Building Your Organization - Where Do You Begin?

By Tom Bixby, President & CEO, LEVEL Management Partners
Published May 5, 2016

Level Management Partners’ core service offerings are Value Growth Planning and Exit Planning (with Value Growth Planning). In this article series, we’ll focus on challenges faced by owners of young companies as they consider when and how to add people to their ranks.

During this series we will touch these and more:

  • When is the right time to grow?
  • Should I outsource some functions?
  • How do I find the best people?
  • Should I pay more to hire experienced talent?
  • When should I add management layers?
  • How do you keep everyone on the same page?

What are you getting yourself into?

Adding employees can be a difficult decision, as it has a profound effect on administrative complexity and your obligations as an employer. Still, it is a natural part of growing the company that all owners must face if they aspire to own a large, valuable business.

LEVEL Expert Network™ member Scott Williams is Founder and CEO of The Stonehaven Group – HR, a global human resources support and advisory firm headquartered in the Atlanta area. Williams shared, “Adding the first employee is the biggest step I have ever had to make. I will be responsible for the employee, their family and their issues, their hopes and their dreams -- a lot beyond a paycheck.”

Williams has counseled many businesses as they consider questions about adding people to their growing company. Scott shared his own experience in building The Stonehaven Group – HR with this story.

“Starting, supporting and growing a business is like having a child. You are there from the concept, concept development, pains of business launch and all the growing pains. If you ever started your own business from scratch, as I did, you lose a lot of sleep and, in my case, my retirement savings and nearly my house in 2010. But the biggest stressor was, by far, whether I needed to hire an employee. Do I need one? Can I support an employee?”

When is the right time to grow?

Should you wait to hire more people until you just can’t wait anymore and risk expensive errors, possible turnover from overburdened staff, customer complaints and damage to your hard-earned reputation? Should you add people once you suspect you might get that next big customer, knowing you could not afford them if the big deal falls through?

The answer probably lies somewhere between those two extremes. It takes a long time to develop a great reputation, but you can earn a bad reputation in the blink of an eye.

Williams suggests a logical decision-making approach for growing your company:

  • Do the math: Will the company recover the new hire’s pay within six months by increasing revenue or reducing business costs through improved process efficiency?
  • Do the pros and cons: Will the hire bring more pros than cons to the company and/or existing staff? Document your thoughts by committing the pros and cons to paper!
  • Do the cultural assessment: Will the company benefit from their personality and/or desire to win?

If you answer “yes” to all three, Williams suggests you are in good shape to bring on employees, otherwise, two “yes’”, maybe not, or one, you should get back to work!

Regardless, don’t wait too long. In Williams’ experience, waiting too long and trying to do it all by himself hurt his business and their ability to grow. “Waiting to hire caused non-returned calls, lost prospects, upset customers, late hours for all and stagnating profits. Within six months of increasing staff we realized a 55% increase in overall customer satisfaction, then we tripled our revenue as we added our sixth team member!”

Outsourcing Options

One important route for scaling up is by outsourcing non-core functional support activities to a third-party who can bring immediate best-practices and plenty of resources for your growing firm.

Growing firms commonly outsource these functions:

  • Payroll Processing
  • Human Resources
  • Accounting
  • Marketing
  • Other non-core administrative functions

Outsourcing makes most sense when business revenue can’t justify a full-time employee and staff lacks the expertise, discipline or resources for the non-core function without outside help. Hiring a part-time executive in Finance, Marketing, Sales or other functional discipline can be a great way to acquire tremendous knowledge and expertise at a very manageable cost.

With respect to outsourcing human resources support, Williams added, “The owner has the ability to bring on concentrated HR expertise at a greatly reduced functional cost while reducing the risk of legal or regulatory hardship. On average, our clients see overhead cost savings of 30 to 45% versus a qualified in-house HR professional or a PEO provider.”

In the second article in this series, we will dive into the subject of recruiting talented people into your organization.

View Part 2 - Building Your Organization - Attracting Talent
How healthy is your business? What changes might drive sustainable growth?
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