Hiring First Managers
This article discusses hiring your business’s first managers and supervisors.
This typically starts to happen in what we have called the Small Business (5-19 Staff) phase of your business growth journey.
We begin with refreshing your mind on some of our other discussions on the affordability, timing and budgeting for staff. Then we look at some specific issues relating to the selection and hiring of managers and supervisors.
Hiring Housekeeping Issues
We touched on several issues regarding the timing and funding of new hires in our Who and What to Hire article. We will not repeat those suggestions here. We encourage you to re-read them to refresh your memory if it is a while since you have hired . Topics covered there included;
- Most smaller businesses are financially constrained. In order to hire someone, something else has to be forgone. Often, that is Profit and Salary in the hands of the owner
- the amount of Revenue the business raises will need to increase to cover the wages cost. This is often 2-3 times the salary of the new hire + on costs like training and housing and equipment
- a wise business owner sets up a buffer of cash sufficient to pay for this “spin up”.
When to Hire
A manager or supervisor can generally manage somewhere between 8 and 12 staff. The theory of this is known as the Span of Control. The actual numbers may vary with your industry.
If they are in charge of fewer staff, they are possibly under utilised and also less likely to recover their costs from the efforts of those they supervise. In this case, you could group several specialities together under one manager and later break the group into two groups as the number of staff being supervised significantly exceeds the upper limit of the Span of Control.
If they are managing significantly more than (say) 12 direct reports, they may not be doing it well.
Ideally, when the business is small, the best supervisors to hire are ones that will actually be directly earning revenue themselves as well as supervision. A so called “leading hand”.
What Slots to Fill
You can probably only afford to hire 1 -2 managers at this stage of your business growth journey so you need to choose the skill-set wisely.
Replacing the Owner
It often makes sense to hire someone who compensates for your personal weaknesses; providing that those weaknesses are in a key area, like production or sales.
However, it makes little financial sense to hire a non-Revenue earning, full-time manager / supervisor to replace an administrative weakness on your part until at some time in the future when your business is sufficiently large to warrant the expenditure.
Although you did everything in the early days of the business, it is very likely that you can’t do some things well enough to meet the increasing revenue and production requirements of the business. Sales is a typical case in point.
In order to continue to grow the business, it makes a lot of sense to hire a specialist manager to boost the areas where you are weak.
A similar argument can apply when there are aspects of the business that you don’t like doing and can hire a manger to cover them. Be rather more careful here that the decision is still a wise one. A manager will cost up to twice what a normal worker costs – and will likely not directly earn any revenue for the business – and your business may still not be large enough to indulge you in hiring managers just to suit your work preferences.
Staff the Constraint First
We are great admirers of the Theory of Constraints . Essentially this says that any manager hired in an area that is not the limiting factor in your business will not make much impact.
Therefore, always try to identify the (usually) single thing holding the business back and then hire to reduce that limitation. Otherwise, your new hire will not be maximising the benefit to the business of hiring your first managers.
Known or Unknown
There can be the option of choosing an early manager from people whom you know. This can be especially true of promoting an existing staff member to a management role. They come along with certain weaknesses, but at least you are often fully aware of what they are and can build a compensatory system to manage them.
This might be more feasible when you are raising someone from front line to supervising front line in an area they already know.
It is much less likely that an existing staff member can make the jump to a specialist manager. You are looking to hire specialist managers that are much better at the task than you are.
Allowing for Future Growth
Early on, the expertise level of managers you can afford to hire may not grow as rapidly as your business.
Therefore, you might find your business outgrows your first managers. This is common.
The lesson is to be careful not to promise, or give the impression, that a new manager will go up the ranks as your business grows. A good salesperson may not turn out to be able to handle a larger a more sophisticated sales system. Your admin person may not be able to do a later CFO job so you don’t want to call them that at the outset. The Peter Principle highlights the negative impact of people promoted beyond their competency.
With 5-19 staff, you should be able to afford 1-2 managers or supervisors. Carefully choosing the roles for these people will help your business continue along its Sustainable Business Success growth journey with minimum lost traction.
There are lots of employment scenarios and many different practices in different industries. The advice in this article is general in nature and should not be relied upon in specific cases. If necessary, consult an expert.