Talent Acquisition Challenges Small Business Index Growth
Small business owners’ outlook on their businesses, which has grown steadily over the past six quarters, ticked down slightly in fourth quarter 2018 as hiring difficulties put a strain on business growth. The fourth quarter Small Business Index, produced in collaboration by MetLife and the U.S. Chamber of Commerce, recorded an overall score of 69.3. While still reflecting general optimism from the small business community, it is down almost half a point from the third quarter’s record high of 69.7.
The index has measured optimism on the health of the national economy increasing continuously since second quarter 2018 and in fourth quarter it reached a new high with 58 percent of small business owners believing the U.S. economy is in good health. Optimism regarding the local economy also improved in the quarter with 56 percent of small-business owners noting their local economy as good, up six points from third quarter 2018.
“Small businesses are the growth engine of the American economy, employing half of the nation's private sector workforce,” says Jessica Moser, senior vice president, Small Business Solutions in MetLife’s Group Benefits business. “The owners of those businesses make crucial decisions about expansion and hiring every day, so their level of optimism is a good indicator of future growth. The findings of this quarter’s Index show they are still bullish, which bodes well for our economy as a whole.”
Approximately 40 percent of small-business owners say they have been actively searching for new hires throughout 2018, but 67 percent report having difficulty finding candidates with the skills they need. Very few small-business owners, nine percent, say the talent pool for potential recruits is “very good” with 55 percent describing it as “fair” or “poor.”
“There are too many people that lack the skills or credentials they need to compete for 21st century jobs and too many businesses that can’t find the workers they need, when and where they need them,” says Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce. “A lack of skilled workers is going to hold back economic growth for the entire country.”
Instead of focusing on future growth and the development of their companies, 81 percent of the small-business owners surveyed for the index say that they had to work longer hours or take on additional roles to compensate for their inability to find qualified candidates. This is especially pronounced among businesses run by women (86 percent), manufacturers (87 percent), minorities (89 percent) and Millennials (95 percent). Most respondents, 61 percent, say they had to push their staff to work longer hours and 55 percent say they are instead investing time and money into training their current employees to compensate for not finding new recruits.
Most small businesses, 84 percent, rely on professional contacts and current employees to refer quality candidates. In their analysis of the index’s results, MetLife and the Chamber note that while it is clear that companies need to find innovative and different ways to attract and connect with talented candidates, they may be at a loss of where to do so. Two out of three small businesses that searched for talent in 2018 say they do not plan to use a different recruiting strategy in 2019.
More details from the fourth quarter index can be found here.