Who you hire could have a lot to do with who does the hiring. Entrepreneurs who own the business tend to hire very different candidates than HR managers who work at companies they don't own.

Hiring talent remains the number one concern of CEOs according to the 2019 Conference Board Annual Survey. As Peter Cappelli says in a recent article for the Harvard Business Review, businesses have never done as much hiring as they do today. "They've never spent as much money doing it," he writes, "And they've never done a worse job of it."

Using census data, Cappelli found that the majority of people who took a new job last year weren't looking for a new job. They didn't see the job post and apply, they were proactively recruited and convinced to leave their current employer.

So if finding top talent is the greatest priority, why is it that the best don't always get hired?

The Hiring Fallacy

"The best person for the job gets hired" is a fallacy that I held for many years. Until I learned the truth. As a young lawyer I interviewed at many firms before finding one that fit. On several occasions I was told I was overqualified or wasn't a good fit. I didn't find out the truth until many years later from an HR manager at a firm.

When company owners hire, they hire the best: the best fit, the best candidate, the most valuable. Perhaps because, as owners, the success of their employees puts money in their pocket. But law firms, like many large organizations, employ proxies for hiring. They have HR managers and, as I learned later, HR managers don't hire the best, they hire the person less likely to get them fired. 

An HR manager wants good people, but more importantly, they want good metrics. Low turnover, being the often seen as most important, means finding those that fit but aren't too overambitious as to leave. So at a big firm one wants new hires that will stay the course and not bolt for greener pastures. In other words, they're likely to pass on some of the best candidates, which leaves an open opportunity for entrepreneurs looking to recruit talent. For that reason, entrepreneurs should look particularly close at those who report having difficulty getting hired at big Fortune 500 companies.

Hiring the Best

Unlike employees in HR, entrepreneurs should always hire the best, even if that means shorter tenure overall. At a startup, all employees wear multiple hats. This is often because the firm is under-resourced and simply everyone has to pitch in. Entrepreneurs need employees that can rise to the chaos and not help the firm strive, but help the firm thrive.

Jack Welch, the famous Chair of General Electric and one of the most respected business minds of the last century, deployed what I call the "Six or Nine" theory. Welsh pontificated that all leaders should rank their team members as either "sixes" or "nines." To Welsh, a nine (out of 10) was a proactive, self-directed superstar, and a six was an underperforming asset that needed to be culled. He suggests then firing all the sixes and reassigned their salaries, responsibilities and resources.

I used to teach a similar model to founders I've invested in. When hiring, eliminate the sixes and only focus on the nines. If there are no nines, do not proceed with a six. Hiring sixes will only bring down the company culture, and results as well. Wait to find the nine, the benefit will outweigh the delay.