Headcount

In a company without the word, hiring ran on individual favors. A team lead would catch the founder in a hallway, say the team was short-handed, and get a yes or a no on the spot. The evidence behind that answer was how strained the team had looked lately, and whoever asked most often tended to get the yes.

Two things broke. The first was money. Approve requests one at a time and nobody knows what payroll will be twelve months out. A person is a fixed cost — salary plus insurance plus equipment — and companies kept hiring the next one without ever adding up what they had already committed to. The second was fairness. Ask any team lead whether they need more people and the answer is yes, so granting requests in the order they arrive means the loudest team grows.

At Pagedeck it played out like this. The engineering lead got an extra person in March, design saw that and asked in April, sales followed in May. By late summer Grace added up the year's payroll and found it more than 30 percent over plan. No single decision was wrong, and the total was still wrong.

Headcount reverses the order. Instead of adding up requests, the company fixes the total it can carry, cuts that total into slots, and hands the slots down to each team. So the word points at a budget for positions, not at a count of people.

It starts with money rather than people. Set the total payroll for the year first, then divide it by the average cost of one person to get a number of slots.

A budget is money set aside in advance for a period, and payroll budget is the share of it that goes to people. When runway — the number of months the bank balance survives at the current spending rate — gets short, this share is the first one cut.

1. Fix the payroll total for the year. Pagedeck set $3.25 million.
2. Divide by the fully loaded cost of one person. Salary plus insurance, equipment and office space comes to $65,000, which gives 50 slots.
3. Subtract the people already there. With 45 employees, five slots are open.
4. Split those five across teams. Pagedeck gave engineering three, sales one, and customer success one.

Each slot carries three labels: which function, which level, and when the person starts. The first two matter because the average cost differs by slot. The third matters because an engineer starting in January and an engineer starting in October use the same single slot while costing four times apart this year. Write the three labels down when the slot opens rather than when the offer goes out, or the team spends June arguing about whether that slot was ever meant for a senior hire.

A slot someone vacates stays where it is. Refilling the seat of a person who left does not consume a new slot, since the payroll it costs was already counted. Going past the allocation does need approval, because asking for a sixth hire is the same as asking to raise the payroll total.

The number comes out in four places.

1. Annual planning — it gets set alongside resource allocation, the decision about how much money and how many people go where. Once next year's work is chosen, the number of slots it needs follows, and when that total runs past what the company can carry, one of the planned projects comes out.
2. Hiring — check that a slot is approved before the job description goes up. Reverse the order and you end up with candidates you can't make an offer to. Time to hire, the stretch from posting to start date, usually runs two to three months, so a person needed in Q3 needs a slot open in Q2.
3. Org design — slot counts turn into layers through span of control, the number of people one manager handles directly. A team that reaches twelve slots outgrows a single manager, splits, and adds another box to the org chart.
4. Quarterly review — unused slots move to another team, or close when the plan changes. Freezing the open slots is the first move when revenue lands under plan, because unwinding a hire that hasn't happened costs far less than letting someone go. A frozen slot can reopen in a better quarter; a person who was let go rarely comes back.

"Is that position approved headcount? Don't post it yet."

A check on whether the slot is in this year's budget. If it isn't, settle that before meeting candidates.

"Engineering has three slots this year. The fourth one moves to next year's plan."

Once a team spends its allocation it can't hire again, and hiring further means reopening the company-wide total.

"This one's a backfill, so it doesn't use new headcount."

The role is replacing someone who left, so the payroll total doesn't rise.

Pagedeck's October planning meeting is where the number gets traded. Grace opens with next year's payroll total and slot count, and each team brings what it wants to do and how many slots that takes. When Mia says rebuilding document search needs two engineering slots, Grace asks where those two come from — five are open and the requests add up to nine.

The most common mistake is reading the word as the number of people currently employed. It looks like a counting word, so that reading comes naturally. It actually covers filled and empty slots together, which is how a company of 45 employees can have a headcount of 50, so say which of the two you mean whenever the number lands in a plan. A sales lead who hears "headcount of eight" and plans next quarter's quota around eight sellers, when six are actually working, ends the quarter with two people's worth of target assigned to nobody.

Treating an approved slot as an arriving person is the other frequent slip, because approval feels like the problem is solved. A slot is only permission to hire; posting, interviews and notice periods add another two or three months on top. Brooks's law — adding people to a late project makes it later — points at exactly this gap. Request a slot because this quarter is tight and the person arrives after the deadline, while the time your current team spends in the meantime goes into interviews.