Although hiring and retaining excellent employees is crucial for any company, it’s particularly important for small and medium-sized businesses (SMBs). This isn’t just because smaller staffs mean each employee is more integral to the success of the company – it’s also because SMBs can’t afford the significant costs associated with hiring the wrong people. This is why SMBs have to focus on developing robust and affordable methods of talent acquisition.
There are many strategies and tools SMBs can use to drastically improve their hiring processes, from pre-employment assessments that can predict how well candidates will perform in their roles to virtual interviews to onboarding procedures that will rapidly integrate new hires with their teams. The long-term effects of more rigorous and streamlined hiring practices are substantial: higher morale, lower employee turnover, and ultimately increased productivity.
Traditional hiring methods like sifting through piles of resumes and cover letters are quickly becoming obsolete as companies increasingly rely on evidence-based methods of assessing candidates. While this is a positive development for companies of all sizes, SMBs stand to benefit even more than their larger peers. Big companies can afford to invest a huge amount of resources in their HR departments and hiring platforms, but the tools cited above are available to companies with much more modest budgets.
SMBs have never been in a stronger position to compete for talent, and the ones that recognize this fact can start building the workforce of the future today.
When companies consider the risk of a bad hire, they have to account for much more than opportunity cost and inconvenience. There’s a wide range of direct and indirect costs the companies incur when they make the wrong hiring decisions: employee remuneration; the time and resources invested in finding and reviewing prospective employees; onboarding and training costs (as well as other administrative costs); and the loss of productivity. It’s no wonder that turnover costs American companies $1 trillion per year.
The costs associated with hiring mistakes are especially harmful for SMBs because they have limited budgets and each new employee has an outsize role in day-to-day operations (in comparison with larger companies). When an SMB loses an employee, it doesn’t just have to invest resources in finding and training a replacement – it also has to factor in the lost productivity during the new employee’s acclimation period. According to research in MIT Sloan Management Review, the amount of time it takes for new employees to reach “full productivity” is significant: “From eight weeks for clerical jobs to 20 weeks for professionals to more than 26 weeks for executives.”
Turnover can also have a corrosive effect on employee morale, which can in turn lead to even more departures. This creates a culture in which collaboration suffers because fewer employees are forging long-term relationships with their colleagues – a reminder that the long-term consequences of bad hires go well beyond the immediate direct and indirect costs, which are already debilitating for SMBs.
According to Deloitte, SMBs consider hiring one of their top challenges. A recent LinkedIn survey mirrored this finding – 84 percent of SMBs say they “struggle to find enough people to interview and hire,” while 73 percent say competition with better-known companies prevents them from securing talent. But the most alarming statistic is the fact that three-quarters of SMBs are “unsure if candidates will succeed in the role, even after the interview.”
It’s clear that SMBs need better methods for finding, assessing, and hiring employees, but the good news is that these methods are only becoming more powerful and accessible. For example, pre-employment assessments measure traits that have repeatedly proven to be highly predictive of professional success, such as general cognitive ability (GCA), emotional intelligence, and conscientiousness. And these assessments don’t just help SMBs develop an evidence-based approach to hiring – they also mitigate the cognitive biases that often creep into hiring decisions and lead to discrimination.
Assessments also allow SMBs identify and review a larger number of applicants – the tests can be taken anywhere at any time, they immediately provide actionable insights (allowing SMBs to rigorously and fairly compare several candidates at one time), and they efficiently screen out candidates who won’t be a good fit. SMBs can even use assessments to determine whether prospective employees have the personality traits they’re looking for and how well they align with the company’s values, culture, and mission.
At a time when many companies face a skills shortage, competition for talent is fierce, and the global economy is in a constant state of flux, digital platforms for candidate management, application tracking, and psychometric evaluation give SMBs tools that help them discover and hire the best talent available.
While assessments and other digital hiring solutions are essential for SMBs that want to compete with their larger peers and hire employees in the most consistent and data-driven way possible, this doesn’t mean other hiring methods are irrelevant. As we explain in our recent SMB hiring guide, companies need to provide prospective employees with a compelling job description; use all the methods of sourcing candidates at their disposal (including referrals, social media, and job boards); and conduct interviews.
How SMBs deploy these strategies is critical. For example, SMBs should only use structured interviews – a consistent set of questions that are asked of each candidate with a rating scale attached to each one – if they want to maintain their commitment to fairness and due diligence. This minimises the bias of the interviewer and ensures that every candidate gets a fair shot. Before SMBs even get to the interviewing stage, skills tests and psychometric assessments can narrow the range of potential candidates to the ones that most closely align with the company’s preferences – a reminder that new hiring methods can work in tandem with old ones.
According to a 2019 report, SMBs report that assessments and applicant tracking systems are among the top contributors to the quality of their hires. However, half of SMBs say they don’t know what assessment options they have. Considering the challenges that SMBs face in the post-COVID world – from a much larger pool of candidates to an ever-more dynamic and competitive global economy – it’s clear that they need to explore the full range of hiring solutions available to them.