For most small businesses, the decision to hire is always a tough one. After all, you’re making a huge commitment, not just for your own business but to the person who lands the big job as well.
When it comes to a recession, the stakes are even higher. Particularly with the current economic climate anything but positive, this is a position many business leaders will find themselves in.
Bearing this in mind, today’s article is all about looking at the thought process you should be engaged in as you weigh up this potentially business-changing decision.
Do You Have Sustained Demand for a New Position?
Recession or not, one of the biggest mistakes we see in the hiring process is businesses making knee-jerk reactions.
They’ve just come off the back of a tremendous period of sales and, because of this, they put their recruitment plans into overdrive.
At this point, particularly when the economy is down, you need to ask even more questions on whether or not this is a sustained period of demand? Or is seasonality a big factor in your business, and it will ride various ups and downs that don’t warrant a permanent new hire?
Do You Need to Open a Permanent Position?
In some cases, it may be that you only need somebody on a short-term basis. This is particularly common when you have a project-based requirement that will only last for a set period.
There are now several great ways of hiring staff on a short-term or freelance basis. This means you can get the skills and expertise you need without going through the process and commitment of opening up a brand-new, permanent position.
Even if you have a sneaky suspicion that you might require a permanent employee, staying cautious can sometimes be crucial during a recession.
What’s the Financial Impact of a New Hire?
This is where many businesses get caught out because they don’t consider all the potential costs of a new hire.
Yes, you have the obvious ones like salary, but there are often other, more hidden costs that can quickly eat into your budget.
For example, you may need to invest in new equipment or software for the new staff member. Then, of course, all the ancillary costs are associated with onboarding a new employee, like training, induction, etc. You may even have different insurance obligations.
These factors must be considered when budgeting for a new hire during a recession.
What’s the Opportunity Cost of Not Hiring?
This is one of the most important questions when hiring during a recession.
In other words, what’s the cost of not hiring somebody?
For example, if you’re not hiring a new salesperson, what’s the cost in terms of lost sales?
On the flip side, if you’re not hiring a new accountant, what’s the cost of the time you’ll need to spend on the accounts yourself?