Headcount Growth: Building a Compelling Argument for Your Team
A Go-To Guide To Manage a HC Increase
Hey, fellow Leader 🚀,
I am Artur, and welcome to my weekly newsletter. I am focusing on topics like Project Management, Innovation, Leadership, and a bit of Entrepreneurship. I am always open to suggestions for new topics. Feel free to reach out to me and share my newsletter if it helps you in any way.
Everywhere we hear accounts from colleagues about how overworked they are and how great it would be to have a slightly bigger team. However, decision-makers might disagree with increasing a team’s size. So, how can we make this Headcount growth happen?
I think it's important to note that people are expensive and can be challenging to work with (at the same time, AI is happily taking over the world). The last part might be overdramatic (the people, not the AI), but people are also the ones pushing innovation, creating opportunities, and finding opportunities within a problem to transform it into a sellable product. The important part to note is that payroll constitutes a lion’s share of the company’s costs, so an increase in headcount (HC) should come with a clear value proposition. So, what are the main factors to consider when preparing a case for an increase in HC to present to management?
The Roots Of All HC Increase
It’s difficult to overgeneralise to different contexts and companies, but if I had to select a short list of reasons, it would be:
Changing The Level Of Service
New Project or Product
Political momentum
As you can see, “Overwork” doesn’t appear here. Let’s imagine you own a small convenience store with two employees besides yourself (three in total). The business is successful. However, the staff complain they are too few to handle the clientele, restocking, paperwork, etc. Hiring a new colleague would directly cut into your profitability at the end of the month. What would be your decision? Would you accept less profit to create an environment where workers have more “free time”? Or, since the shop and its systems are working and you anticipate a certain profit level, would you continue “As Is” until something changes? This is exactly what often happens at a corporate IT level.
Level Of Service
When a system is working, management typically doesn’t change its funding or investment unless something is about to change. I have seen this regularly with IT Support or IT Helpdesk teams that, unfortunately, weren't set up correctly. In cases where user satisfaction is low, measures are often put in place, such as knowledge transfer workshops or ceremonies, to anticipate application changes. However, if the team is overburdened with work, we rarely see an increase in budget. Often, the strategy is simply to make do with the resources the team has. The reason mirrors the convenience store example, with the key difference being that IT teams are often viewed as significant cost centers with no direct revenue generation.
In this scenario, the conversation should shift from the amount of work the team has to how much management is willing to invest in increasing the quality of the service provided. If a newcomer were to join the team, which metrics would be impacted, and how? How would the team improve the level of service in a quantifiable way? Ultimately, the decision to invest in a newcomer will depend on the projected ROI (Return on Investment), comparing the investment against the expected outcome. One might be surprised to find that even reasonably good ROI projections get rejected simply because that particular team or product isn't considered strategic. Nevertheless, presenting the request effectively, backed by credible numbers, is key to getting approval.
New Project or Product
Believe me, if anything makes sponsors open their wallets, it's the prospect of new projects or products. This is simply because of their inherent potential to produce unique outcomes that benefit the company. Before a project gains approval, calculations are made and numbers are crunched well before any kick-off meeting. The sponsor typically has an idea of the required investment or the timeframe they are willing to finance a team for product development. The decision often involves calculating ROI (Return Over Investment) with a payback period or considering the TCO (Total Cost of Ownership), especially in Buy vs. Build analyses. The key point is that once a project framework is analyzed and pre-approved, the team can propose a realistic number of HCs and the necessary profiles to execute the project. If an existing team, already operating at full capacity with BAU (Business As Usual) tasks, is assigned the project, this often becomes the trigger to increase the team's size. I have seen teams double in size to accommodate new projects. This often happens because the necessary calculations are performed, presented to a sponsor, and approval can lead to a significant increase in the team's HC.
However, if you feel the team is overworked and see the project as an opportunity to also bolster capacity for BAU tasks, several justifications related to the Level of Service can be presented to the sponsor. Here are some examples:
Experts are currently dedicated to BAU tasks and need to be allocated time to train newcomers before they can be fully assigned to the new project.
A newcomer's initial output won't match an expert's, so investment in training and time is needed to maintain service quality without detriment to the project.
A project risk is that ongoing BAU tasks might consume capacity that should be allocated to the project. Therefore, we should request a budget or HCs to mitigate this risk during project execution to avoid jeopardizing milestones.
The goal is to frame the HC investment request in a way that highlights how it protects the project outcome, which is the sponsor’s main concern. Day-to-day activity typically doesn't concern the sponsor, as the assumption is that BAU operations will continue unaffected with the current investment. And believe me, team turnover usually doesn't sway these decisions unless there's a significant drop in service levels.
Political Momentum
Up to this point, I hope the main message is clear: When asking for more HCs for the team, we need to be factual, proposing concrete figures and demonstrating added value. That being said, political momentum can sometimes override any factual arguments. In such cases, I recommend a different approach: Adapt (or ride the wave like a surfer in Ericeira). An increase in a team's size might also result from how teams are funded within the organization, as funding can be shifted or transferred based on executive decisions. There might be cases where, for your team to increase its HC, another team must decrease its own, simply because organizational focus has shifted.
For example, I once led a team that was frequently targeted during IT budget reviews (both for increases and decreases). The CTO, while approving an HC increase, once told me that because my team was consistently targeted during budget reduction, it would also benefit when new margins for growth became available. Other examples include cost transfers between departments, where a team ceases certain work, and another team takes it on, increasing its size purely due to an organizational decision. Nearshoring projects can exemplify this, although they are often driven by cost optimization.
Final Notes
I hope this article helps you understand and navigate the challenge of increasing your team’s capacity to perform better and improve the overall work environment. Especially in today's context, where mental health is a key concern and instability can lead people to feel disconnected from their work. There are no magic recipes, but we can always strive to improve conditions in our corner of the company, enabling our teams to perform their best work.
That’s it. If you find this post useful, please share it with your friends or colleagues who might be interested in this topic. If you would like to see a different angle, suggest it in the comments or send me a message.
Cheers,
Artur
The article is wonderfully clear and gets straight to the point. I hope many top managers read it and think about it. The method of simply always saying no to staff expansions without understanding the context is just as toxic as hiring people to avoid pressure from the organization.
This is such a useful guide especially for those who have just been promoted to director or even senior management level. Increasing the team headcount is tricky, there's always a concern for culture changes but also whether it's a good investment. Bigger companies are often more apt to use this article too because they have more processes to make sure they can onboard new team members. For startup, it's a bit of a toss up as most of them often decide on ad hoc so I actually think they're more for the political momentum phase.