Managing for growth
How to hire and retain the people who will help your business succeed
Is hiring harder for small businesses?
In a word, yes. With unemployment at a record low, hiring is difficult for everyone, but small businesses, inevitably stretched thinner, can’t really afford to make hiring mistakes. According to the U.S. Department of Labor, the average cost of a bad hire is about 30 percent of the first year’s salary—that’s close to $25,000 for an $80,000-a-year employee. Small businesses often can’t match the salaries of big corporations; this has been even more of a challenge as the explosion of information on career sites has made workers more aware of what competitors offer. You can step up in ways beyond the salary—from a bonus structure to perks like lunches. “Employers, especially small employers, need to be focusing on the intangibles beyond the paycheck,” Paul Furiga, the CEO of 12-person public relations firm WordWrite Communications, told The Wall Street Journal. You need to find ways to let workers know they’re joining a company where their contributions are valued.
Do small businesses have any hiring advantages?
Small businesses don’t need to squeeze every employee into a one-size-fits-all bracket. One way you can distinguish yourself from large corporations is by offering better work-life balance. Often, smaller teams can get more done in the same time. There’s even a name for this: the Ringelmann Effect, named for Max Ringelmann, the scientist who first described it. That lets you offer a better work-life balance. A proprietor is often more able to offer flexible work arrangements, such as four-day workweeks. And at a smaller company you can develop your own work culture. Candidates and employees want to know your firm’s values, and you’re in a great position to define those values and let workers know they are genuine.
What’s the best way to interview potential employees?
If you are a sole proprietor, you may be used to making decisions off of gut feelings. In hiring, though, that can be dangerous. If you actually want to hire and cultivate a diverse group of employees, unconscious bias gets in the way. One way to avoid it is to make sure you have well-structured interviews. Many people say that they prefer unstructured interviews, and that seems natural in an informal, small business. But often when people say they like unstructured interviews, what they really mean is that they want a relaxed atmosphere, said Michelle Armer, chief people officer of CareerBuilder.com. Ask questions that highlight the abilities you value—not just skills specific to the job but also traits like resilience, rigor, and curiosity. Create a hiring checklist of traits and skills, so you have a system you can use to compare candidates, refine your hiring, and collect data.
What pitfalls should I avoid?
It’s a common conception that the best hires are those who are happy in their current jobs and need to be pried away. If you put the search largely in the hands of outside recruiters—a big temptation for companies without an HR department—they are likely to focus on these “passive” candidates. However, Wharton business school Professor Peter Cappelli says there’s no data that supports these hires being better bets than active job seekers. In fact, passive candidates willing to move appear motivated more by money, while active job searchers “seem interested in moving because they are ambitious, not because they want higher pay,” Cappelli writes in the Harvard Business Review. Ads, referrals, and relentless networking can help you reach those candidates. Also consider “nontraditional” candidates who haven’t worked in precisely the role you’re hiring for. Remember: Many of today’s fastest-growing job categories didn’t even exist a few years ago.
How do I improve retention?
The way employees start can affect how long they stay. According to the Society for Human Resource Management, those who went through a structured onboarding program were 58 percent more likely to still work for a company three years later. Onboarding should include an orientation that gives a clear understanding of company culture and expectations. If you are concerned about your best people leaving—and you should be—consider that the No. 1 reason employees quit is a better career opportunity. You need to cultivate talent, giving your staff opportunities such as courses, mentorship, and workshops. You also send a powerful signal that workers will be rewarded for staying by promoting from within. The opposite is true, too: Hiring someone from outside, when a current employee could take on a bigger role, will breed resentment.
How do I keep my staff happy as the business expands?
You can offer employees a chance to grow with your company in ways that a larger corporation can’t. In a LinkedIn study, nearly six in 10 workers said they would leave their company for one that offered better training opportunities. Smaller firms can let all their employees see every part of the business—and learn to expand their skills in the process. In many small companies, collaboration is the norm, but as your company gets bigger, there will be more voices in that collaboration that you’ll need to effectively manage. As the number of projects you handle increases, give each project “an owner”—a person who gets to be the final decision maker. Delegating in a way that gives people power over the projects they’re most involved in keeps disorganization at bay and gives your employees a deeper connection to their work. ■