6 Challenges Small and Medium Businesses Face In Hiring Process

The number of Small and Medium Businesses (SMBs) in India, registered and unregistered put together is an estimated 42.5 million. They employ roughly 40% of the total workforce in India. In the competitive, ever-changing corporate world, there is always an intent to dominate the space. In that context, small and medium businesses cannot afford to mismanage hiring. Acquiring top talents and retaining them is not an easy task.  

The biggest factor that sets apart a great company from a mediocre one is in their ability to hire and retain top talent. Bill Gates once said, “The competition to hire the best will increase in the years ahead. Companies that give extra flexibility to their employees will have an edge in this area.”  

We have already discussed Top 10 Challenges Faced by Recruiters in Hiring. Now, let’s discuss 6 Challenges Small and Medium Business face in the Hiring Process. 

1. Employee Attrition 

At the outset, it might look like employee attrition is a common challenge that every organization faces irrespective of their size. Nonetheless, it is a bigger challenge comparatively for Small and Medium Businesses. It may be difficult for SMBs to match the salaries and perks offered in the market by bigger players.  

There could be multiple reasons for it rather than just a better salary. Maybe the employees are:  

• looking for a more challenging role  
• seeking a better management relationship 
• have a particular location preference 
• dislike workplace policies 
• seeking a better work-life balance etc 

Whatever the reason may be, employee attrition is something that Small and Medium Businesses struggle to deal with in an efficient manner. Sometimes, even when the employees are offered growth opportunities, or are treated well, and even recognized for their contributions, the attrition rate still may continue to remain high. 

2. Cost per Hire 

Keeping cost per hire low is generally a challenge for SMBs as they don’t have access to a lot of resources a larger enterprise may have. In the overall recruitment budget of SMBs, the recruitment costs, especially the cost per hire occupies a major portion. Cost per hire is a metric that shows how much money is spent in the process of hiring, per employee. For instance, if a company hires 25 employees in a year and spends an estimated 10 lacs INR for it, the cost per hire comes to 40,000 INR. This might include costs spent on sourcing, screening, advertising, costs towards job boards, and also employee referral bonuses etc.  

Not all Small and Medium Businesses would be able to afford such a high cost per hire. They might end up hiring via employee referrals which results in on-boarding average candidates. This makes hiring quality candidates quite challenging for SMBs. 

3. Competing with Big Organizations 

Hiring becomes tough for SMBs when competing with bigger organizations because they may provide candidates with better salaries and perks. This is a challenge that Small and Medium Businesses face. Competing with bigger organizations in hiring top talent becomes increasingly difficult. Candidates more often lean towards accepting offers from companies with better branding. Big brands can offer better salary packages, more employee benefits, and also a great work environment, which SMBs may not be able to match as their budgets are generally smaller. This makes it difficult for them to acquire top talent.  

4. Inefficient Hiring Process 

Most Small and Medium Businesses will not have a dedicated hiring team. Often, their existing employees manage the hiring process themselves, in addition to handling their regular job functions. This kind of in-house recruitment leads in hiring candidates who may not be the right fit for a particular position. This may lead to employee backouts i.e. employees quitting right after getting onboard and also an increase in interview cost, causing greater inefficiencies in hiring.  

To avoid such a scenario, SMBs could hire a recruitment agency and let them handle the entire hiring process. Alternatively, they use an Applicant Tracking System (ATS), if they are keen on continuing to do the hiring themselves. By using an ATS, SMBs can simply upload jobs and intelligently screen and track candidate applications and schedule interviews in a way that helps them to avoid a lot of manual processes. An Application Tracking System offers a whole range of other benefits including ranking resumes based on keywords, advanced filtering, etc. that you can explore in our earlier article, What is an ATS? 

5. Settling for Average Candidates 

Due to budget constraints, lack of hiring experience or due to inefficient hiring processes, Small and Medium Businesses may end up hiring a candidate who is pretty much average. As a result the candidate might not be able to perform as per expectations and there could make a case of re-hiring. This may lead to a dramatic increase in hiring costs, which is something SMBs cannot afford. 

The SMBs should be willing to spend comparatively higher in terms of their hiring budget. It is not correct to evaluate hiring purely from cost cutting perspective. 

6. Hidden Costs 

These costs are something that might go unnoticed. It includes all hidden costs that are in addition to what is offered in the total cost to the company (CTC) of the employee.  

Examples of such costs may include:  

• Time and effort spent by the recruiters  
• Relocation costs
• Training costs 
• Infrastructure costs like cost towards Laptop etc 
• Time spent by C-Level executives and  
• Time spent by business division leaders  

These are not taken into account in the CTC. If those are accounted for, that might be quite steep on the budget of Small and Medium Businesses. 

In India SMBs currently employ over 130 million people and is also a worthwhile contributor to the GDP of our country. There is always a demand for talent and regardless of all these challenges, SMBs ought to find some creative ways to get qualified talent. We at WebPipl are trying to address these challenges and you can go ahead and explore some of our offerings at WebPipl.com