- Almost all businesses undergo the process of hiring and experience the cycle that comes with it. The first stage is as a start-up.
- The second stage occurs once the business experiences growth, which brings up different hiring needs.
- The final stage is expansion, where the business will begin hiring specialist workers to maintain productivity and growth.
There are many different models of business growth or business cycles for small to medium-sized businesses. As they progress through this cycle, frameworks and employees’ mix of skills and capabilities will change as a part of growth and expanding market needs.
This article explains how can different stages in your business cycle impact on your hiring decisions? The business cycle I will discuss combines several factors, different requirements of skills, and the complexities of the HR frameworks. In this cycle, I will discuss three stages. Other models will have 5 to 7. Regarding human resources requirements, this department is where the biggest impacts are felt.
Stage #1: Start-Up
The first stage of the cycle is the start-up stage. The start-up stage of the business cycle involves a founder. The founder is primarily the person who is undertaking the majority of the tasks required to get either the product or service to market. When the founder decides to hire their first employee, it’s a very difficult decision. Usually, they are snowed under with work and do not have the cash flow to support an additional resource.
If they are able, they will hire someone to assist in the back-end of the process to ensure that products and services are getting to market. This position is usually in the administration and the person will generally be a “jack of all trades.” This person will typically answer incoming calls, schedule meetings, undertake sales, and help with the bookkeeping for the business, while the founder will make all the necessary decisions for the key functions such as marketing, finance, strategy, productions, operations, and logistics.
There are several options open to founders at this point of the hiring process. You can employ directly or look at alternatives. Contractors are an option. However, they can be an expensive overhead. Contractors give the flexibility to utilize them for only the hours required. The founder can also employ on a casual or part-time basis to fit the needs of the business, and as the business grows, then the role can increase the hours performed.
Recruitment agencies can also be effective, even though there is an additional cost if you utilise one. One benefit is it provides more flexibility when the employee is actually employed by the agency. This also can reduce difficulties with managing the performance of the employee as this will be handled by the agency. However, there is a trade-off. As a business owner, you want someone to understand your business and not need to train them regularly. You also want someone who is going to stay with your company rather than leave to take up a more secure position.
Stage #2: Growth
The second phase of the hiring process is growth. In this phase, the founder is still very vested in all the company decisions, and the growth of the business will be putting pressure on their time, capabilities, and skills. Consequently, the number of employees will start to increase, and the HR frameworks required to conduct business will start to be recognised. At this stage of the hiring process, this will involve generalist roles as described in the start-up phase.
The business is not usually big enough to support dedicated functions, so the founder will be looking for more generalist skills which may cover a variety of roles, for example, sales, marketing, and production. The same employment/hiring options are available to the business as in the start-up phase; however, at this point, the founder will be looking for more employee retention. HR frameworks are becoming more important to ensure that expectations are being clearly communicated to employees and processes and procedures will now be required to support business decisions.
Stage #3: Expansion
When your business gets to the expansion state recruitment will have a major impact on hiring decisions, and the skills and capabilities of the employees. The founder will begin to work on the business rather than work in the business. Functional areas within the business will require more focus and level of capability. Usually the first of the functional areas of the business will be the finance section and the skills required to run a smaller business will now exceed that required of a bookkeeper and need the abilities of a finance manager. A finance manager or CFO will be able to manage the day-to-day transactional activities of the business, but they will also be able to formulate more extensive budgets and align the numbers to the business plan. This position will also add value in identifying venture capital opportunities, strategic alliances, acquisitions, and mergers to ensure the business to grow and expand into different markets.
The hiring requirements for this stage are critical decisions for the business in more specialized functional areas. Other functional areas which are recognised at this stage are HR, marketing, production and the like.
A difficulty for business owners as they transition from the second stage in the cycle of growth to expansion is they will have many employees who have been with the business since its inception. They are incredibly loyal, and the founder may have a personal relationship with them. At the same time, capabilities are starting to change. There is a requirement for more in-depth skills and capabilities, as well as management and leadership skills, which are necessary to the success of the business. Employees who were generalists and performed their roles very successfully, now do not possess the depth of skill and specialized expertise required. This is a tough time for the founder of the business as there is a balance between loyalty and capabilities. It is sometimes a very expensive option to keep an employee who does not possess the functional expertise now required to support business activities.
Recruitment needs will change throughout the business cycle and this will have impacts on the skills and capabilities of the candidates you are seeking. As your business grows, you will go from recruiting generalist roles to more specialist roles. The most challenging phase of the cycle is the growth phase and making the decision to move from recruitment of generalist skills to more specialized skills. These decisions will be impacted by cash flow and existing capabilities within the business.