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How to hire right

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Looking for good staff can be a search for a needle in a haystack. And what’s worse, search methods are often not up to scratch

Small business employers have a big problem, they can't find the workers that they want. This is a problem right now and it’s been this way for several years, as some intensive research shows.

And, to make matters worse, two out of three bosses don't even know how to hire properly.

Research indicates businesses that recruit smarter tend to be better growers. A report from accounting body CPA Australia and the Monash University's Family and Small Business Research Unit (FSBRU), found the human resource management (HRM) practices used by small businesses and, in particular, their hiring methods, were unprofessional.

Very few small businesses take a systematic approach to recruiting, training or developing staff.

CPA Australia says that employers are also less likely to align their HRM practices with their overall business strategy. Unless they formalise their HRM practices and include them as part of their business plan, they are less likely to reap the benefits of growth.

Only a few years ago, a damning report on the competency of bosses found 65 per cent of small businesses have little structure or formality in employment practices. While there has been progress on business plans with more than 54.3 per cent using formal plans, only one in five had a staffing plan with a budget.

The 400 businesses examined in the research showed small business employers recruit using unimaginative, informal and ad hoc methods such as word of mouth or newspaper advertisements. Rowena Barrett, the director of the FSBRU, believes these methods are easy to use and convenient but not always effective in reaching a larger pool of suitable recruits and finding the right employee.

Other mistakes included interviewing candidates without using a written list of skills and qualifications in the selection process. This not only leads to poor selection but leaves bosses exposed to accusations of indirect discrimination if the best person for the job is not selected.

The Recruitment and Consulting Services Association's (RCSA) Business Confidence and Labour Market Report has found recruitment business confidence slipped to its lowest levels since the September 2001 terrorist attacks. The report looked at found a key factor contributing to the drop in business confidence was a lack of appropriate candidates in a tight labour market. “The softening of recruitment business confidence may be due to a shortfall in the quality and quantity of applicants in the jobs market,” said Julie Mills, CEO of the RCSA.

“The economy had adequate demand for employees; however, the available pool of candidates, particularly skilled ones, did not meet demand.”

Employer group NSW Business Chamber says a majority of its members believe the skill shortage is affecting their business viability now and in the near future.

The managing director of Provident Inventory Finance, which provides working capital to small business, recently outlined the main sources of growth. In addition to the predicable planning, financial stability, and marketing strategies that have to be pursued to ensure growth, PIF highlighted sophisticated HRM practices. “Human resource planning including management, staffing and training were essential to growing a business,” he said.

CPA Australia agrees that unprofessional bosses with poorly planned staff-handling practices undermine business growth.

They could benefit by improving their HR practices to maximise the investment in their most important asset -- their staff.

Good policies and procedures will help increase productivity and grow the business.

US academic Jim Collins in his best-seller Good to Great analysed many US corporate giants to see what was critical in their success of turning their good business into a great business.

One of the standout reasons for businesses of the calibre of Kimberly-Clark and Wells Fargo, which outperformed the stock market's rise by substantial factors between 1985 and 2000, was their employment policies. Working with a team of graduates for something like 15,000 hours, they found it was not hiring the right people for the job so much as hiring the right people. And, unbelievably, these companies saw the people as being even more important than the vision and strategy. “We found, instead, that they first got the right people on the bus, the wrong people off the bus, and the right people in the right seats,” Collins said. “And then they figured out where to drive it.”

This is a massive finding and will surprise the 65 per cent of employers who are approaching hiring in an unprofessional way. The reliance on ads -- newspaper or internet -- and the unwillingness to use recruiters can often be driven by a cheapskate mentality and can often be a case of false economy. Consider another of the major findings from the CPA's research: one of the key employment concerns for small business was finding the right staff – 69.4 per cent of businesses owned up to this one. 

Need help with hiring? Book a free business assessment with Switzer Business Coaching today. 


Published on: Wednesday, October 14, 2009

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