Good morning! Paolo here.
Warren Buffett’s management philosophy is just four words: “Hire well, manage little.”
He’s not the only prominent executive who’s emphasized the importance of smart hiring and the resulting long-term gains. In a LinkedIn post earlier this week, Netflix cofounder Marc Randolph outlined an oft-overlooked recruiting mistake: hiring too quickly.
“Hiring too fast is like skipping steps in a recipe,” Randolph wrote. “It might seem efficient at first, but the end result can be disastrous.” His words are particularly striking given recent layoffs after companies over-hired during the pandemic and as, more recently, they rush to acquire talent well-versed in generative A.I.
Usually, companies hire too quickly because they misconstrue thoughtful, slower, deliberate recruiting for stagnation yet view rapid hiring as a show of company growth, especially at startups.
“Almost every company hires too fast, thinking: ‘I have the resources, I should use them,’” Randolph wrote. “But 99% of companies that go out of business do it by running out of money. Only 1% do so because they didn’t hire enough people.”
The Netflix cofounder isn’t wrong to emphasize the financial costs of poor recruiting. According to data from the Society for Human Resource Management, hiring a standard employee costs companies $4,700 and over $28,000 for executives. And that’s before accounting for wages and benefits costs.
Managers might also be gung-ho about increased hiring because they’re eager to offload small tasks. Leaders who take this approach want to hire “henchmen” rather than coworkers, Whitney Johnson, an executive coach, writes in Harvard Business Review.
Randolph encourages managers to instead, try to solve their own problems. For managers of larger teams, there’s always the option to “quiet hire” among existing talent rather than finding someone new, a trend my colleague Jane Thier aptly points out.
Randolph offers these three parting tips for hiring at the right pace.
1. Don’t hire someone unless you’re sure you need them. Doing so can drive “just plain dumb” decisions.
2. When it comes to hiring, patience is a virtue. “Wait until it’s painfully obvious that you’ve got a huge capability hole that’s hurting your ability to execute.”
3. Select employees who balance your strengths and weaknesses once it is time to hire. “Having one person [who] compliments you is better than three that think the same way you do.”
Paolo Confino
paolo.confino@fortune.com
@paolo1000_
Reporter's Notebook
The most compelling data, quotes, and insights from the field
The tech publication CNET started using A.I. to write articles. Now its newsroom is unionizing and demanding some of the first job security provisions specifically addressing the technology.
“Its employees could become one of the first unions to force its bosses to set guardrails around the use of content produced by generative A.I. services like ChatGPT. Any agreement struck with CNET’s parent company, Red Ventures, could help set a precedent for how companies approach the technology.” —Wired
Around the Table
A round-up of the most important HR headlines, studies, podcasts, and long-reads
- JPMorgan monitors employee attendance data in a dashboard and feeds it to senior management. Insider
- The number of self-employed workers increased by 2.2% last year, mostly on the backs of women eager to avoid toxic workplaces. Bloomberg
- AT&T told employees they must return to the office three days a week despite reducing its overall office space. Washington Post
- Microsoft CEO Satya Nadella says A.I., like all disruptive technologies, will lead to “real displacement” in the job market. CNBC
Watercooler
Everything you need to know from Fortune
WFH high horse. In an interview with CNBC, Elon Musk continued criticizing remote work, accusing the “laptop class” of enjoying privileges frontline workers don’t have. “You’re going to work from home, and you’re going to make everyone else who made your car come work in the factory?” —Nicholas Gordon
Parenting woes. In an unusual development, working fathers are more likely than working mothers to fear that parenthood could harm their careers. —Orianna Rosa Royle
Twitter mea culpa. Elon Musk acknowledged that the “baby got thrown out with the bathwater” during the mass layoffs he conducted at Twitter. —Eleanor Pringle
Built on diversity. Target CEO Brian Cornell says diversity has fueled much of the company’s growth in recent years because people of all stripes can “walk into a store and [they] feel at home.” —Alan Murray and Michal Lev-Ram, Listen time: 34 min
This is the web version of CHRO Daily, a newsletter focusing on helping HR executives navigate the needs of the workplace. Today’s edition was curated by Paolo Confino. Sign up to get it delivered free to your inbox.
