In our leadership meeting the other day, we were discussing sales forecasting. Specifically, how I’d love to get more solid models in place, but haven’t yet figured out what those models would look like. Frankly, I’m not sure I’ll ever have the answer for perfect agency sales forecasting, but luckily I’m not alone. Plenty of other people feel my pain (see here). That’s another blog post entirely, but it did get me to thinking about agency hiring strategies and why I believe proactive hiring is ideal.
Admittedly, I have an agenda, and that’s to get you to consider hiring proactively vs. the reactive-to-sales hiring that we’re all accustomed to. It can be difficult in an agency since sales have a certain ebb and flow, and you don’t want excess overhead for an extended time period. I get it. However, in many cases, trading a little short-term profit for a more solid hiring and onboarding experience can have several long-term upsides.
Relationship Between Sales and Hiring
I don’t know about you, but at each agency I’ve worked at, the volume of closed sales is rarely consistent. More often than not, you might have a 4-6 week dry spell, and then five leads could close over the following two-week period. On the surface, fulfilling this new work seems simple enough. You know the volume of work coming in, your current team’s capacity, and the difference between the two. If it’s substantial enough, you hire new team members. Problem solved!
I know that not every agency will be in a position to think about proactive hiring, and that’s okay. Maybe you’re just starting up and building your book of business, or your recruiting pool is running a little dry. But if you’re able to make a small financial sacrifice in order to get someone up to speed before day 1 of a client’s engagement, and you don’t do that, you’re putting short-term profit over long-term success in several different areas.
Reactive vs. Proactive Hiring
I define “reactive hiring” as hiring that takes place out of a need for an immediate capacity increase. For example, your team might have been at 90% capacity but the new deals you closed this month will put you at 110%. “Proactive hiring,” on the other hand, typically occurs when you’ve hit a pre-defined capacity threshold that’s lower than 100%. At UpBuild, we feel comfortable putting our team at a 90% capacity maximum before we decide it’s time to hire.
As with anything, both strategies have pros and cons:
- Reactive hiring
- Pros: Short-term profit preservation
- Cons: Reduction in quality and quantity of onboarding and training
- Proactive hiring
- Pros: Smoother, more comprehensive onboarding and training experience
- Cons: Short-term profit reduction
When talking about profit preservation or reduction here, “short-term” is key. Yeah, if you hire proactively, you’ll see a dip in your profit in the beginning; however, I firmly believe the long-term benefits outweigh the short-term impact on your profit. Because you won’t be rushing to immediately fulfill work for a new client, your new team member will have a higher-quality onboarding and training experience, resulting in a more comprehensive understanding of the agency, its services, client roster, and individual client needs. Most of the time, this will naturally translate into better client results and higher long-term profit through client retention and expansion.
When you make hiring decisions that are reactive to closed sales, it typically comes with a rushed onboarding and training experience that leaves the team members half-prepared for the work they need to complete because the team is trying to react to the work that needs to be fulfilled immediately for the new client. Additionally, many agencies will wait to actually make a hire until they already have an extra person’s worth of work booked, meaning current team members are working above capacity during the hiring process. This increases team member turnover, which necessitates more hiring, and the cycle continues. This can put you in the dangerous position of constantly being over capacity.
Another critical area that’s impacted by your strategy choice is culture. Client engagements have a hard start date, so when you’re hiring reactively you feel the pressure to fill that seat. This can lead you to make allowances and exceptions for skill set or, more often than not, culture fit, that you might not normally make. I know I’ve made that mistake in the past, and it can create a mess that takes a long time to clean up. When you take the proactive route, you have the luxury of time and can critically evaluate soft skills and personality traits.
Tips For Hiring Proactively
- For billable positions, have a pre-defined capacity threshold below your maximum capacity that triggers the hiring process. This threshold differs from agency to agency – it depends on your lead pipeline, time to close, talent availability in your recruiting area, interview process, and more. For some it might be 95%, and for others it could be 80%.
- Advocate for a truly comprehensive interview process. If you’ve made the decision to sacrifice some profit in order to fortify your hiring process, you really should go all out. Have a skill evaluation. Let your team members get to know the candidates, even (and especially) the ones who would be lateral or junior to the position. If you’ve made the choice to hire proactively and you implement a lengthy hiring process, the candidates you truly want to attract won’t balk.
- When you’re hiring for a new role that hasn’t yet existed, there are additional implications on organizational development. What function(s) will they support or be responsible for, and how does this change the responsibilities of their colleagues? What level within the organization do we want to bring them in at? How will this new role affect process, interactions, and communication within the agency? For example, when young agencies first bring in someone to own operations, the assumption is that this will free up the CEO (or whoever) to put more time into business development. That’s true, but it also affects how the rest of the team interacts with the CEO and ops lead, and that needs to be taken into account. This also alters the trajectory of the agency’s organizational development and you should be looking at different permutations of how this will affect your team’s structure as you grow.
Like I said before, each agency will have different needs and not everyone will be in the position to hire proactively. Having worked with both strategies in the past, I can tell you from experience that proactive hiring results in better client results, higher team morale, and less turnover. All of those are critical components of increasing profit – I hope you’ll give it a shot.