Need Three New Employees? Hire One Who’s Great.

Most CEOs agree that one of their most most important jobs is to identify talent. When I think about talent I often recall a “Corner Office” interview in the New York Times with Kip Tindell, CEO of the Container Store.

Here’s the paragraph that’s stuck with me:

One great person could easily be as productive as three good people. So we try to pay 50 to 100 percent above industry average. That’s good for the employee, and that’s good for the customer, but it’s good for the company, too, because you get three times the productivity for only two times the labor cost.

I can easily see how this applies in a retail environment, particularly if you’re talking about the difference between a minimum wage employee and one paid double that. My question is, does this apply to ad agency new business?

I think it can, if you – the CEO – focus on identifying the best talent.

  • Let’s say you’re thinking about creating a new business team out of existing account service personnel. They’re all likable and gregarious; everyone thinks they’ll do great. Their all-in cost is $50,000 each, including salary and benefits. They don’t know much about sales, but have some knowledge of the various industries you have expertise in. They’re young and eager, and relatively inexpensive, so you’re okay giving them a chance to show what they can do.
  • On the other hand, you have a prospective external candidate who will cost you $100,000 a year. She has worked at two different agencies over the last ten years, and has demonstrated her ability to work in related industries, has good sales skills, and can orchestrate a pitch.

Who do you hire?

Sure the external candidate is twice as expensive as any one individual candidate, but will she be three times as productive? I’d say she will, and perhaps in ways that you wouldn’t even think of.

For example, many less experienced new business people will spend inordinate amounts of time researching a long-shot prospect. They’ll argue that they need this information so they can relate to them once they get them on the phone. On the other hand, the more experienced person will quickly and efficiently do the research to identify potential business issues they’re facing, and will then pick up the phone, engage the prospect with relevant questions and concise insights that reflect your agency’s capabilities.

Good sales people are hard to find: most employers I know tell me that their success rate on new sales hires is 1:2 (best case) and 1:4 (worst case). So, if you go the “hire three” route, you’re most likely to end up with one who’s good. So, your decision really is between promoting one good person (but you don’t know which one), versus hiring one proven, great person.

I’d go with experience and proven results and productivity every time.

What do you think? Do you believe in Mr. Tindell’s approach?


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