When is it time to hire a new employee? This is a common question asked by advisers. Should you hire early to prevent a crisis or wait to see whether an existing employee can take on extra work? Are things so dire that a new employee — and the related costs — is truly needed?
Most experienced advisory business owners agree that it is preferable to hire before chaos breaks out. But there are some interesting nuances regarding the timing of making the new hire.
Hiring replacements
When the new hire is a replacement employee, hiring early is wise. Assuming the existing staffer is good at the job, having some overlap lessens the training load. Plus, hiring always takes longer than we expect it will. There may not be many available qualified candidates around from whom to choose. Or you might be too busy to write a job description, review resumes, conduct interviews and talk to references — all steps that can't be shortchanged.
Filling new staff positions
When hiring for a new position, you need to be more deliberate. Ask yourself:
• What precisely is the need? Have you documented what's needed in a job description? Job responsibilities tend to shrink once you get them down on paper.
• Can an existing employee assume the responsibilities? If yes, this can be a double benefit — the new tasks will be handled for the firm and the employee will gain valuable experience.
• Is the firm's productivity solid? Are employees motivated, and is morale high? Have you taken advantage of technology to achieve greater efficiency? Do procedures need streamlining?
Seeking new advisers
It's not just support staff I'm talking about. Predicting when to hire the next adviser is equally — if not more — acute and tricky. For example:
• An adviser who plans to retire in two years knows she can't find a young adviser, train him or her, and transition clients overnight. And the less experienced the new adviser, the more time the transition will take. (Individuals with two to 10 years' experience are good candidates to consider in such instances.)
• Developing a new niche at an established firm means that either an existing adviser needs to learn all about the niche or someone with expertise in the niche must be brought into the firm. This could lead to questions concerning whether to merge with or acquire another firm.
• Analysis of a firm's client base may indicate that the lead adviser has grown enough to keep another adviser busy and that it's time to offload clients. This could free up the lead adviser to focus solely on his strength: business development.
(More: Boomers: Envision your business transition plan)
The CEO's role
A leader's role includes identifying the organization's human resource gaps, yet hiring involves risk. For example, your 401(k) firm may be set to bring on a giant new company. The client wants to be sure you have the staff to deliver on your promises. But what if you hire an employee in advance to conduct enrollment meetings and you don't win the business?
Risk is obvious when taking on a new adviser. It assumes that he or she will pass tests, learn the required skills, like the job, and ultimately thrive in the role. Hiring to fill a new non-adviser position (e.g., a marketing specialist) presents a new expense that must be covered by the greater efficiency or innovation the position provides.
I've frequently met young advisory business owners who avoid the risk of growing — or even replacing — staff. To the novice CEO/CFO adviser, saving a buck may seem like a good idea. On the other hand, the experienced advisory business owner who has garnered wisdom over time knows that investing in the firm in a variety of ways, including human resources, is the path to growth.
(More: Why diversity and inclusion should matter to advisers)
The takeaway
Before deciding when to hire, answer these questions:
• Is your firm growing?
• How important is growth?
If growth is neither happening nor important, your firm is likely in the decline stage. If a decline is your future, hiring staff is the least of your concerns. Nevertheless, with early detection, a decline can be reversed. The wise CEO pays attention to the firm's business stage and makes considered decisions to help the company thrive, including when to hire new employees.
(More: 2018 and beyond: Business planning, and questioning)
Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network.
