How to Avoid Overhiring

Caitlin Weiser, aPHR
February 10, 2023

With new layoff announcements happening daily, downsizing has been seen across industries in businesses of all sizes. Due to the pandemic and the rise of remote work, organizations found they had access to a larger talent pool which allowed them to grow quickly. Many businesses made the mistake of thinking hiring more employees would translate to additional business growth. Now that the market has shifted due to rising operational costs, inflation, and changes in customer behavior, companies have an unsustainable headcount. In this blog, I share how you can identify if you have overhired and the steps you can take to avoid overhiring in the future.

Why Overhiring is Bad for Your Business

An important reason businesses should avoid overhiring is because it negatively affects profitability. During the past few years of extreme business growth, companies paid overinflated salaries to get talent through the door. Superfluous compensation packages quickly become unsustainable when sales slow down or customer needs shift. When you can no longer afford the salaries of your employees because there isn’t income to sustain them, you end up having to lay people off.

Overhiring goes deeper than salary costs. It affects company culture, team morale, and employee job satisfaction. When a large number of employees are brought onto a team during an uptick in business, everyone is busy. Once things slow down, there isn’t enough work to keep employees occupied, which results in a lack of motivation and engagement which spreads throughout the entire organization. Even your most tenured employees can become disengaged or begin looking for new job opportunities if they don’t feel challenged in their work.

How to Identify if Your Company Has Been Overhiring

It’s easy to overhire when there’s plenty of work to do and your team’s daily activities connect to business goals. Layoffs happen when businesses focus on short-term solutions to immediate problems rather than a long-term growth strategy. For example, if your sales team is swamped it’s easy to see the solution as hiring additional resources to support demand, but what happens if sales slow down and your new employees are left with little to no work? Mishires cost your company valuable time and money so it is important to identify if you’ve been overhiring before you continue to bring on additional team members.

Analyze your organization and the employees you have within each functional area. Speak with line managers about their department’s workload and employee performance to understand if employees have too much, too little, or a manageable amount of work. If you do need to hire, strategically plan where you should be adding additional resources. Only bring on new employees you know the business can fund, both in the short and long-term, and whose skill set supports your business strategy.

Factors to Consider to Avoid Overhiring

Businesses know they need to hire to scale but end up overhiring because they haven’t identified exactly who they need to hire and why. Workforce planning requires you to identify the skills and traits that will grow the business and if your organization is in a position to financially support new hires, even if the business changes. Align your hiring strategy with business objectives to maintain line of sight on meeting company goals. Review your business goals and workforce planning periodically to avoid overhiring.

Consider Your Immediate Business Needs

Taking a reactive approach to staffing leads to overhiring. When you are scaling quickly it is easy to add additional team members before thinking strategically about what the business may look like in the future. Evaluate your immediate business needs and create a workforce strategy that supports your current and future goals. By focusing on quality over quantity you make calculated hiring decisions based on skills, ability, and company culture. When you take the time to hire slowly and strategically you hire candidates who will continue to add value as they grow throughout the organization. A skilled employee can produce results that lead to business growth. Taking the time to hire one good employee can give you a greater return on investment compared to the return on investment of hiring multiple employees quickly.

Communicate with Your Current Team Members

Before you rush into hiring additional resources, talk to your current team. They can provide insight into how the business is performing from their perspective. Numbers and metrics only tell part of the story and your employees can shed light on where your business stands from the ground level. Asking employees how they’re feeling about their current workload can help guide your hiring decisions. If they are not feeling overwhelmed you know you can hold off on hiring for the time being. If they are in need of additional support, you can choose to either redistribute responsibilities or make the decision to bring on a new employee.

Hire a Specialist for Your Most Pressing Needs

Hiring someone who appears to be a jack of all trades may seem like a good idea when trying to avoid overhiring because they can be placed throughout the organization as needed. While generalists can be useful to your organization, you want to ensure you are seeking out specialists for your persistent needs. When you solely hire generalists, you run the risk of not having the right skill set for your long-term business goals since they are not developed in one specific area.

Make sure you hire someone who specializes in the main functional area you need now and will continue to need in the future. A specialist will have the defined skills needed to address your most pressing needs and will continue to add value to your business as it grows. While hiring a number of generalists may lighten the workload at first, they cannot consistently meet your specific ongoing business needs. This means there is less opportunity for their long-term potential to add value to your organization. 

Be Honest and Upfront About Your Expectations

When making an employment offer, be transparent and don’t make any promises you can’t keep. It’s easy to get carried away in the offer stage, especially if you are offering a position to an extremely talented candidate and want them to accept. Avoid making future guarantees you are not sure the company can meet, like guaranteed job advancement or salary increases. You run the risk of losing talented employees and having to start over in your recruitment process when you make promises in the offer stage you cannot keep later. Communicating expectations upfront will help with your retention efforts and ensure that the people you hire are the right fit for your organization.

Start Your Workforce Planning Process With the Help of Red Clover

Have you found yourself in an unsustainable workforce and think you may need to conduct layoffs? Do you want to proactively plan for the future growth of your business? Regardless of if you’re downsizing or growing, when it comes to workforce planning, Red Clover can help! We create scalable workforce strategies to support intentional growth to protect the longevity of your teams. Contact us today to see where we can help you!

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