person that will multiple the team output by at least 2. I know it is hard to measure it, but if you defined the scope of what you need, and find the right candidate, the win will be very clear.

Who should I hire

This subject probably deserves a post on it’s own, but generally speaking, you should hire the best possible candidate. Obvious, I know. However, that is not always what happens. From time to time, companies hire people that are not the best match. Sometimes it is because time constraints, rarely it is because politics, or inequalities. The reason doesn’t really matter, the outcome is always the same: disaster in the worst case, and sub-optimal performance in the average case.

Balancing the risk between missing the right person and hiring the wrong person is withing the performance of each company, but I prefer erring on missing the right person.

The important takeaway is to question why are you hiring, and if you are picking the person that will multiple the output of the team they are going to join. This is the single most important decision to make before you are starting the hiring journey.