Quality always supersedes quantity. I can't think of a single exception.
What's the point of hiring tonnes of people if most of them are doing a subpar job? I'd much rather assemble a small team of highly skilled people, than many average players.
Not only is the end result a superior product, it's also far easier to manage. Highly effective people self-manage themselves. You don't need to babysit them. Any mistakes made are minimal and self-corrected as much as possible.
It ends up costing less, too. Even if each skilled player is highly paid, it's still cheaper than hiring many subpar performers. Not just because of the cost of their collective wages, but also because of the severely reduced overhead and externalities A-players bring to the table. With the bonus of not having to deal with headaches and frequent fires.
It seems like most companies hire tons of people for the sake of it. Because it's what you're supposed to do when you have tons of VC money laying around. It makes you look big and successful. It's for ego, not practicality. And also because humans are social creatures and like bringing people on board just because they can.
Most jobs today are bullshit. Companies create positions out of thin air simply because capitalism demands each person has an income. If organisations were optimised, we would barely even need many people working.
In reality, over-hiring is not effective at all. A bigger team doesn't necessarily mean better. Look at Instagram, for instance, it only had 13 employees when it was sold. I'm sure it has more employees now, but it probably doesn't need most of them.
Another example is the amount of people who work at most big tech companies today, such as Facebook or whatever the hell. It's ridiculous. I don't understand what these people are even doing. Most of them are probably barely contributing and are just spinning their wheels.
In fact, that's not just an assumption. I've literally heard Google hires talent simply so they don't go to the competition—not because they actually need them. They barely have to do anything and get paid a shit load for it. What a joke.
If you own a company, stop over-hiring. Instead, be smart about your recruitment process and build a dream team. Anything else is insanity.