Small businesses are feeling bullish about the future, according to some reports. The Index of Small Business Optimism, for example, reached its highest level since 2004, reports the National Federation of Independent Business (NFIB).
But if your company is to adopt and capitalize on that optimism, you’ll need the right employees in the right roles. And that's not easy in a today's tight job market.
A new survey from Robert Half suggests many small businesses are facing serious hurdles when it comes to recruiting and hiring. Here are some of the findings of our survey of more than 1,000 U.S. small and midsize business owners:
- Nearly half of respondents said they have underestimated the complexity of the hiring process.
- Almost two-thirds admitted to problems with their hiring process.
- The vast majority (81 percent) confessed to having made a bad hire.
A recruiting Catch-22
One reason for the hiring difficulties cited by respondents could be that many small businesses lack in-house recruiting resources. That often leaves hiring duties in the hands of the business owner or top-level managers whose time and resources are already stretched thin. Because of competing demands, hiring often drops to the bottom of their priority list.
This could well leave your company in a Catch-22: You're short-staffed because you're so busy. But you're so busy because you're short-staffed.
The real costs of a bad hire
When you don’t have time to properly vet candidates, you increase the odds of hiring the wrong person. And that risk is coming home to roost for small business owners. Four out of five survey respondents said their business has been saddled with a bad hire.
And bad hires cause more than a bureaucratic headache for small and midsized businesses. Business owners estimated that their team wasted an average of 45 hours of precious time hiring and onboarding people who ultimately did not work out.
That's bad enough, but the effects spread much further. For example:
- More than half (53 percent) of respondents reported increased stress on the team that worked with the bad hire.
- Forty-six percent said productivity decreased.
- Nearly one-quarter (23 percent) lost customers, and 18 percent said the company’s reputation was damaged because of the bad hire.
- One in five (20 percent) business owners said bad hires have caused them to lose confidence in their managers’ ability to make good hiring decisions.
But what’s most critical is what it will take to fix the situation. “It’s not a question of whether or not a bad hiring decision will adversely impact the business,” says Paul McDonald, senior executive director at Robert Half. “The more important question is, how long will it take the business to recover, and at what overall cost?”
Got 17 weeks to spare?
When you've hired the wrong person for the job, you usually find out right away; most survey respondents said they knew within a month.
But that's just the first part of a four-month odyssey, the study found.
To begin with, it took small business owners almost a month, on average, to realize they had a bad hire on their hands. After that, they said it took them an average of 8.8 weeks — more than two months to terminate an employee. And that only got them back to square one. They still had to search for and hire a new employee, which took them another five weeks, on average.
That means four months of increased stress for the team, decreased productivity and — depending on the role — damaged customer relationships.
Hidden small business hiring hurdles
Still, managers are often unaware of all that’s involved in starting over — and not making the same mistake again. They simply repeat the process of recycling an old job description, posting it online, and then waiting for the “right” person to appear from the ether.
And even when that person seems to appear, your work is not yet done. You need to check references. And even if the person has the perfect resume, you have to consider the soft skills — organization, communication, leadership — that make for a great employee and colleague. After all, more than one-third of failed hires result from personality conflicts or a poor fit with the culture. And in a tight job market, the chances of hitting the nail on the head with that approach are even lower.
Once you consider the hiring process as a whole, you begin to see why nearly half of the small business owners surveyed said they underestimated its complexity before diving in.
The power of a recruiter
If posting a recycled job description doesn't do the trick, what’s the answer for a small business? Many survey respondents reported success from reaching out to a recruiter or staffing agency. It helped them get the right person for the job, get them up and running more quickly, and left them free to concentrate on the pressing demands of running the business.
How exactly did that approach work? By partnering with a staffing firm, business owners said they were able to:
- Reach more candidates. Among respondents who have used recruiters, 76 percent said the recruiter was able to find a candidate they wouldn’t have found on their own.
- Save time and resources. For 45 percent of business owners, evaluating candidates based on their skills and potential fit was the most challenging step in the hiring process, and 26 percent admit it takes them too long to fill open roles. Yet 43 percent said working with a recruiter saved them time because the staffing agency did most of the work. Thirty-six percent said they saved money by finding someone more quickly than they could have on their own.
- Get a guarantee. One third (33 percent) of businesses working with recruiters said they do so for the service guarantee. Be sure to ask recruiters about their placement success rates — and the guarantees they offer if a new hire doesn’t stick.
- Maintain productivity. The survey suggests that some business owners may be missing an opportunity to lift the burden from existing staff and keep projects moving while they are trying to replace a failed hire: Only 18 percent of respondents said they bring in temporary professionals to help with excess workload while roles are vacant. That can also give you a chance to evaluate a temporary employee for a potential full-time role.