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Navigating the Challenges of Pricing Headcount

As far as budget and headcount goes, most pricing functions have been relatively lean machines since their inception. Many will have gotten a fairly modest start as a “toe in the water, on a shoestring budget” and have just continued to operate in that bootstrapping mode over time.

As a result, a lot of teams will cite “lack of human resources” as being the primary impediment to engaging in more strategic pursuits, contributing at a higher level, and having a greater impact on results.

But while there’s definitely a lot of truth in the notion that pricing functions tend to be understaffed, that doesn’t mean that adding headcount is always a good idea. In fact, as counter-intuitive as it may seem, there are a number of situations and circumstances under which you should not hire more pricing people.

You should think twice before hiring more pricing people when:

  • You’re throwing bodies at processes and tasks that could be automated. From performing administrative tasks like updating multiple price lists and keeping disparate systems in sync to executing more strategic processes like structured account analysis and elasticity-based price setting, today’s software technologies have become so capable and cost-effective that additional personnel can no longer be viewed as the default solution.
  • You’re throwing bodies at processes that shouldn’t exist in the first place. Some processes only exist because there are deficiencies elsewhere. Adding headcount to shore up these processes not only fails to solve the real problem, it creates an entire infrastructure around those processes that’s painful to eliminate later—i.e. building out a whole team of analysts to handle price exceptions that are only occurring because the initial prices being put into the market lack granularity and specificity.
  • You can’t articulate how new hires will generate incremental results. Beyond the situations above, when hiring justifications are largely qualitative in nature and/or centered around generalized efficiency gains, it can indicate that human resources will not be put to their most valuable and strategic purposes. On the other hand, when you’re hiring to address your most costly problems and capture your most valuable opportunities, you’ll be able to describe the expected benefits in quantitative terms as well.
  • There’s an economic slowdown on the horizon in your particular sector. If you’ve ever had to lay people off, you’ll never want to do it again if you can avoid it. It’s painful all around. And as layoffs and RIFs very often take the form of “last in, first out,” it’s just not fair to hire someone away from a job where they may have greater seniority and security if there are things brewing in your sector that make layoffs a real possibility in the near future.

Of course, once you know what these situations and circumstances look like and better understand how they manifest, you can be proactive and take steps to avoid them. These proactive steps might include things like:

  • Change your default biases and explore your options for technological solutions before jumping to the “more headcount” conclusion.
  • Fully diagnose any apparent problems to identify the real root causes and contributing factors before brainstorming potential solutions.
  • Engage in strategic planning processes and road-mapping exercises to get clear about where you need to go and what you need to do.
  • Monitor and assess the pricing intelligence signals that will help you see around corners and keep you from getting blindsided.

To be clear, we agree wholeheartedly that most pricing functions are underfunded and understaffed, particularly in relation to the magnitude of the opportunity. And we firmly believe that the vast majority of companies would do very well investing much more in their pricing functions.

But when it comes to adding headcount…hiring people…we believe it’s important to be doing it for all the right reasons.

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