Does effective hiring matter more for large or small companies?

Anyone who has worked in both large and small organizations can attest to how radically different hiring practices can be between them. In large companies, a dedicated talent acquisition team handles the bulk of the hiring process, insulating managers and business leaders from much of the process. As such, they can partake more readily in high-volume recruiting. In smaller companies, however, hiring is almost always a group effort, often with much involvement from the business owner or CEO. But at which organization size does effective hiring matter most, and who should be prioritizing effective hiring to the greatest extent?

In this article, I will outline the differences, similarities, and overall importance of effective hiring based on company size, along with practical recommendations.

Hiring in Small Companies

Hiring in small companies feels palpably more important than in larger companies. Senior leadership typically takes great interest in hiring decisions, even for relatively junior employees. Naturally, hiring happens less frequently at smaller organizations, and the smaller the organization, the more infrequent hiring becomes. Additionally, HR teams in smaller organizations are disproportionately smaller and unspecialized, often comprising one or two HR generalists rather than talent acquisition specialists. As a result, smaller organizations often rely heavily on outside agencies and recruitment consultants to find applicants, lacking the resources to do this in-house.

Given that individual hires often represent a fairly large proportion of the workforce, specific hiring decisions are naturally of greater importance and risk than in larger organizations. A single mid-senior level mishire could be a catastrophe for a small organization, potentially even an existential risk to the viability of the business. Even relatively junior staff have a disproportionate impact on the business, as they are often relied upon to complete many disparate tasks. By extension, this also means that good hires can be particularly transformative for smaller organizations, helping take organizations to the next level.

However, smaller organizations have many challenges which larger organizations simply don’t face. Without a dedicated talent acquisition team, there is often less expertise available to help maximize the quality of hire. This, combined with the fact that smaller organizations inevitably receive far fewer applications, makes it practically more difficult to recruit good people. Additionally, hiring managers and senior business leaders take a more active role in the selection decision, taking them away from their main duties and creating an opportunity cost. Given that business leaders are rarely experts in employee selection and assessment, making effective hiring decisions is usually more challenging.

Hiring in Large Companies

Hiring in large organizations is a very different endeavor, as the hiring machine is far more standardized and well-oiled. A dedicated talent acquisition team, supported with extensive HR tech, can create quality shortlists for any role, requiring comparatively little input from hiring managers. Many larger organizations even have occupational psychologists on staff who are able to employ the most advanced and cutting-edge insights into employee selection and psychometric tests. Overall, this makes it easier to identify top-performing candidates and reduces the probability of making a mishire.

However, hiring does certainly feel more mundane and process-driven in larger organizations, as individual hires simply matter less in this context. In larger organizations, roles are more strictly defined, and the scope of work is inherently more narrow, limiting the impact of mishires. Although a senior mishire could result in serious damage, material or reputational, the size of the organization largely insulates it from extreme effects. Similarly, ultra-high performance is less transformative in larger organizations, as their impact is often only felt locally and not organization-wide.

The biggest advantage that large organizations have over smaller ones is the volume of applications they receive. The more applicants that apply for a role, the more selective the employing organization can be, enhancing the quality of hire. When being highly selective, even relatively ineffective selection tools can offer considerable return on investment, as you can select the very highest performers available to you. Nowhere is this more potent than in the early careers space, where larger companies are typically inundated with applicants.

Conclusion and Recommendations

Although effective hiring is the cornerstone of organization performance at any size, it just matters more in smaller organizations. Low performers have nowhere to hide in smaller organizations, and the impact of their underperformance has far-reaching consequences. Likewise, high performers shine brightly in smaller organizations, whereas they often remain obscured in larger ones. Consequently, the stakes are simply higher in smaller organizations, and small business leaders should keep this in mind.

Small businesses should therefore do everything they can to ensure quality of hire, and there are a number of approaches to take. Firstly, sending hiring managers on interview training will increase the efficacy of your interviews, improving the quality of hire. Next, the adoption of pre-employment tests can dramatically improve the quality of screening decisions, especially for more junior staff. Lastly, spend time (and potentially money) on building internal expertise in employee selection and assessments, keeping up to date with hiring trends and best practices, leveling the playing field between large and small companies.