Small Business: It’s incentives that secure the talent

“A company founded by an entrepreneur looking for the talent at senior level to take it to the next stage is a very attractive scenario and one which is highly prized,” he said.

While most SMEs can compete on the basic salary element, they often have difficulty matching fringe benefits such as non-contributory, defined benefit pension schemes, he says. To compensate, they need to revisit the issue of equity.

“The more open-minded and modern SMEs will look at their equity. If they are taking on a commercial director with a target of doubling turnover in three years they will offer him real equity. That’s a thousand times more attractive to a candidate than paper share options.”

Many of them could do this but the trouble is that they won’t. “The problem is that equity is in the blood here and too often people won’t relinquish it,” said Carolan. “Owner-managers need to see that if they want exceptional talent, they are going to have to take a more enlightened approach to getting it.”

Mike McDonnell, director of the Chartered Institute of Personnel Development, says larger companies can afford spiralling wage costs as the supply of suitable candidates constricts simply because labour accounts for a smaller proportion of their overall costs.

However, he does not see a return to the heyday of five years ago where certain companies, particularly those involved in IT, were soaking up all the available talent. To improve their chances of securing suitable applicants however, SMEs need to market themselves better.

“A lot of companies, particularly small firms, don’t appreciate the real change that has taken place in the way people view work,” McDonnell said. “Companies pay lip service to concepts such as life-long learning but the job for life is no longer an option. People are going to move around more and therefore continuously need to upgrade their skills.”

The expanding economy should present a terrific opportunity for small firms that can offer a candidate more challenges and responsibility earlier in their career. “The problem is that SMEs are simply not exploiting this enough when recruiting,” he said.

This means pointing out that, yes, the candidate could go to a large multinational and probably get paid more initially.

“Or they could spend three, five or seven years with your firm and get wider practical experience, in both technical and soft skills, enabling them to leave with a vastly enhanced CV at the end of it,” he said.

Acknowledging the expectation that it is likely people will move on after a number of years does no harm.

“They are going to leave anyway but too many SMEs put their heads in the sand. They know they can’t hold on to people but they aren’t doing anything about it.”

Too many SMEs “think small and act small” warns Gerry McLarnon, an independent human resources consultant. “Very often in an interview the SME owner-manager will say no to something, such as continuing with a candidate’s VHI cover, without even thinking about it,” said McLarnon. “They dismiss it simply because they never offered it before or they fear that if they offer it to X, it might offend Y— it’s small-minded.”

McDonnell says it beggars belief that smaller companies are not more innovative when it comes to recruitment.

“If they are investing in a €1m machine, you can be sure they wouldn’t weigh up the benefits on the back of an envelope. Yet this is often the approach they take to people.”

Neither is the recruitment process over once the contract has been signed. Between 60%-70% of people who leave jobs within the first few weeks do so because of insufficient induction. In viewing recruitment as a chore, SMEs often forget its significance in the life of the individual.

“If a new employee turns up and finds nobody is expecting them you’ll have that person questioning their decision to join at the very time they need reassurance,” said McDonnell.

John Barry, the managing director of Sigmar Recruitment, says money is far from the only weapon in a company's armoury when it comes to enticing staff. He identifies four main factors influencing the decision to change job: money, career development, location and the calibre of staff with whom they are likely to work.

“One of those things is not normally enough but if two of those things are improved by moving, they will go,” he said.

But that doesn’t mean employers can scrimp on the money in the hope that the non-financial factors will make a position desirable. Money is still a crucial factor, says Sylvia Harrison, managing director of Head Hunt International.

“People are so maxed out with mortgage repayments that it makes them very cautious about moving jobs,” she said.

There is little doubt that expansion-minded smaller companies are again finding it tough to recruit the right staff. Greg Clarke, managing director of Digicom, an audio-visual and office technology company, says this year’s recruitment bill will be the highest in the company’s eight-year history. Digicom has taken on four new staff since January and is looking for four more.

“There have been candidates we have interviewed and been impressed by, but when went back to them they were already gone.” he said.

It is a refrain likely to be heard more often in the future.