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Hiring good employees is a big challenge for anyone starting a business. This is even more of a problem in small cities, where the talent pool may not be large enough. A study from Karnataka finds startups can get around this problem by using existing personal and professional networks to find future hires.

The study’s authors, Kumar Mukul of Institute of Management Studies and Research and Gordhan K. Saini of Tata Institute of Social Sciences, interviewed founders of six startups in Hubli-Dharwad, an emerging startup hub in Karnataka.

Startups struggle to attract talent as they are not yet well-known, can’t pay fat salaries, and are a career risk given they could shut shop anytime. In a 2018 survey of 170,000 engineering graduates, only 10% wanted to work in startups. In small cities, the most talented leave for metros and it’s difficult to convince candidates from metros to relocate to small cities.

The study finds that these companies can’t afford to invest in human resources staff to recruit candidates, so founders take on the job. Instead of expensive methods such as newspaper ads or campus recruitment, founders put the word out among their networks. They even incentivize existing employees to refer potential hires.

Since founders trust these contacts, they also trust the candidates they refer, the authors find. Founders who are better networked are able to find good talent quicker. The strong ties between the founder, their contact and the candidate help future hires look past a startup’s lack of reputation and resources.

For startups, it is important to find employees who quickly adapt to changing demands, can take on multiple responsibilities and who share the founder’s vision. Hiring through personal networks makes it easier to filter for such soft qualities, say the authors.

Also read: “Talent acquisition in startups in India: the role of social capital"

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