Why Small Businesses Suck at Hiring

Building out a solid team is a challenge, especially in small business. Things get even tougher when you require a very specific skill set. When you finally manage to find a candidate they might still be on the fence about joining a smaller company. Here are the most common reservations and how you can convince candidates to think otherwise.

Lower salaries and benefits

There is no point denying that smaller companies often offer lower salaries than big corporates. It’s very hard for smaller businesses to match this as their operations are often more subject to fluctuations. Their limited size might also make it excessively expensive to set up certain benefit plans. While you might not be able to match the full compensation package, you should at least play in the same ballpark.

Most candidates make a conscious decision to apply at a smaller company. This means that you’re most likely to be competing with other smaller companies for talent; not the big corporates. Knowing this, you should be outclassing your direct competitors and have policies in place to show you take your team seriously, just like the big guys:

None of these benefits are novel, but it’s shocking how many smaller companies do not have policies for these items in place. Simply having these written up shows professionalism. We also offer our team a daily lunch (prior to COVID), but genuinely feel this as much of a benefit to the company than the employee. Making sure you employees are well equipped (tools, workwear, etc.) is not a benefit, but some companies make it out to be.

Little attention to professional development

When you join a larger business you are quite likely to spend your first week(s) in a company-wide onboarding. Young Professionals are enrolled in multi-month programs to get them up to speed. These structured programs are an amazing way to help new employees hit the ground running and they are amazingly beneficial to both parties. After their first few weeks, HR follows up to check in and discuss how the new employee can continue developing professional.

Very few small companies have any of this, sadly. As a hiring manager you can do a lot of things to alleviate this issue, but the most important is to show that you really care about your team. This means carving out time every single week to talk to each of your team members, even when you’re busy. Set up a Professional Development Plan (PDP) and not just when the employee is not performing well. Have policies in place for evaluating their and your performance, including how pay raises or bonuses are earned.

Describe how you handle these types of things at your company when talking to candidates. If they’ve worked at other smaller businesses they are most likely to be impressed. Also understand that executing on things like a PDP are amazingly difficult, but they are great opportunities to get the best out of your team members. Even if you only manage to achieve a single goal a year.

No clear career path

Large companies have multiple layers of management and additional departments, allowing the employee to either get promoted or transferred to. When a manager moves up, it’s natural for many companies to promote a team member to this vacant position. Companies with a traditional hierarchical structure give potential employees a perspective on their internal career path. Something that is a lot harder to envision when working in a smaller organization.

As a small business you will have to acknowledge that you’re not going attract employees who wish to climb up through the ranks in no time. Their career path is often limited by how fast the business is growing and hiring. Be up front when being asked this question by a candidate.

While you might not be able to offer a management position down the road, try to uncover why this is important for a candidate. There are a lot of individual contributors who become managers because this is a natural progression and they exhausted their pay grade. Can you offer more salary for a higher performer? Most likely. Is the candidate looking for more responsibilities? There are plenty of challenging jobs experienced team members can take on, especially in smaller companies.

Smaller opportunity to specialize

The bigger the company, the higher the odds that employees can focus on one specific skill and get really good at it. They will probably have colleagues that have the exact same job description, allowing them to learn from peers and become an expert in their field. In smaller organizations the opposite is true. There are as many jobs but fewer people to do them. This results in having employees wear many hats at the same time.

While it is true that working in a smaller organization allows for less specialization, it depends on the company and the team whether one has the opportunity to really hone their skills. As a hiring manager you should emphasize the capabilities of the team you are hiring for. Our hiring process includes a conversation between the candidate and a non-hiring team member for exactly this reason.

It is also good to highlight the advantages of being able to develop a wider range of skills. I’ve personally seen team members rise to the occasion and taking initiative simply by being presented an opportunity. Opportunities which they might not have encountered when they took a job with a much more narrow set of responsibilities/opportunities.

Location, location, location

Big companies have fancy offices, often in prime locations. Despite COVID, offices will remain a status symbol. Possibly not as much as they previously were, but they still remain important for customers and employees alike. Your office should be a physical artifact of your company and candidates will definitely have a good look when they come in for an interview. But how can small businesses compete with companies that spend millions on their real estate each year?

This is where being small is actually an advantage, especially in European cities where large office buildings are often found at the outskirts of the city, rather than in the center. A cool office in an interesting location will vastly outweigh an anonymous three story building tucked away at the corner of some business park. The larger you get, the harder is to find such locations.

Don't feel the need to put a foosball table in your office if this does not fit your company culture. Make sure you have pleasant and nicely furnished spaces, good chairs and please don’t try to fit as many desks as possible in a single room. Try your best at maintaining a good internal climate and above all, make sure it’s not a permanent mess.

Unlike larger businesses, small businesses are often able to set up in smaller cities and have opportunities to set up shop where costs of living are lower and modes of transportation more accessible. Don't forget this when hiring candidates that are relocating. 

Wrap up

Small companies can be great places to work, but some certainly aren't. Larger businesses have policies and HR departments in place to ensure it’s a great place to work. Unless you dedicate a substantial amount of time and thought about how you can make your company a great place to work, you fail to hire or retain a great team. Smaller companies can offer a lot of great things larger organizations can not. When you put policies and processes in place, small businesses can offer a lot of what the big companies can. Don’t cut yourself short.