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Recruiting Employees for Small Businesses:
A Little Planning Goes a Long Way


Small Business Series

James Lindner
Chris Zoller

"We hired the wrong people . . .
because we were in such a hurry to fill those positions."

Lynn Bignell

Recruiting is the process of generating a sufficiently large group of applicants from which to select qualified individuals for available jobs (Buford, Bedeian & Lindner, 1995; Zoller, 1996).

If this process is not carried out, small businesses may not be able to select a qualified staff. In fact, there may be no selection at all; a business may be forced to hire those people who are available or allow jobs to go unfilled. This is particularly true for small businesses with affirmative action programs. Quite often these programs fail simply because no organized effort is made to develop sources of minority applicants. There is no generally accepted "best" way to recruit prospective employees. However, research suggests that the type and nature of information used in recruiting has a direct affect on who will apply and accept a particular position (Bretz & Judge, 1994). Prospective employees may be recruited from a number of sources, depending on the type of job opening. The following discussion groups recruiting sources as being either internal or external (Table 1 illustrates type of job applicant likely to be recruited by different recruitment sources).

Table 1. Type of Job Applicants Likely to be Recruited by Different Recruitment Sources
SourceUnskilledSkilled Managerial/Professional
Internal Job PostingsXX
Employee ReferralsXXX
Public AgenciesXX
Private AgenciesX
Search FirmsX
Educational Institutions
High SchoolX
State AgenciesXX
Government ProgramsXX
Direct RecruitingX

Internal Sources

Internal Job Postings

Current employees are an important applicant pool for job vacancies in an organization. These vacancies may represent promotions (upward moves) or transfers (lateral moves). In general, all vacancies should be publicized and all employees be allowed to apply for any opening. The consensus among experts is that individuals should be with an organization for at least a year and in their present job for six months in order to become eligible to bid on a vacancy (Klieman & Clark, 1984). Posting and circulating notices of vacancies maximizes employee awareness of job openings. The notice should include such items as title, department, job summary, qualifications, and salary and should be placed on bulletin boards, announced in meetings, and otherwise communicated to employees. Job posting helps to discover talented, qualified persons within an organization and helps in meeting equal employment opportunity (EEO) commitments. Although it is neither necessary nor desirable to give present employees first refusal on all vacancies, a fair and understandable promotion-and-transfer system will build employee trust and enhance morale.

Employee Referrals

Current employees may also make referrals. This is a very effective job applicant source, especially if those making the referrals are good performers. People usually make friends with people similar to themselves. Applicants referred through this process will tend to have a more realistic picture of an organization. Moreover, qualified people may be reached at practically no cost. There are disadvantages, however. People might expect that all referred applicants should receive job offers, when hiring all referrals is likely to be impossible. Employee referral programs may be perceived as discriminatory in practice, therefore, caution should also be taken to ensure that a referral program does not result in discriminatory hiring practices.

External Sources

Media Advertising

One commonly used external recruiting source is advertising through radio, television, and newspapers. Perhaps the most popular method of recruiting is through newspaper and magazine advertisements. How to write a want ad is described in the Filling a Position in a Small Business fact sheet. It should be noted that advertisements that do not disclose the name of the company are typically less effective than other classified advertising methods and should be avoided. Position announcements may also be posted in locations where they are likely to be seen by persons seeking jobs. Through advertising, you can be selective and indicate clearly the nature of a job and required qualifications. Advertising also enables you to target minorities through minority-oriented media, announcements at "grassroots" organizations, and colleges and schools with a large proportion of minority students. If a small business is seeking a particular skill, it should emphasize this skill in any advertisement used. With the exception of newspaper advertisement, the main disadvantage of advertising is that it can be expensive.


Another external recruiting source is walk-ins. This source is relatively inexpensive, and applicants may be filed and processed whenever vacancies occur. Walk-ins provide an excellent public relations opportunity because well-treated applicants are likely to inform others. On the other hand, walk-ins show up randomly, and there may be no match with available openings. This is particularly true for jobs requiring specialized skills.

