I use a phrase that attempts to highlight the importance of hiring decisions in a company: You are what you eat and your company is who it hires. This observation has important implications for your company’s internal operations and appearance.

Simply put, excellent companies are very often comprised of excellent people. Quality in, quality out. From an operational perspective, excellent people tend to both improve efficiency and identify new opportunities. The value of these contributions often can’t be quantified when the people are being hired because excellent people create value that is unexpected. By hiring excellent people you create the potential for great things to happen.

Furthermore, excellent people usually have impressed their previous colleagues and partners, enabling them to lend their reputation to your company. When someone highly talented speaks favorably of their new organization, I assume that the new company is very strong. Top performers generally have credibility within their communities. These perceptions do matter, as reputation can create a virtuous cycle whereby more talent workers and future partners seek out your company.

The opposite holds true on both fronts. Bad hires often become very expensive, as they gum up the operations of a company, are costly to replace and can damage an organization’s reputation in the marketplace.

A lot of entrepreneurs have been told to live by the phrase ‘great is the enemy of good’, meaning that they should settle a little bit in order to move forward. Outside of hiring this is generally a phrase to live by in the early stages of a company. Getting a first version of the product to market that is not yet perfect is usually better than waiting for excellence. However, I believe that this phrase can be a bit dangerous when applied to human resource decisions, especially in a small organization. You should try to build an amazing team from the start, as doing so can expand your vision and help you build something better than previously imagined.

However, in some cases, you may not be able to find the dream team from day one. If this is your situation, you should go with the good team in the short-term, with an eye toward becoming great in the future. Position your company to be able to trade-up in the future – your goal should always be to make your team great.

Ultimately, if your team is great, your company is more likely to be great.

Comments

[Berislav Lopac]

It reminds me of the saying: "Companies don't succeed; people do."

[Evan Rudowski]

Hi Mark,

Thanks for a good blog. We've been enjoying your common-sense advice.

We recently had extended discussions with a reputable VC firm that ultimately decided not to invest. They wished us well and asked us to follow up after we hit certain commercial milestones.

As part of the process we of course introduced the VC to our team. The lead partner was particularly impressed with one role we had created and the person in the role. The VC partner told me he had encouraged another of his portfolio companies to create a similar role.

So guess what? About two weeks after the conversation ended, our team member received an email from the private address of the founder of one of the VC's portfolio companies. The same VC partner is on their board. The founder did not name his company, but said he had heard of this team member through "the grapevine," and said they were looking for someone like this person to fill a similar role at his "well-funded start-up."

It did not take Sherlock Holmes to figure out this person's company, or his connection to the VC. Since this team member does not circulate much in the sector, nor in the geographic area where this company is located, it seems pretty clear that the lead came from the VC himself.

Maybe I'm naive, but I thought we could assume some level of integrity from the VCs with whom we speak -- or is all fair in love and business? Obviously it would not be helpful to the VC firm's deal flow if they were to be seen as likely to poach from companies in which they decide not to invest (presumably this is why they clumsily decided to cover their tracks with an email from the founder's personal address rather than the company itself).

What do you think of this? Underhanded? Or commonplace?

Kind regards,
Evan Rudowski

[Mark]

Evan,

This sounds like an undesirable situation.

This is a reputation based business. As a result, while I suspect that these things happen on occassion, the best firms don't do these types of things if they want to remain on top.

Mark