Lean and Fit: Managing Headcounts for Small Businesses

By Tunde WaleTemowo | 3 min read
16th May 2017
Lean and Fit: Managing Headcounts for Small Businesses

According to the National Policy on Micro, Small and Medium Enterprises (MSMEs) in Nigeria, Micro enterprises are classified as businesses hiring less than 10 employees with an asset base of less than N10 million. Businesses with 10 to 49 employees and an asset base above N10 million but less than N100million are classified as Small enterprises while Medium enterprises are businesses with 50 to 199 employees and an asset base of N100m and above, but less than N1billion. 

From the above definition, it is safe to say that a lot of businesses operating in Nigeria fall within the Micro and Small business bracket. The 2013 SMEDAN and Nigeria Bureau of Statistics Report shows that there are 37,067,416 MSMEs in Nigeria with Micro businesses totaling 36,994,578 of the total sum, Small Enterprises totaling 68,168 and Medium Enterprises totaling 4,670[1].

Regardless of the size of your business however, the type of personnel you hire plays a vital contributory role to your business success. For the purpose of this write-up, headcount refers to the actual number of individuals carried on your organisation's payroll. So how do you keep your business lean and fit and successfully manage headcount?

  • Work to achieve More with Less: For small and growing businesses, Personnel cost is definitely one of the key items that impact on the bottom line. The goal therefore should be to achieve more with less by hiring just what you need. Often times, businesses do not make hiring decisions based on rational analysis of manning or staffing needs and this results in unsustainable personnel costs and lay-offs when revenue projections fall short. When you hire what you need, you are able to keep personnel costs down and manage your team better because your team is lean and fit.
  • Use HR Techniques to Determine your Staffing Needs: To keep your team lean and fit, and successfully manage headcount, consider using HR techniques to determine your staffing/manning needs. You could adopt the Full Time Employee (FTE) technique which is a quantitative means of determining staffing requirements. This technique analyses jobs based on volume/ frequency and the time required to perform the activities/ tasks. Once the time and frequency of the activities have been determined, the total time required to perform each job monthly is then computed and used to determine the number of full time staff required to perform the job. This method is mostly applicable to structured organisations with clearly defined processes/ activities and volumes.
  • Consider the "Rationalisation" Approach: The Rationalisation approach is also a technique used in determining staffing requirements. It is commonly adopted because it is time-saving, easy to use and less tedious than the FTE method. Rationalisation estimates staffing requirements by identifying and analyzing key indices such as the size of operations, extent of internal and external stakeholder interactions, and other peculiarities relating to the function and the organisation as a whole. You could consider using this approach instead when planning to keep your team lean and fit and also manage headcount successfully.
  • Beware of "Key-man Risks": Irrespective of the staffing or manning analysis approach you adopt for your business, you must keep an eye on "key-man risks" and the need for checks and balances in certain aspects of your business operations. While some processes can be run by just one staff, it may be risky to run some critical aspects of the business with a lone staff. In the event of incapacitation, unplanned absence or unanticipated turnover, the entire business could be held to ransom when the sole process owner (or key man) is unavailable.
  • Clearly delineate Responsibilities: Closely linked to the key-man risk is the need to clearly delineate "maker" and "checker" responsibilities in business processes. This is very critical in finance functions where a single individual initiating and concluding transactions creates the risk of fraud. A small business may be able to afford deploying a lone staff on its front desk or even in marketing, HR and Admin, but a Finance and Accounts team of one is fraud waiting to happen.

In summary, it is strongly advised that small businesses, especially startups maintain a lean workforce. A Lean workforce entails working with just enough numbers to get the job done in the most cost-effective manner possible, while not compromising controls and business continuity.

In subsequent discussions, we will be considering outsourcing and technology-driven approaches to managing lean workforces.

[1] SMEDAN and National Bureau of Statistics Collaborative Survey: Selected Findings (2013), http://nigerianstat.gov.ng/pdfuploads/SMEDAN%202013_Selected%20Tables.pdf, Accessed March 26, 2017                  


Tunde WaleTemowo
Tunde Wale-Temowo heads the Human Resources function of a specialized financial services institution in Nigeria. Prior to his current role, he had worked in the Management Consulting practice of one of the Big 4. He writes from Abuja.
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