Public and Private Employment Agencies

Public and private employment agencies are another good external recruiting source. These agencies are established to match job openings with listings of job applicants. These agencies also classify and screen applicants. Most agencies administer work-sample tests, such as typing exams, to applicants. Normally, public employment agencies charge no fees for their services. Public employment agencies are an excellent source of applicants for support-level jobs. Private employment agencies are typically paid a fee for their services if they refer a candidate who is subsequently hired. Businesses that use private employment agencies should attempt to have the agency agree to a minimum employment period during which the fee will be refunded if the candidate hired does not work out; typically three months. Search firms are a type of private employment agency that specializes in the placement of managerial, technical, and professional employees. Employees of search firms are often referred to as "headhunters."

Educational Institutions

High Schools are excellent sources of non-skilled employees. Vocational and technical schools train students on a variety of skills, such as secretarial, electronics, mechanics, data entry, construction, farm operations, and others that can be applied in the work place. Colleges and universities are excellent sources for managerial, technical, and professional employees. All three types of educational institutions have persons on staff that will assist small businesses in recruiting potential employees.

State Agencies

State Employment services and unemployment offices are another source of recruitment. Typically these organizations provide prescreening and testing of prospective job candidates for free. A notable disadvantage of this type of recruiting is that perspective employees may not be truly interested in employment, but may be using the organization for other purposes.

Government Programs

Technical colleges, trade schools and vocational training programs such as those conducted under the Job Training Partnership Act (JTPA) prepare individuals for skilled trades and clerical occupations. Officials of these institutions and programs take a very active role in placing their graduates in suitable jobs. This type of training program provides an excellent applicant pool for small businesses.

Direct Recruiting

Direct recruiting is also effective. When using this method, a small business sends a representative to meet with potential applicants to encourage qualified individuals to apply for jobs. A small business manager, for example, might visit a number of vocational schools to recruit applicants for entry level positions, or the manager might attend professional meetings and trade shows to contact potential applicants for a senior level position. Direct recruiting offers a number of advantages, including selectivity, public relations, and better responses. As would be expected, however, direct recruiting is typically expensive and time consuming.

Recruiting Strategies

The effectiveness of recruiting varies widely across small businesses. Understanding a small business's philosophy is important. Frequently, small businesses are under the mindset that "we get 20 applicants for every job opening, why do we need to recruit?" Often a business that advocates this type of philosophy does not fully understand the importance of hiring an individual with specific knowledge, skills, and abilities to perform the job as described and needed.

Avoiding Liability

Employers and recruitment agencies are governed by laws prohibiting discrimination in employment. The goals of hiring competent workers and staying safely within the law are not mutually exclusive. In fact they reinforce each other. It is quite possible to live up to the letter and spirit of the law and to hire a highly competent work force. Equal employment opportunity requirements must be followed...and will usually result in hiring a more competent workforce. Affirmative action, while not strictly required, usually makes it easier for an organization to avoid legal challenges and usually results in more effective hiring.


Buford, J. A., Jr., Bedeian, A. G., & Lindner, J. R. (1995). Management in Extension (3rd ed.). Columbus, Ohio: Ohio State University Extension.

Bretz, R., D., Jr., & Judge, T. (1994). The Role of Human Resource Systems in Job Applicant Decision Processes, Journal of Management, 20, 548-549.

Klieman, L. S., & Clark, K. J. (1984) An Effective Job Posting System, Personnel Journal, 63, 20-25.

Zoller, C. (1996). Filling a Position in a Small Business, Extension Fact Sheet: Small Business Series, Columbus, Ohio: Ohio State University Extension.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.

Keith L. Smith, Associate Vice President for Ag. Adm. and Director, OSU Extension.

TDD No. 800-589-8292 (Ohio only) or 614-292-6181

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