Top 3 Reasons Small Businesses Aren't Hiring

The data shows a struggle in small-business hiring, but a few tweaks in process may help improve those numbers.
CEO, Small Business Trends LLC
March 14, 2013

With a new year firmly in place, the “fiscal cliff” averted (for now) and healthcare reform finally taking shape, are small businesses finally ready to start hiring? Despite the seemingly positive indicators, several recent surveys show small businesses still are not hiring, and there are three main reasons why they probably can't find qualified employees. 

A January National Federation of Independent Business survey found ever-so-slightly positive job creation in January. Overall, 11 percent of small-business owners in the poll said they added employees over the past few months, while 9 percent cut back on employees. For 80 percent, it was status quo.

The Intuit Small Business Employment Index for January found similar results. Small-business employment increased a tad (by 0.11 percent), with 20,000 new jobs created. The numbers were very similar to the December data.

Over at Gallup, growth was essentially flat as well. The U.S Wells Fargo/Gallup Small Business Index reported “less overall hiring activity and essentially no improvement in small business job growth over the past two years.” However, while small-business owners on average say they let go of slightly more employees than they hired in 2012, their outlook for 2013 is a bit more positive: 17 percent expect to add jobs.

RELATED: 7 Ways to Dramatically Improve Your Hiring   

But will they be able to fill those jobs? Although 43 percent of small-business owners in the NFIB survey reported hiring or trying to hire in the last three months, 79 percent of those (34 percent of business owners overall) said they found few or no qualified applicants for those jobs. 

A separate Gallup poll found similarly disheartening results. Despite the tough economy, over half (53 percent) of U.S. small-business owners say it’s either very (23 percent) or somewhat difficult (30 percent) to find qualified employees. One in four owners (27 percent) say the struggle to find qualified employees to hire has hurt their business in the past 12 months, up from 21 percent in January 2012.  

Since a prolonged economic downturn should mean more people are eager for work and willing to accept lower salaries, what’s behind small-business owners’ struggles? The surveys don’t dig to the bottom, but these three ideas can shed some light on the problem.

Small-business owners can’t find qualified employees because they’re looking in the wrong places. In the Gallup poll, two in three U.S. small-business owners say word-of-mouth is a "major way" they find new employees. That’s been pretty much unchanged since 2005. The second most popular source of new employees is referrals from existing workers (47 percent). Only 15 percent cite the Internet as a major source of new employees, 9 percent cite newspaper ads and 4 percent cite recruiters.

As the saying goes, "If you always do what you’ve always done, you’ll get what you’ve always gotten." If you need employees who have skills you lack in-house, do you think the people in-house are the best way to find them? Maybe you need to broaden your horizons by using specialized job search boards for your industry or (if the job is really crucial to fill) biting the bullet and enlisting a recruiter. 

RELATED: How to Hire Top Talent

Small-business owners can’t find qualified employees because they’re looking for the wrong types of employees. Gallup reports that small-business owners are more likely to look for temporary workers or independent contractors (40 percent) or part-time employees (36 percent) than full-time employees (22 percent) when they need to hire. If you're seeking specialized skills and experience, that does come at a cost—and people with those skills may want the security and benefits of a full-time job rather than part-time or independent contractor work. 

Small-business owners can’t find qualified employees because of larger, systemic problems. Gallup notes that many workers have now been unemployed for a long time, causing their skills to atrophy or their experience to become less relevant. High school students and new college grads may not have been able to find the entry-level or part-time jobs that used to prepare them for “real jobs” or simply give them an education in basic workplace experience. And cutbacks in higher education are leaving both young people and displaced adults without skills to handle 21st century workplace challenges. 

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Photo: iStockphoto 


CEO, Small Business Trends LLC