The Battle For Talent: Hiring Skilled Workers When the Unemployment Rate is Falling

Publication: Small Business Review
December 1, 2006
By Gary M. Stern

A strong economy is a good thing. But for small businesses, it brings a fresh challenge: When the unemployment rate is low (it hit 4.4% in October), how do you compete for talent? How can you convince candidates to choose you rather than that Fortune 500 company that may be offering signing bonuses and stock options, in addition to gold-plated benefits and high salaries?

First, make sure that recruiting is a high priority. “Many small business owners see hiring as the thing that gets in the way of their doing their real job, says Steven S. Little, author of The 7 Irrefutable Rules of Small Business Growth (Wiley 2005). “My response is, ‘This is your real job.’ Hiring the best and the brightest is the most effective way to grow your business.”

The most successful business owners recruit continuously. Wherever they go—on a client call, at a trade show, or at the Rotary—they keep an eye out for individuals who someday might fit into their organizations. They get to know them—over coffee, say—then keep in touch. When an appropriate opening appears, they start with a strong candidate.

Two: Work your network, says Robert W. Wendover, author of Smart Hiring: The Complete Guide to Finding and Hiring the Best Employees (Sourcebook 2002). A referral from a trusted associate is worth 100 responses to a recruiting ad—and you avoid employment agency fees, too. Tap your trade and college alumni associations, which can clue you in to skilled talent, too. When an opening appears, make a list of 25 people you know and call each one to tell them about the search, Wendover says.

And don’t forget to tap your own staff for recommendations. They should have a keen sense of who can do the job and fit your culture. As head of two consulting companies, Wendover says he gave bonuses of $500 to $1,000 when a candidate referred by an employee was hired—plus a kicker if the new hire lasted a year.

To land the best candidates—and keep them—you have to make a competitive offer. David Wood, president of Watchfire Signs in Danville, Ill., uses Illinois Compensation Data from the Illinois Chamber of Commerce to benchmark salaries and benefits. As a result, the manufacturer of electronic signs has sweetened its benefits, including providing paid leave for family illnesses and improving a short-term disability plan. The company also pays 75% of the premiums for the family medical plan and has instituted a bonus plan for high-level personnel.

Like many small businesses, Watchfire is located in a small town. There isn’t a large labor pool and not many qualified candidates want to relocate to Danville, a town of 33,000 that lies100 mile south of Chicago. So Wood grows local talent, by offering paid internships for engineering and computer-science majors at nearby community and four-year colleges. That has helped fill positions, but he concedes there is a risk of giving ambitious young Danvillites the skills to get out of town: “Last year we lost three top interns to Fortune 500 companies,” he says.

Operating in a small town can have its advantages. Wood knows what all the other businesses are up to. So when a nearby plastic tubing company called Tee Pak downsized, he hired the quality control director and taught him the electronic sign business. “We know people in the community,” Wood says. “This isn’t New York.”

Another way to attract top talent—even if you can’t match Fortune 500 compensation—is to emphasize the benefits of working in small businesses, advise authors Little and Wendover. Look for the “disenfranchised corporate worker, who doesn’t want to worry about bureaucracy, enjoys a more collegial atmosphere, and maybe has socked away money and is looking for new challenges,” Wendover says.

Small businesses should avoid national job sites, says Little. In a sea of online listings “your competitive advantage or point of differentiation” doesn’t stand out, he says. Instead, use targeted sites such as or, which specializes in life sciences and pharmaceuticals. Many industry associations also have job sites, such as the Marketing Association’s job bank.

What about personnel and recruiting companies? When your company has grown too big for the boss to handle hiring or if you’re having trouble hooking top talent, a “headhunter” can help. For a fee—usually one-third of a year’s salary—he takes care of all the heavy lifting, including reviewing resumes, screening candidates and choosing a handful to present to the hiring executive.

It is important to find a recruiter with expertise in your industry. Top headhunters often st come from industry, with a Rolodex full of experienced applicants. A good recruiter will help you fine-tune your compensation package to meet market conditions and should be able to find candidates who might not answer an ad. Also, a professional recruiter can head off trouble by eliminating candidates whose deficiencies you might never detect in an interview or through a routine reference check. “It saves an owner money not to make a mistake,” Little says.

Hiring a search firm on a contingency basis is most cost effective. But there is a risk: Because the firm only gets paid if you hire, “they will pressure you to make a decision quickly in order to get paid,” Wendover warns. A “retained search” firm gets an annual or monthly retainer, which makes sense if you know your business will be filling many positions.

Sean Kavanagh, CEO of Ariel Group, an Arlington, Mass. leadership training and consulting firm, knew when his company broke $5 million in revenues in 2004 that he needed a search firm. “I didn’t have time to do searches anymore,” he says. “As long as you prepare the firm, explain exactly what you want and make sure the candidate fits into the culture, it’s very helpful.”

Remember, if you do it yourself or rely on a search firm, the goal is not just to fill a job. You’re looking for people who will fit into your organization and help your company grow. “We view it as a creative job to find talented people.” says Wood of Watchfire.

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