“That poor team!”

“Could it happen to us?”

When layoffs and seemingly sudden shutdowns make headlines, these are normal reactions. At Trace, we're not so normal because we also think, “that poor finance team.” 

If you’re in finance, you can take the blame for under-hiring as much as over-hiring. Company finance leaders must realize how to strike a balance to grow teams sustainably. In our opinion, the best way to do that is by collaborating with the right teams in the right way. Headcount management might start with finance and end with finance–but in-between it’s all about the teamwork.

We sat down with Amy Spurling, a three-time former CFO and the current CEO of Compt, for a candid discussion on collaboration, headcount planning, and how finance can lead the way. Here are the tips we uncovered from our conversation.

Are you ready to put some of these lessons into practice? Take action by reading our guide on how progressive teams manage headcount.

1. Start with a clearly defined company goal

Before beginning the headcount planning process, you must start with a clearly defined company goal. Your company’s plan typically starts with your CEO's vision. After understanding the vision, set SMART goals that get you there and ensure leaders are on the same page.

“Every single person on the leadership team needs to buy in on what the goal is for the year. They need to feel that, understand that, [and] be on board with that,” shares Spurling.

2. Get the right people in the room

Headcount planning is a collaborative process.

An essential counterpart in headcount planning is HR. “You certainly want HR involved in that process because they are the other team that sits across everybody and sees everything,” states Spurling.

In additionOn top of help from to your human resources team, you need functional leaders from each department in your organization. These leaders know the market, know the hiring climate, and understand more than anyone the impact of headcount on their ability to hit their objectives.

3. Don’t be afraid to meet with team leaders individually

Headcount planning can be a contentious experience. Everyone has their own needs, and sometimes it can feel like a competition for the most seats. To ease this tension, Spurling suggests that finance meet with leaders individually.

“It takes the angst down a level if you're working individually with each of the leaders, then pulling it back together,” Spurling adds.

Work with HR to set up individual meetings with each functional leader. In those meetings, you can dive deep into what they need without the stress of other voices in the room.

4. Consider what needs to be true to hit your company’s strategic goals

Building a strategic headcount plan can be difficult for team leaders because there could always be a few extra hands on deck. Instead of thinking about headcount based on what’s desired or getting more team members, Amy asks leaders to think about strategic goals.

If this is what needs to be true, what do you see needing to happen?

For example, if your goal is to grow by 40%, you should consider: What does each team need to do or build? How many new employees do they need to make that happen?

You can collaborate with the functional leaders to make these assumptions at the start of the headcount planning process.

5. Find common language to make headcount planning easier

When you get into the weeds of headcount planning, there can be nuances that finance teams don’t need to understand. As a finance leader, your job is to let your team managers be the expert in their field.

Find common language and information to make the best decisions for the company. For example, finance can look at the costs and the number of employees needed, and then work with HR to make sure everything checks out. “HR needs to make sure that you're not arbitrarily paying people in one group versus another a lot more outside of their band,” Spurling notes.

HR can be another check to ensure that you adequately staff teams and avoid pay gaps.

6. Manage strong voices to ensure that headcount planning is fair

As your team grows, the way you handle headcount planning has to change. Strong voices like CEOs and other executives can make headcount planning tough.

“What you typically find in organizations is that the CEO has a particular background,” shares Spurling, “Whether they came up from marketing or engineering or sales or wherever they came up, that is usually the team that gets all the resources because the CEO intrinsically understands it.”

As a finance leader, you have some pull if you manage your CEO. Work with executives to make sure they understand the weight of a well-staffed and compensated team. You don’t want any of your departments struggling to make ends meet. Work with functional leaders to help them make their case to the company’s leadership. You aren’t necessarily an advocate, but you want to ensure that teams have what they need to meet company goals.

7. Understand the trade-offs of not giving a team their headcount wishlist

Hiring team members is expensive. Base salaries, bonuses, commission, health insurance, and training costs are just some factors determining how many people you can afford to hire. Most leaders will not get their full wishlist every year, but what are the consequences of that?

“As an organization, you need to make sure that you are giving a clear picture of what the risks are,” Spurling shares, “What happens if you get one less engineer, what happens if you get 20% marketing budget? What is left on the table?” Fewer engineers might mean a compromise on the product roadmap. Slowing down marketing hiring could have a downstream effect on sales. 

Now that you have a clear picture and can articulate this to the executive team, you are on your way to wrapping up the collaboration phase of the headcount planning process.

8. Allow for flexibility to ramp up or decrease hiring as needed

Annual headcount plans are typical, but they don’t fit the needs of businesses today.

Annual planning cycles can make it challenging to decrease or speed up hiring as needed.

Instead, Spurling currently uses a mix of annual goals and quarterly/monthly reflections to make sure that things are still on track. If you move away from the yearly model, you can look at current numbers to see where you might need to accelerate or decrease headcount spend.

Revisiting hiring plans often can prevent some issues with overhiring or under-hiring. Overhiring has an impact because you aren’t creating a stable environment for employees to develop and grow long-term. On the other hand, under-hiring can stress out even the best people in your organization due to a lack of time and resources.

Try using a flexible system with rolling hiring to onboard employees at the speed you need if your company can do it.

“Part of the CFO's job is risk management,” adds Spurling, “What happens if we don't hit this number? What happens if this contract doesn't come through? That's where those rolling hires make more sense.”

Companies who test, learn, and hire team members when it’s financially smart can create longevity and agility in their business.

Conclusion: Headcount planning is a collaborative effort

While headcount planning can be an arduous process, it’s an important collaborative effort.

Leaders need to trust each other, learn how to advocate for their needs, and make sound budgeting decisions.

Finance is at the helm of this conversation, facilitating several strong voices and helping leaders understand the financial weight of their requests.

HR helps  finance understand how financial decisions impact employees and team dynamics.

When these people come together, it should be about getting towards a specific goal, building the company, and expanding its reach.

“Iit's not about who can get the most” shares Spurling, “If you get the most headcount and you manage to talk finance and HR into it, but the whole company goes down because it wasn't really you who needed the most, we all fail.”

If you’re ready to get a deeper look at headcount planning, check out our guide on how progressive companies manage headcount.