Right-sizing your business: getting the right ratios of juniors to seniors

Due to the current pressures in the market, many professional services businesses and agencies are facing uncertain times, with pressure on their pipelines, forecasts, and ultimately on cash. This means that leadership teams are in frequent discussions around team size and make-up. Some businesses will need to reduce headcount, whilst also looking at whether they have the right ratios of juniors to seniors throughout the business. 

When businesses are under pressure it is sometimes difficult to clearly define what the ratio needs to be between junior, mid and senior staff. The natural instinct is to hold onto seniors and mids, and even hire more mids because juniors are seen to be more risky and take longer to get up to speed in a business. 

Establishing an approach where a business recruits the majority of new employees into junior roles (followed by mids, then seniors) makes obvious commercial sense (this article explains more about hiring juniors). Juniors get paid less and should therefore have the opportunity to contribute more to the business as long as seniors are able to train them, and they are able to be utilised quickly. This approach is reliant on juniors being able to do the work your business produces, so more production-focused agencies are able to more easily leverage this model, especially if they are willing to take some hiring risks. It is also reliant on having seniors who are willing and able to train juniors coming into the business. These seniors need to be aware that the success of this model is reliant on their ability to train and be accountable for the juniors working with them.

The current challenge in the market is that people coming into junior roles are expecting faster promotions and pay rises. This means businesses are left carrying larger numbers of mid-level talent that will take longer to get to a senior level because they are being promoted more quickly and need to spend more time at a mid level before they become seniors. There are of course exceptions to this where some junior members of staff are able to move very quickly to a senior roles, but outside of these exceptions some agencies end up carrying too much cost at a mid level. When thinking about how best to downsize, these mid level people are often harder to let go as they’ve been with the business longer, and have accumulated more knowledge of the business than their more junior colleagues. However, they are a key group to look at when downsizing because they are less able than seniors to train juniors, are more expensive and may not be as easily utilised as juniors. 

One way of using data to assess whether you have the right ratios of juniors:mids:seniors in a business is to record the average monthly salary across all staff and look at this as part of your monthly reporting. If this number starts to creep up and your revenue figures are not doing the same, it’s likely that you’re giving people pay rises that aren’t resulting in additional revenue. 

So, when the next person in your business asks to hire a mid or senior level person to solve a problem, make sure you take a look at your current ratios to ensure you’re not putting too much commercial pressure on the limited numbers of people you have in the business to deliver the revenue you need.

Here’s an example:

Contact Sarah Vick at svick@old.wypartners.com if you have any questions or wish to discuss anything further.

WY Partners offers specialist M&A and strategic advice to businesses who are seeking to either buy, sell or raise investment at the intersection of media and technology. If you have any questions or wish to discuss anything further, please get in touch hello@old.wypartners.com.