Why a lot of SMEs are shooting themselves in the foot by hiring less experienced people.
When you're an SME business owner, building your team is always challenging. ?? Attracting people to a smaller enterprise can be hard because they may not see the same level of benefits being offered or the progression opportunities immediately evident within the organization. This, coupled with the fact that budgets are often tight means that in my experience, a lot of S.M.E. owners look to more inexperienced hires that they can train up over time. They can be easier to attract initially and often crucially, are seen as a cheaper resource.?
In my years of experience of working with S.M.E. owners though it’s become apparent that by leaning towards, cheaper, less experienced people who are perceived to be good value, the S.M.E owner is often shooting themselves in the foot. Why? Because cheaper more often than not doesn’t mean better value. ??
Why not? I’ve listed a few reasons below…
?? The cost of training. In order to bring that person up to speed to be the most effective performer they can be in the business, they are going to require significant training. That not only involves employing them for their time while you train them but also paying for any specific training courses or the time taken for other members of staff (or yourself) to bring them up to speed. This can be a lengthy process and therefore an expensive one.
??The cost of mistakes. Errors can have a significant detrimental impact on your business, not only because you have to then pay to put them right but they can give customers a bad impression, negatively impacting your reputation and likelihood of new business.
??They are not bringing contacts to the business. More experienced hires have generally built up a bigger, more valuable network within the industry over time. When you employ a more experienced hire this often (non compete clauses etc permitting) gives you access to that network, potentially bringing in new clients, suppliers or even other high quality employees.
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??The cost difference between a less and more experienced person is less significant than you think. When the cost differences between a less and more experienced hire are considered, they are often considered purely on the basis of the difference in employment costs, often forgetting the cost of overheads for running the business that can be allocated to each individual. I.e. for every productive hour it costs a certain amount in terms of management, insurance, office space marketing etc in order for someone to be in that chair. If that cost is allocated out to each individual employed by the business equally, that can add a not insignificant amount to each individual's hourly rate. When you factor this in, the hourly cost to the business of an employee on twice the salary, may only increase the overall cost per hour to the business by 25% or less. If that individual is for example 50% more productive, then it is actually more cost effective to employ the more experienced person.
I’m not saying you shouldn’t employ junior staff who need training, you can find some of the most brilliant long term employees this way and if no one did this then young people wouldn’t be able to engage and progress in the world of work, as businesses we all have to do our bit. ??
What I’m saying is, it’s good not to rely too heavily. It’s good to also bring in some highly experienced staff who can hit the ground running, potentially bring in business with them, they are highly productive and can generate a lot of value for the business with their time from the word go. ??
So the next time you're looking to hire and setting budgets and packages and thinking about the level of hire you want, just pause and consider what impact a slightly more expensive and experienced hire might have on your business if you can stretch the budget a little bit more. ????