One of the biggest factors that business owners need to look at is the number of staff that they need on hand. Hiring the right number of employees helps improve productivity and minimize turnover.
Staffing decisions need to be made carefully, especially if you are trying to minimize turnover. The average employee turnover across all industries is 17.8%. This figure tends to be higher both among companies with too many and too few employees.
What to consider when deciding how many employees to have on your team
In business school, I remember looking at hypothetical scenarios regarding the marginal benefits of additional employees. One scenario involved a construction company. The construction foreman would find that the team productivity would nearly triple if the team size increased from one construction worker to two.
However, the marginal benefit of added team members would decrease with every employee that was hired. By the time the company hired the seventh worker, total productivity would actually be even lower than it was with six employees.
The relationship between the number of employees and team productivity is not close to being linear. This makes it difficult to determine the exact ROI of hiring more workers.
There are a lot of rules of thumb for determining the number of people to hire. Some companies argue that the ideal team size is six or seven employees. However, that data might only be accurate for the types of companies they worked with. You need to figure out how many people you need to hire for your particular company.
Of course, you also need to make sure that your employees are well managed. Teamweek, a company that provides workplace scheduling software, has emphasized the importance of tracking employee hours and productivity carefully. Their company has offered some great solutions for worker management, which are more effective when the right number of employees are retained.
There a few things to keep in mind.
Team size affects the company culture
The company culture is one of the most important factors that you need to look at. A good company culture can decrease employee turnover by 34%.
The number of employees that you hire is going to influence the company culture. How many employees do you need for a good company culture? That is obviously going to depend on the types of employees that you are bringing on.
Some employees are going to be more introverted. They are going to prefer working in a company with a smaller number of people that they can forge closer connections with. They’re going to be overwhelmed in a much larger company where they have to encounter dozens of people every day.
You need to consider the personalities of the people that you’re going to be overseeing. Try not to hire more people then they will be comfortable with, unless those positions are absolutely necessary.
Consider the consequences of social loafing
In the hypothetical scenario that we covered in my business school class; our instructor discussed the reasons that marginal employee productivity dropped as more employees were hired. One of the biggest reasons is that employees started spending more time socializing then working. This is the biggest reason that the productivity of a seven-member team would be lower than one with six members.
Another issue is freeloading. When you start hiring more employees, they start thinking that they can get away with letting their coworkers do most of the work.
You need to take this into consideration. It might be better to have a smaller team where people are less tempted to socialize and freeload.
Differentiate between employees that are busy and employees that are productive
Many entrepreneurs confuse being busy with being productive. This is not a mistake that you want to make, especially when you have a team that you are paying weekly salaries to.
You might think that you need a larger team, because your employees are completing a lot of tasks every week. The problem is that many of those tasks might not actually be contributing to your bottom line. You need to figure out what is actually helping the company move forward. You might be able to decrease headcount by an employee or two by cutting back on unnecessary work.
Choose the size of your team carefully
There are a number of factors that you need to Keep in mind when deciding how many employees to have on staff. You need to be careful not to hire too many, because that might reduce productivity overall. You also need to be careful not to be understaffed, either. It is a delicate balance that you need to keep.