Why Every SME should build a business case before hiring

Human resources

Are you thinking of creating a new role to take some load off your shoulders or finally filling in a long standing vacancy?

If you were hiring new people without creating a proper business case – perhaps you would want to review that practice. Building a business case before hiring helps you make more informed and balanced decisions on investing in additional resources.

What is a business case in hiring?

It is a document that will carefully examine the benefits and costs of hiring a person as opposed to keeping that position vacant.

It doesn’t have to be a complex document that will steal hours from your busy schedule. Even starting simply will make a long term positive impact on your recruitment decisions and ultimately add to your bottom line.

Build a business case in three easy steps

Step 1: Understanding the role

If you don’t have a clear perception of the role i.e., why should it exist, what results should it achieve and what skills, expertise and qualities are needed to fill the role, you cannot truly define or quantify either the benefits or the costs of filling the position.

If you don’t have a clear job description, start with some basic questions. You can use this format for any role that you are recruiting in.

  • What is the purpose of this role?
  • What will be the main tasks assigned to the role?
  • Ideally what results should be achieved by the functions performed in this role?
  • What training, skills and expertise are needed to perform in this role satisfactorily?

Step 2: Understanding the benefits of recruiting in the role

What values will be added to the business if I hire this person?

It will be helpful if you can quantify the answers.

  • Business development (example: what is the expected increase in revenue?)
  • Acquisition of critical skills and expertise needed for the business (example: how much do I save by not hiring an external professional or an agency; )
  • Better management of operational functions (example: how much do I save if staff turnover reduces by 10%)
  • Freeing up your time to focus more on strategic issues rather than doing operational taks (example: How many hours in a day/week/month will be now freed up)

Step 3: Understanding the costs of recruiting in the role

Against this answers, list the true costs of hiring the person.

  • Base salary and benefits (both statutory and discretionary)
  • Fixed cost of additional equipment
  • Taxes and insurances
  • Cost of training and supervision

 

This is a starting point to do a basic cost/benefit analysis. Given your knowledge of the business, the market your industry operates in and the state of the economy both local and global, you have a fair idea whether the potential benefits are going to be realised or not in the next 12 – 18 months. You can weigh those benefits against the true costs of hiring. This is your Go/No Go point.

Even if you take a Go decision, there is no harm in systematically exploring some other options:

  • Can you hire a fixed term contractor only for the busy season as opposed to a permanent team member?
  • Can some part of the work be outsourced and the rest absorbed by existing employees?
  • Can you make a compromise of not hiring a seasoned professional but a less experienced person and thus saving some costs?
  • Finally, is there any opportunity of process or system improvements and working smarter that will negate the need for an extra person?

Making the Decision

If after considering all the elements mentioned above you come to the conclusion that the benefits of hiring a new team member far outweigh the costs, at least in the mid to long term – go ahead and start the recruitment process.  If later you needed to review the situation, you can dig out this piece of paper and refine your thoughts for the next round.


Mahua Das

Director at Next Gen Teams

I am an HR professional recently started my own consultancy. My preferred area of work is organisational change management. I live in Sydney, love to travel and also am an avid foodie.

Next Gen Teams

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Human resources and recruitment


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