Over and understaffing are highly prevalent across industries in companies of all sizes. Even businesses that have been in operation for decades can struggle to ensure that they are hiring enough people (most companies err in this direction) but not too many.
Fortunately, with the right data, you can get a much more accurate idea of how many people you actually need. While these are estimates, basing your estimation on solid analysis, you’ll find that they are much more accurate than they had ever been previously.
Method 1: Rule of Thumb
This is the least mathematical, but it can also be a good way to get a quick estimate of where you want to go. It’s the best method for people who not only are very familiar with their organizational structure, but want to maintain it moving forward.
For example, if you have decided that every manager will have a team of 20 people, then you know that hiring a manager immediately means hiring 20 employees. Similarly, when you are hiring for a new team, you’ll need to hire managers consistent with those numbers (i.e. 80 new entry level positions will also need four management hires).
As the name implies, Rule of Thumb is a very loose estimate and is more concerned with maintaining organizational structure than reacting to any specific data, but if you are still gathering recruitment data, it’s a good place to start.
Method 2: The Delphi Technique
The Delphi Technique is named after the Oracle of Delphi, a fortune teller in ancient Greek myth who would be consulted by important people from around the world to help them make major decisions.
Rather than asking a person shouting in Apollo’s temple, you’re asking a group of experts. The group can be composed of senior managers, consultants, business experts, and others who are familiar with your company’s history, industry, and geographic challenges.
Generally, a Delphi Technique group does not meet or even know who one another are (anonymity is crucial to getting unbiased data). Rather, a facilitator sends them a questionnaire setting out basic information and asking them relevant questions about your business needs, then collects them and collates the data.
Often, there can be a second round where the new data is shared with the Delphi group to see if this changes any of their answers.
You are, of course, not obligated to take this advice, but at the very least you’ll have trusted information from experts to guide you in your decisions.
Method 3: Productivity Ratios
This method requires a decent amount of performance data from your company, but the idea is to set a particular productivity goal, then use what you know about the performance of your employees to determine what you will need to reach that goal.
So, if you make 1 million doodads every year with your staff of 30 production workers and you want to make 2 million doodads, the most obvious idea is to bring your staff up to 60 production workers. However, this is where things start to get interesting.
Increased staff gives you the opportunity to experiment with different production systems that might increase productivity. The ratio of management to floor labor can be considered as well.
If you have the numbers in front of you, you can calculate with reasonable accuracy the number of people you need in which positions in order to achieve your productivity goals.
Method 4: Statistical Regression Analysis
This is the big one and can get kind of complicated, but I’ll try to make it as easy as possible.
Fundamentally, statistical regression analysis is a method for identifying and estimating relevant variables in data. You choose a dependant variable (a thing you want to predict), then identify independent variables that affect it.
Imagine that you’re planning a trip. You want to estimate the total cost before you go. That’s your dependent variable. Your independent variables might be things like cost of food, travel, lodging, souvenirs, attractions, etc.
More relevant to recruiting, the cost per hire is generally your dependant variable. Independent variables might be job board fees, time to hire, historical turnover rates, etc.
Now take the numbers for one of your independent variables and put it on the x axis of a graph. Do the same on the y axis for your dependent variables. After that, you use the following super simple equation:
...or you could just use an online calculator like we do. Once you put in your data, you can enter an independent variable (for example, how much you pay for job advertising), and calculate a dependent variable (such as, how many people you’ll be able to recruit for that amount based on how you’ve done historically).
Bringing It All Together
Nothing says you only have to use one of these methods. If anything, we recommend collecting as much data as you can.
Not only will going through these exercises help you better understand your real staffing needs, but it will also help you identify pain points in your hiring process that can be addressed by new processes, new assumptions, and high quality tools like the Talentify platform. Once you identify the problems, you’ll have a much easier time developing solutions.