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In this 10th edition of its research series, SCORE examines the challenges small business owners face in their efforts to retain and engage employees, the impact and cost of disengaged employees and what they’re doing to remain competitive in the talent marketplace.
Small businesses are struggling to hire and retain workers, with over 63% having difficulty during the COVID-19 pandemic. Employee engagement is important for a small business's success, and "quiet quitting" can be damaging. Small businesses must exercise creativity and flexibility to motivate and inspire their teams, attract new talent and achieve success.
Key research findings include:
Part 1: Employee-Related Obstacles Endure
- Employee challenges top business owners’ list of concerns: Among their top business challenges, small business owners rank hiring the right talent (60.7%) and retaining/motivating employees (33%) as their number one and number three challenges, respectively. That’s unchanged from fall 2021.
- Hiring and retention have gotten easier for some, but not most: Compared to fall 2021, fewer small businesses are having trouble hiring and retaining employees. For most, however, challenges persist. Indeed, eight in 10 (84.3%) small business employers report challenges with regard to hiring new employees while nearly half (45.8%) say it’s difficult to retain existing staff. Furthermore, nearly two-thirds (62%) say they have a hard time keeping employees engaged and productive.
- Wages and healthcare are major roadblocks: Myriad issues make it difficult to motivate and retain employees. According to small business owners, the top reasons for disengaged employees are wages (59.3%) and healthcare benefits (39.1%), although employers also are struggling with workers who are less motivated (38.5%), workers who have other jobs and/or side hustles (29.7%) and workers who are less qualified (23.4%).
- Detachment is dangerous: Disaffected employees aren’t just unhappy; they’re also a liability, according to small business owners, who say less engaged employees affect productivity (41.7%), the workload (31.2%) and morale (23.7%) of other employees, and even business growth directly (22.8%).
Part 2: Closing the Talent Gap
- Small business employment has stabilized: Despite challenges, employment overall has stabilized, with just 17.5% of small businesses indicating that they have fewer team members now than they did a year ago. That’s down from 26.8% in fall 2021.
- Business owners are feeling optimistic: Optimism among small business owners has surpassed pre-pandemic levels, with nearly three-quarters of small business owners (72.2%) saying they’re very or somewhat optimistic about the future growth of their business compared to 67.2% in fall 2021 and 69% in 2017.
- But pessimistic where employees are concerned: Although small business owners are more optimistic overall, most (59.2%) think employee-related challenges will endure for a year or longer.
- Employees demand more than strong compensation: Most small businesses (59.1%) have increased wages to help them attract and retain workers. But compensation isn’t the only solution. Offering an attractive company culture (46.2%), professional development opportunities (41.3%) and flexible work options (36.8%) are also proving effective.
Small business owners are facing a “nightmare” scenario in finding, hiring and retaining employees, according to new survey data from SCORE, mentors to America’s small businesses and a resource partner of the U.S. Small Business Administration.
According to a recent report from SCORE, six out of ten small business owners are increasing wages to attract and retain workers, but they express concerns about the resulting higher costs. Small business owners are finding that higher compensation alone is not sufficient for maintaining profitability and employee satisfaction, leading them to explore additional strategies such as building company culture, offering professional development, providing bonuses/profit sharing, and incorporating flexible work options. Despite the challenges, employment numbers have stabilized, indicating signs of improvement for small businesses.
The Megaphone of Main Street data report series by SCORE provides insights into small business trends and challenges in the United States. The reports cover a range of topics such as the impact of the COVID-19 pandemic on small businesses, financial management strategies, and marketing tactics. The data is collected through surveys of small business owners, providing valuable information for entrepreneurs, policymakers, and other stakeholders interested in the success of small businesses.
To speak with SCORE’s media relations team or request an interview with executive staff, expert business mentors or small business clients, please email media@score.org. Visit our Media Resources for data reports, FAQs and more.
