How can small businesses attract good talent?

How can small businesses attract good talent?

Small businesses have always struggled to attract good talent.
Thoughts on this started with a writeup by Raj Shankar on his blog. Raj says in his blog that “Small businesses need to stress on the importance of the role, job, person to the institution and impress on the best graduates to join them.”  Read Raj's blog "Small Business and Talent: An Irony!" here.

Now, to dwelve further and to understand the reasons for this gap, we can borrow some concepts from some management principles. Broadly, I can see four guiding principles on which most of these decisions about individual salaries and small businesses are based.

i)                    Demand and Supply – market determines which talent to price how much.

ii)                  Contribution i.e. value addition – The more a person produce/contribute/value-add more he is rewarded (salaries, incentives, recognition, etc.). So, it becomes difficult for a person to leave a high paying job to take more responsibilities with low salary. However, when other rewards (like recognition, achievement, etc.) are plenty to balance the salary factor then people are sometimes willing to consider the change.

iii)                High Risk, High Gain – For a job with high risk i.e. small business (unpredictable sales, salaries, etc. in initial phase) a person should get higher rewards. Again these rewards can be monetary or motivational.

iv)                Maslow’s hierarchy :) – First priority of a person is to get a decent income to sustain a decent living (physiological and safety needs). Once this is achieved, people start thinking of other things like esteem (achievement, recognition, etc.). However, there are some rare exceptions.

So, person create/produce/contribute something based on his talents. This contribution is priced based on demand and supply. The market sets his price/salary for the contribution he is making. More talented attracts higher price tag.

Now, he is getting a high market salary in a big established brand/MNC for his contribution. Then going to small business means higher risk. So, person will be willing to switch only if rewards (salary + incentives + motivation) are higher. At this point if the person has already met his physiological/safety needs then he is ready to switch for motivational purpose otherwise he works for salary to meet his daily needs.

Also, when a graduate comes out of college he is struggling to get his daily needs right (physiological/safety need), so they first look for a job, any job and if options are available then a good salary package. Once this is achieved, a job is secured, they start thinking of other things like esteem, achievements, challenges etc.

So, what is the solution? 
Considering all these factors for small business we can see that if a small business (mostly in growing phase and lesser stable than stable brands/companies) wants some good talent they can get it by one of the following:

A.    Good (higher) salary and incentives.

B.     Attractive opportunities for motivation (challenges, achievements, learning etc.)

Small businesses usually don’t have fat cash reserves. So, the options to explore this alternative are limited.

Freshers, entry level employees – Still small businesses can manage decent salaries as the baseline salary for entry level is low.

Mid management and senior management – Companies can offer them lower fixed salaries + Motivational incentives like equity, ownership, commissions (e.g. percentage of sales they bring to companies). However, here small businesses have to also ensure that people they are hiring share similar passion for the work and vision of the company. If they can find people who share similar higher purpose (life’s purpose) then that is the best bet.

 For any of this to happen the bottom line is that small businesses need to highlight the opportunities to find people with similar passion and purpose. They have to ensure that their customers and employees are the evangelist of their company.