Chapter 4: To Hire or Not to Hire? Implications of Alternative Staffing Models for Emerging Organizations

In discussing staffing issues in entrepreneurship, we often focus on recruiting permanent employees, although several scholars have acknowledged that perhaps the staffing needs of small and medium enterprises (SMEs) could also be served by alternative means, such as through professional employer organizations or contingent labor. In this paper, we focus on three specific staffing models in SMEs: hiring workers directly, contracting contingent workers directly or through labor brokers such as temporary agencies, and outsourcing staffing entirely to a professional employer organization (PEO). We argue that the choice of staffing model should be driven by five key organizational considerations, including anticipated speed of growth, mental model of the firm, organizational flexibility, time spent on HR issues, and control over internal firm dynamics, and that each staffing model implies tradeoffs among these factors. While SME managers may incorporate speed of growth and mental models in their staffing decisions, many do not consider how their staffing approach impacts their time allocation, flexibility, or control over employee issues. Implications for practitioners and managers are discussed.