Business Week, December 17, 2008, Wednesday

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Business Week

December 17, 2008, Wednesday

HEADLINE: Where to Find Top Talent; Small companies don't have much luck with traditional recruiting. Instead, they count on referrals and trusted networks to find good people

BYLINE: John Tozzi

BODY:
Where can small businesses find good employees? Despite the recent flood of corporate layoffs, entrepreneurs of-ten gripe that the best candidates don't even know their firm exists, and finding them can be like looking for a needle in a haystack.

Traditional recruiting methods usually fail small companies. Broadcasting openings on job boards sometimes yields a flood of applicants who don't qualify, and the number of responses can overwhelm small firms, says Dennis J. Ceru, a Babson College professor of entrepreneurship and a consultant to small and midsize companies. Paid recruiters can find good candidates, but at a high cost -- typical fees are 20% or more of the position's yearly salary. Ceru says the price may be worth it to fill a top position such as a chief financial officer but not for ordinary hires.

Instead, most small companies prefer to find candidates through referrals and networks of people they trust. To do this effectively, entrepreneurs need to articulate what they want in job applicants, says networking expert Diane Darling. "People don't know what you need. They just can't read your mind," she says. She also suggests small business owners keep an open mind about who might refer good candidates. Sometimes unlikely social connections can refer good employees, although Darling cautions business owners always to check professional references, even when a trusted friend recommends someone.

Beyond reaching out to existing contacts, entrepreneurs can meet potential hires at networking events. Ceru says a casual meeting is a smart way to gauge whether the person is a good fit before starting the conventional application process. "Nothing beats eyeballing the candidate," he says. "Rather than have 500 resumes and 10 appointments, why not go to two networking nights and have a beer, get to know them in social environment?" To cast a wider net, compa-nies can look for job candidates at conferences and trade shows as well.

"A Better Pool"

Small businesses should enlist their current employees as recruiters, essentially selling friends and contacts on the benefits of working at their company, says Chris Collins, associate professor of human resource management at Cornell University's school of Industrial & Labor Relations. "Take the price of that ad you were going to run and give it to the person who identifies the candidate who eventually gets hired," he says. "You'll probably get a better pool."

One startup betting that companies will benefit from turning employees into recruiters is Jobvite. The two-year-old San Francisco company offers Web-based software that allows hiring managers to give information about job openings to employees, who in turn can push it out to potential candidates in their professional and social networks. Hiring through employee referrals is more effective and less expensive than placing ads or using recruiters, according to Jobvite CEO Dan Finnigan, a former executive with Yahoo! (YHOO) HotJobs. "Everyone now has a Rolodex, and it's all online and they're all interconnected," he says. Companies pay for the service based on the number of employees they have, with the price starting at about $500 a month for small firms. Even without paying for software, small businesses and their employees can use online networks to expand the reach of their hiring. LinkedIn reports that 45% of jobs posted on the network in the U.S. come from small and midsize companies, with an average of 22 responses per posting in November, up from 12 in January. [Disclosure: LinkedIn has a partnership with BusinessWeek.com that includes a tool that lets users find LinkedIn connections at companies mentioned in BusinessWeek articles.]

Small businesses can also find good candidates through universities. Owners and managers can show up at career fairs, ask campus career centers to refer candidates, and post to job boards and lists that go out to students, recent gra-duates, and alumni. Companies need to raise their profile on local campuses to get students' attention, says Lindsey Pollak, an author and career expert who works with students and young professionals. "The students would love to work for you, they just don't where to find you," she says. Firms can get involved on campuses even before they need to hire by working with classes on consulting projects and hiring interns, says Erik Medina, director of graduate career services at Indiana University's Kelley School of Business. "You'd be surprised, a little bit of good marketing, a little bit of good outreach can go a long way to distinguish yourself from the very large well-known firms that most students focus on," he says. This year in particular is a good time to recruit on campuses, Pollak says, because many large firms won't be hiring.

Wherever entrepreneurs look for new employees, they shouldn't wait until they have to fill an opening. By con-stantly networking with an eye open for potential hires, owners and managers can keep a pool of candidates in mind for when they do want to bring someone on board. Continually identifying good candidates is particularly important for small companies because the time and money they invest in filling each position compounds the cost of a mistake. Says Pollak: "It is so much more dangerous for them to make a bad hire because 1 out of 50 employees is so much more damaging than 1 out of 50,000."

For more suggestions on where to find employees, online and off, flip through this slide show.
More elements of this special report are available in the related items box on the upper right side of this page.

URL: http://www.businessweek.com/smallbiz/content/dec2008/sb20081211_402088.htm

LOAD-DATE: December 17, 2008