Specialization vs. Generalization: How to Hire the Best Team - Fora Financial
Close
Specialization vs. Generalization: How to Hire the Best Team
February 01, 2020

Specialization vs. Generalization: How to Hire the Best Team

This biggest cost in almost any kind of business is the employees. In fact, it’s not uncommon for labor costs to account for as much as 70 percent of all business costs. This makes it critical to maximize the money you spend on labor costs by getting the most from your staff. Of course, that’s easier said than done. One way to look at it, though, is by making hiring and training decisions through the lens of specialization vs. generalization.

In this post, we’ll define specialization and generalization. Once you understand these terms, you can hire the right employees to grow your business.

What is Specialization?

Specialization’s definition is the “segmenting of large, labor-intensive tasks into workable subtasks that may be done by different workers.”

Whatever the industry or business, every project is made up of many, smaller subtasks. For example, let’s say you’re building  a hotel on vacant land. You need to:

  • Obtain approval from the local government.
  • Survey and grade the construction site.
  • Pour a foundation.
  • Frame the building.
  • Install electricity, plumbing, etc.

To complete all these tasks, you need specialists like framers, equipment operators, electricians, and plumbers, among others. Since each of these tasks requires very different skills, they require specialized workers. In this way, specialization allows employees to perform very well at a specific activity.

Other highly specialized workers include cybersecurity experts, software developers, accountants, analysts, and many more. However, even within a fairly specialized field, it’s very common to specialize even further.

For example, within the cybersecurity industry there are numerous, further defined specializations. You may have various experts that specialize in protecting different types of networks or technologies.

It’s important to note that specialization isn’t just beneficial to employers. It’s also good for employees. After all, the more specialized an employee gets in a certain area, the more competitive they become in the job market.

Of course, there’s still a balance to be struck. If an employee specializes in a skill that becomes obsolete, their career options will be severely limited.

Improving Perceived Value

Business Dictionary defines perceived value as “a customer’s opinion of a product’s value to him or her.”

The definition also says that perceived value is based on the “product’s ability to satisfy his or her needs.” By hiring specialists or specializing in certain products, you can improve your goods or services. As a result, your product or service will become more desirable, allowing you to extract more value from customers. You can do this by raising prices or changing payment terms.

What Is Generalization?

Generalization, as it relates to staff, is having basic skills in various areas. For example, project managers are often generalists. They may have basic proficiency in using certain technology, communicating, organizing, and analyzing.

Other examples of roles that often have a high degree of generalization include:

  • Assistants
  • General contractors
  • Handymen
  • Real estate agents
  • Retail associates

Essentially, generalization is the opposite of specialization. However, that doesn’t mean generalization doesn’t play an important role in building a staff. This is especially true when starting a business, as you may have different challenges to tackle. Or, you may be unsure of the challenges you’re going to face.

By hiring people with generalized skills, your company can tackle a variety of problems. Plus, if your business changes, you’ll still be able to find something useful for generalists to manage.

Also, people with generalized skills are usually easier to find and demand lower wages than specialists. For a new business, generalists can offer much-needed help on numerous tasks for an affordable price.

However, that’s not the only role generalization can play. In construction, generalization can also help you take on larger projects. For example, hiring general contractors, even if they’re more expensive, could help your business grow more than hiring a specialist.

As your company grows, problems typically get more complicated. At that point, it makes sense to start focusing on specialization.

Encouraging Economic Diversity

Since generalist roles can be filled by people with diverse economic backgrounds, your company gains access to new perspectives. With specialization, advanced education or degrees are often needed. For those unable to pay for advanced education, generalization is the only way into the job market.

By focusing your hiring on generalization, you open the door for great potential employees overlooked by the job market. In today’s competitive market, innovation is the lifeblood of business. So, generalization is key to establishing a competitive advantage.

Which Is Better For Your Business?

Choosing to focus on specialization rather than generalization or vice versa depends on:

  1. The biggest obstacles your business is facing.
  2. How complicated those obstacles are.
  3. What you can afford.

As you can imagine, these factors change from business to business. Still, it’s useful to start thinking about your choice in this way. If you’re struggling to overcome an obstacle because you don’t have time, generalization makes sense.

However, if you lack the expertise to overcome a certain obstacle, you need specialization. To help you decide, we’ll make arguments in favor of both generalization and specialization.

In Favor Of Specialization

When you think about the global economy, the advantages of specialization are clear. Since different countries around the world specialize in what they’re best at, as a whole, we benefit. For example, because the United States often outsources manufacturing to other countries, the U.S. economy can focus on innovation. Your business can benefit from specialization in much the same way the U.S. economy does.

For example, since you can hire specialists to design and maintain your website, you don’t have to. Instead, you can focus on business growth. Otherwise, you’d have to learn to do it yourself. Even then, the website wouldn’t be as impressive as it could be if it was designed by a web designer.

In this example, without specialization, you’d end up with a worse website and less time for your customers. Of course, you’d save some money because specialists are expensive. However, the money you saved won’t be worth losing business and having a poorly performing website. As you can see, specialization is critical because it enables efficient allocation of your human resources.

In Favor Of Generalization

For many businesses, growth takes time. In fact, some of the best businesses, including Airbnb, operated in ways that were completely unscalable at first.

Although it seems obvious, LinkedIn founder Reid Hoffman says that to scale, you must do things that don’t scale. This helps you understand your customers’ relationship with your business on a more granular level. It also helps you attract customers through creative means that other large companies wouldn’t or couldn’t do.

However, to understand your customers while also growing, you need generalization. You’ll benefit from having employees who can learn from customers, pitch your business, come up with marketing ideas, and more. With specialization, that’s not possible.

When your business relies on specialization for sales, marketing, and customer research, you need lots of resources. Specialists are generally far more expensive to hire. That’s why it’s important to consider what resources you have when deciding between specialization vs. generalization.

Hiring and training for generalization, as far as direct compensation costs are concerned, is always going to be more affordable. Also, in scenarios where you need an employee who can complete various types of tasks, generalization is the way to go.

Want to learn more about business topics like this one? Sign up for our newsletter!

Subscribe

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Fora-Logo_TEAL-KNOCKOUT
Post by:
Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].