Small firms serve as the backbone of entrepreneurship and are essential for stimulating local economic activity. They also present a unique opportunity to foster a work environment that favours and promotes learning, unlike many established enterprises that are bounded by legacy systems and hierarchical structures. A healthy presence of start-up ventures in local communities is critical for empowering the next generation of entrepreneurs and bringing vibrancy and originality to an economy that’s becoming increasingly homogenized. However, such a presence in the economy hinges upon the ability for small businesses to grow, which often critically depends on their ability to attract talent. Therefore, assessing the type of human capital available to start-ups is critical to understand the unique challenges they face during economic downturns.
Amidst the current COVID-19 crisis, both established and start-up firms have undoubtedly faced extensive challenges as they navigate the ever-changing business realm. The new talent acquisition landscape has proposed significant challenges for small, young firms in particular, partly due to higher-quality candidates turning to more mature firms. Such a desire to find employment with more established firms, a so-called “flight to safety”, has led to a deterioration in both the quality and quantity of human capital available for start-ups. According to a study on the flow of capital to start-ups published by Harvard Business School, individuals seeking jobs amidst the COVID-19 pandemic have, on average thus far, shifted their searches toward larger firms and away from early-stage ventures. In turn, start-up firms have experienced a decline in the number of applications per job posting relative to larger, more established firms. This is ultimately driven by higher quality and more experienced job seekers looking for a less risky employment opportunity.
Small businesses are facing less skilled talent pools, and, thus, are at a disadvantage when it comes to hiring.
Global talent acquisition and management firm Alexander Mann Solutions suggests that the quality of a new hire remains a top priority for the majority of businesses. Small businesses are facing less skilled talent pools, and thus are at a disadvantage when it comes to hiring. They are often forced to scale back hiring to avoid bringing on potentially unqualified candidates and are in turn left with unfilled positions. This suggests that the labor demand from emerging firms is quite sensitive to talent quality.
Korn Ferry acknowledges the importance of acquiring top talent to prepare for success in the post-Covid era. With fewer opportunities to acquire such talent, driven by workers’ “flight to safety”, start-ups are facing unprecedented challenges that could negatively impact their success for years to come. By considering these with respect to talent acquisition, as well as acknowledging the importance of small firms in local economies, society can take steps toward appropriately supporting such businesses with the necessary resources to acquire higher quality talent and ensure survival beyond the COVID-19 crisis. Critically analyzing these concerns is imperative to ensuring that local economies continue to thrive, and young start-up firms remain afloat during such times of tribulation.
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