Last year, when Taiwanese electronics behemoth  Foxconn announced plans to build a plant in Wisconsin and employ 13,000 people, Erik Anderson laughed. "I don't know where they expect to find those 13,000 people," he says. "They're not here."

Anderson is CEO of Jefferson, Wisconsin-based Basin Precision Machining, a supplier of parts for customers like Harley-Davidson. Recruitment "has always been a challenge, but it is beyond the pale at this point," Anderson adds. Wisconsin's 2.9 percent unemployment rate "sounds impossible, but if you're looking to fill positions, it feels pretty real."

With the national unemployment rate reaching a 17-year low, almost two-thirds of fast-growth entrepreneurs cite finding and retaining good people as their greatest obstacle to growth, according to a survey of 2017 Inc. 500 companies. Small and midsize companies such as Basin, which employs about 200 people, are disproportionately affected.

Smaller employers struggle with hiring for several reasons, among them having little money to make competitive offers, lack of a visible brand, and shallow referral networks. With fewer incentives to offer, luring day-one-ready workers is a challenge. Many smaller companies can't afford to spend six months training a new hire. And with no HR staff, CEOs often add hiring to their own already overflowing plates.

Some businesses have coped by lowering their sights. Small companies have begun weakening credential and college requirements, according to job-posting service ZipRecruiter. That may be necessary, but it can sometimes backfire, signaling to top candidates that they are overqualified. "I never think it is a good idea to lower your standards," says Bill Driscoll, district president for Accountemps, a division of Robert Half. "In business, you should always be shooting to attract and retain the best."

Of course, ramping up the STEM curriculum and boosting the number of H-1B visas would benefit many companies. And preserving the Affordable Care Act could make it easier for corporate employees with preexisting conditions to jump to small businesses without comparable benefits. But those changes are outside of entrepreneurs' control. So founders need to get creative. 

Ted Fujimoto got plenty creative back in the 1990s when he moved his systems integration and design company from Silicon Valley to his hometown of Napa. The new location was an agricultural Eden but an employment desert. "We couldn't even hire administrative assistants with the skills we needed," says Fujimoto. "We were thinking we'd probably have to move again within a year."

The solution: Together with the leaders of five other technical transplants, Fujimoto approached the Napa Valley Unified School District about launching a public school whose students would graduate with the kinds of teamwork and problem-solving skills the employers required. That venture didn't just produce the talent pipeline they were searching for; it also became the seed for one of Fujimoto's next entrepreneurial endeavors, the New Tech Network, which comprises over 200 public schools around the country that replicate his Napa model.

Most founders won't go as far as Fujimoto to develop talent. But they have another option: lure it from big companies. Fortunately, many employees are already disposed in their favor. Sixty-four percent of job seekers prefer small to midsize companies over large ones, according to ZipRecruiter. And, in 2015, LinkedIn reported that people leaving companies with more than 5,000 employees were more likely to go to com­panies with fewer than 500.

ZipRecruiter's respondents most often cited the close-knit, familial feel of small companies to explain their preference. Other motivations include "the notion of access to leaders, of seeing more of the business, the ability to learn, and the ability to see the impact that their job has on the enterprise," says Bob Rosone, managing director with Deloitte Private at Deloitte, which recently surveyed private companies about their workforces. "That is a pretty impressive value proposition for someone weighing a fast-growth innovative company against a larger corporate enterprise."

Technology may also shake free some large-company workers. Corporations have adopted automation much faster than small businesses, which has negatively affected their employees' job security, according to a survey by MindEdge, a learning organization consultancy. By contrast, just 9 percent of small businesses investing in automation intend to reduce staff as a result, according to the National Small Business Association.

Basin Precision Machining has used technology to replace some jobs. But with the business growing rapidly and experienced machinists retiring, its recruitment efforts remain in hyperdrive. The company has improved pay and benefits; significantly beefed up training; and grown the HR staff from one person to five. It recently hired a former recruiter for the Marines. "We figured if he could recruit someone to go to Afghanistan," says Anderson, "he can probably recruit someone to come to my machine shop."

From the June 2018 issue of Inc. Magazine