Q Case Analysis
Q had recently raised $15 million in a Series A round and had expanded from New York to Chicago and San Francisco, with high customer satisfaction in all three markets. As CEO, Teran knew that he wanted Q to keep growing—the question was how. Should it focus on acquiring more customers in its existing markets and increasing revenue from each customer by offering more services? Or should it keep expanding into new markets (Ton, 2016)?
A break-even analysis was carried out by the Strategic team using data obtained from the company’s financial spreadsheet (Exhibit 7) and the results obtained were as follows;
Break-Even Point (BEP) = Total Fixed Costs/ Contributing Margin Ratio
Total Fixed Costs is $87500, and Total sales are $4136253,
Total Variable cost (2729929+2859) is $2732786
Contributing margin ratio= (Total sales- Total Variable Costs)/ Total sales
(4136253-2732786)/4136253=0.3393, therefore, the BEP=$(87500/0.3393)
The Break-even point in terms of sales is $257877.198, and the company charges $25 per hour, hence client hours needed to ensure break-even is obtained as follows; $257877.198/$25 per hour = 10315.09 hours.
An approximate 10,315 client hours are needed for “Managed by Q” to reach a Break-Even Point. On average, an employee spends 1320 hours annually on the job. In order to find the number of employees required, the client hours are divided by the annual employee hours. This results in a need for eight new employees. Moreover, since Q is seeking to venture into new markets such as Boston, Atlanta, and Washington DC, there is a need to determine its margin of safety.
Margin of Safety = (current sales – break-even point)/ current sales = (4136253-257877.198)/4136253 = 0.94
This value implies that Q currently has a margin of safety, translating to 94%. It is running at relatively low operating costs as compared to revenue generated from sales and thus can withstand fluctuation in sales. ‘Managed by Q’ is said to have low business risk and can, therefore, expand its outlets into new markets, the Boston market, to be precise.
Comparing Q’s labor expenditure in terms of wages and additional benefits to a Non-Q firm in the industry (exhibit7) shows that Q spends more, ranging at $130600-$2729927, and has low client and employee churn rates. In contrast, a Non-Q firm spends between $653400-$898425 but has higher rates of both employee and client churning. Garton (2017) further supports that there is a virtuous cycle between productivity and people. Higher levels of productivity allow society to reinvest in human capital, and smart investments result in higher labor productivity.
Designing a recruitment strategy involves several stages that must be carried out with due diligence and caution. To begin with, a needs analysis is carried out, and from the statistics above, Q Company needs to add eight new persons to its team to meet the client hours determined in the analysis. Assuming that these client hours are specifically for cleaning and maintenance services, only the positions of field operators and helpers/handymen are needed. These positions are to be filled in 45 days and require persons with good communication and interpersonal skills, good work ethics, integrity, as well as strong beliefs in accountability, reliability, and credibility in service delivery.
The human resource team is to review previous recruitment strategies applied by Q in order to find out the strengths and weaknesses of these methods, not forgetting which method worked best for the company. Ton (2016) shows that Q posted positions on Craigslist, Indeed, and other sites, but more than half of its cleaning operator applicants learned about it from other operators, friends, and relatives of operators, or others who already knew about Q, including job placement programs. This tells that Q, as a company brand, is not well known on social media platforms.
Members of the HR team, which is spearheading the recruitment process, should be allowed to brainstorm on job adverts, with the underlying factor being an inclusive advert that sells the Q brand. Thereafter, they can vote and go further to even post the advert on the department’s notice board so as to obtain relevant feedback from other colleagues. Necessary corrections are to be made before posting the advertisement on various media platforms, especially job boards and the company’s website, with a link explaining the full job details, requirements, and qualifications. People looking for jobs, on most occasions, check the company’s official site for authentication and background information about a given job advertisement. Besides, the company will employ two approaches, the use of a gig economy and an employee referral system. The former refers to a recruitment strategy that involves outsourcing services from freelancers either through Upwork, Guru, among others for short periods, and for jobs that are of immediate urgency (Neelie, 2018). Working with freelancers can also be a long-term goal as it will give the company a chance to see how good such applicants are and how well they work with the rest of the team. In case the company is recruiting again, it will know whom to hire as a full-time employee.
The employee referrals system has proven to be the most effective for the company. To improve and encourage further use of this method, there will be an incentive, especially recognition to employees who have successfully referred an applicant. They will be kept posted on the entire recruitment process as well as how the referred applicants perform. The company will receive applications online via portals created by applicants on the Q website to make tracking of applications easier, minimize duplications, and reduce the time taken in sorting the applications. The applications are then to be analyzed critically, qualified candidates who meet 65% of the requirements will be shortlisted and posted on the company’s website and through print media ten days after the deadline for submission of applications.
The shortlisted candidates will be contacted and invited for interviews that will constitute three parts; written, oral, and practical-based interviews, as was done in previous recruitment exercises by the company. The written interviews will seek to assess the applicant’s knowledge of Q’s history, values, culture, and services, whereas the oral interview will be based majorly on the company’s compensation structure and the applicant’s salary expectations in relation to other competitor firms in the industry as well as ways that Q can improve its investment.
Those who pass these two stages will then be allowed to meet with mentors who will assess their degree of fit into the company team and later be invited for on-the-job training on probationary terms for three months.
The recruiting team will make cost estimates required to accomplish each stage of the recruitment process so as to have an approximate amount required in recruiting the new employees within the given time frame.
Breaugh, J. A. (2009) SHRM Foundation’s Effective Practice Guideline Series: Recruiting and Attracting Talent. Society for Human Resource Management, 1800 Duke Street, Alexandria, VA 22314
Garton, E. (2017). The Case for Investing More in People. HRR.org. Retrieved from https://www.bain.com/insights/the-case-for-investing-more-in-people-hbr
Martin (2014). Break-Even Analysis: What, Why, and How. Retrieved from https://www.cleverism.com/beak-even-analysis/&hl=en=KE
Recruitment & Human Resources Careers. Human Resources: Compensation, Benefits, & Reward. Retrieved from https://www.allaboutcareers.com/careers/career-path/human- resources-compensation-benefits-rewards
Neelie. (2018). 13 Innovative Recruitment Methods Top Recruiters. Retrieved from https://harver.com/blog/innovative-recruitment-methods
Ton, Z. & Reavis C. (2016) Managed by Q 15(168