Why Are Small Businesses Struggling With Hiring?

While so many Americans are still struggling to find sufficient employment, it seems small businesses are having a particularly hard time filling their available positions.

interview-861513-mIn a recent survey conducted by Robert Half, 60 percent of small business owners responded that their biggest challenge in hiring or managing staff is finding qualified workers to do the job. This response came out way ahead of the next biggest concern, maintaining employee morale and productivity, which received only 19 percent of the responses.

These findings mirror the results of a Wells Fargo Gallup Poll conducted earlier this year. The poll indicated that 53 percent of small business owners were finding it very (23 percent) or somewhat difficult (30 percent) to get the qualified employees they need, and 27 percent responded that the difficulty in hiring qualified employees has hurt their business over the past 12 months.

On the surface, this all seems counter-intuitive. But this trend is likely due to two reasons:

1. The majority of small businesses are relying on out-of-date recruiting and hiring processes. According to the Gallup poll, a mere 15% of small businesses are using the Internet to recruit new hires. The two biggest ways smaller companies are finding talent are via word of mouth (63%) and employee referrals (47%). Depending on the nature of the business, this can seriously limit the pool of potential hires.

Why are small businesses reluctant to use popular online recruiting platforms such as LinkedIn? It could be many have tried it, but were unsuccessful, and those yet to stick their toes in the water are probably overwhelmed by it all. This is a problem because today’s workforce relies on the Internet heavily for many things, including finding a job.

2. There has been a shift in workforce attitude. The fallout from our chronically under-performing economy is that people’s priorities have changed when it comes to what they are looking for in an employment situation. Numerous surveys point to the fact that today’s workforce is primarily concerned with their career advancement. It’s a trend that many small businesses may not have caught on to. Small businesses also have fewer resources than their bigger competitors to offer a desirable benefits package, such as health care benefits and retirement plans.

The bottom line here is that small businesses need to be aware of the changes that are happening among today’s workers if they really want to put all their struggle in hiring behind them.

Small Business Earnings Trending Down, Capital Spending Remains Weak

According to some recent studies, it appears U.S. small businesses are still struggling where it counts years after the Great Recession officially came to an end.

Down graphSales generation continues to be a challenge. According to the Wells Fargo Business Insights Survey, almost half of all small businesses claim that in the past 12 months their company revenues either remained unchanged (27%) or have gotten worse (39%). Not surprisingly, a full 32% of the companies surveyed indicated that maintaining a good cash flow position continues to be a struggle.

The latest National Federation of Small Business (NFIB) Small Business Optimism survey seems to corroborate these results. The net percent of all small businesses reporting higher sales in the past three months compared to the prior three months plunged 17 points to a negative 24%. Earnings fell 13 points to negative 35%.

Capital spending among small businesses remains equally weak. According to the Wells Fargo study, more small business owners reported decreasing capital spending over the previous 12 months than those who reported an increase. This trend has persisted a since the middle of 2008. While the NFIB study, reported a 3 point increase in capital outlays over the past six months to 57%, it is still about 10% down from pre-recession levels.

Why are small businesses still struggling? Many point to several possible causes including: lack of real tax reform, the looming health care reform legislation, an over all slow down in the global economy, a fickle consumer confidence, and increased competition from big businesses.

All of these things coupled with the need to keep with the ever-changing trends in Internet-based marketing, are making running a successful business seem much harder now then it was a few years ago.

Whatever the case, it’s clear that small business owners still have their work cut out for them if they want to be successful, let alone operational, heading into the new year.

How Small Business Owners Can Increase Employee Pay When Money is Tight

According to a recent Wells Fargo Business Insights survey, poor cash flow continues to be a major worry point for small business owners across the nation. These findings come as no surprise given the overall decrease in consumer spending and consumer confidence coupled with inflationary pressures and high rates of unemployment.


But as more American workers succumb to debt-related stress and illnesses, small business owners in particular may be struggling to both hold on to their talented, experienced workers while keeping them motivated on the job. The problem: these days, money has become a big motivating factor, even as the owners of many smaller businesses are looking for low-cost ways to encourage their workers without having to offer them a raise they just can’t afford.

So how can you as a small business owner break out of this cycle- especially if you are struggling with your daily cash flow? One answer to this predicament is to offer performance-based pay increases, and the more that you can align your employee performance measures with the company’s overall bottom line, the better. Some examples of this in action: giving employees a cut of the revenues from all new accounts that they help to set up, offering a bonus for coming up with ways to improve quality or efficiency, offering bonuses for high customer satisfaction scores.

Why does this stand a good chance of working? If employee goals are in line with company goals, then your compensation methods can be a simultaneous call to action- as this entrepreneur discovered. Employees will be motivated to give it their best, to help both themselves and the company as a whole, and this could just be the boost your business needs to successfully ride out these difficult economic times.