Every Manager Should Want to Hire the Best -- but Not Every Manager Does

For David Gardner, the Rule Breaker Investing podcast isn't so much a monologue as it is an extended chat with you, his listeners and readers, which is one reason he ends every month with a mailbag episode -- so that he can bring your viewpoints and questions directly into the conversation.

In this segment, listener Sam offers up some thoughts and elaboration on a topic that David discussed a few weeks back -- the idea that "As hire As, while Bs hire Cs, and Cs hire Ds." How true is it, how much of an oversimplification is it, and -- to the degree that it's accurate -- what makes it so? David brings in longtime Fool Mark Brooks to help him develop an answer. They also talk about what the Fool does to improve its odds of getting A players -- and why it's OK to get some Bs.

A full transcript follows the video.

10 stocks we like better than WalmartWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 4, 2018The author(s) may have a position in any stocks mentioned.

This video was recorded on June 27, 2018.

David Gardner: Rule Breaker Investing mailbag Item No. 5, and this one is for the entrepreneurs out there. One of the things that we're always going to do on this podcast, beyond just talking about investing, or especially for our mailbag inspirational stories, is speak to the entrepreneurs, speak to professionals, people working for profit, not for profit, and think, how can we do what we do better?

I want to invite my friend, Mark Brooks. Mark, talk about working at The Motley Fool a long time -- Mark, how long have you been at The Fool?

Mark Brooks: 13 years last week.

Gardner: That's pretty awesome. I really thank you for 13 wonderful years together. Mark, what do you do at The Fool these days?

Brooks: Gosh, it's hard to describe. Management stuff. [laughs] I help make sure our priorities are set correctly, that we're resourcing projects that are important and not ones that aren't, and that we're getting the best investing advice in front of our members.

Gardner: To that end, you've been involved a fair amount over your 13 years in hiring and bringing people here into The Fool. A few weeks ago on the podcast, I used the old saw "As hire As while Bs hire Cs and Cs hire Ds."

Brooks: I'm familiar.

Gardner: What do you think of that line on its own? Agree, disagree? What are your thoughts?

Brooks: I think I agree. I think it's hard to hire up for people. So, yeah, I think there's some truth to the old saw there. There are exceptions both ways, obviously, but, yeah, I agree.

Gardner: I do, too. It's not like it's a unique Motley Fool point, this is an old saw, as we've established. But, if you believe in it and agree with it, it does have you thinking about, who are your A players at your company of whatever size and trying to make sure they're involved in the hiring. I think that you've been one of those A players who's helped us, and you've helped those around you to find the good people. And we have really good people here at the company.

Now, Sam wrote in in response. A couple of thoughtful questions. I'd love to hear your takes on a couple of things Sam said. Mark, he said, "Great podcast this week. Your point about As hiring As, Bs hiring Cs, Cs hiring Ds, an interesting one that spawned a couple of thoughts.

"No. 1," Sam said, "I believe there's a third reason why this happens that might even be the most important. It's that As are able to convince other As to work for them, and that the prospective employee wants to go to work for an A. I think in hiring, convincing someone great to work for you, and not somebody else, can be harder than simply finding a great person."

Brooks: Yeah, agree. Birds of a feather flock together. I think As tend to run in packs. I totally agree with Sam's point. The folks who are referrals at The Fool tend to be really great hires, generally speaking, especially when they come from our A players, from our high-performers. So, yeah.

Gardner: Awesome. "No. 2," Sam said, "this is a significant simplification of the talents and usefulness of employees. Of course, you realize this," he says. You and I agree. This is fairly reductionistic, to reduce people to letters and then say it all works this way.

Brooks: Sure, yeah.

Gardner: So, here's a whimsical question. I didn't have an answer to this. Mark, you're smarter than I am, so maybe you're ready for this. I know you're ad-libbing here. He said, "Also, how do the B employees ever get hired?" [laughs]

Brooks: Man, that's a really good question. I mentioned before that there are exceptions. Some of the most effective hiring processes we've had at The Fool are when we can work alongside someone before we bring them on. In a very condensed interview format, it can be very difficult even for As to determine who's an A vs. who is a B.

Gardner: Good point.

Brooks: A lot of times, it becomes very evident through the interview process, those sorts of things. One thing that we've started doing at The Fool is trying to get projects out there to prospective employees in the area in which they'd be working, and actually paying them to do it. On the tech side, we'll have an actual business problem that we need to solve, and we'll send it out to a prospective employees and say, "We're going to give you $500 to solve this problem. Please submit your response." It's not these theoretical coding questions, or anything like that. We're actually giving them a problem that we need to solve as a business and paying them to do it.

I have to tell you, $500 at the beginning of the interview process lost is a lot less expensive than hiring someone who continues to under-perform and we have to take action later. We've found that to be effective. Any chance you have to work alongside someone and see them in that element, working in that subject matter, leads to a much better hiring decision, I think.

Gardner: That's tremendous. I guess I would supplement by also saying to Sam, neither Mark nor I, nor anybody here at The Fool, walks around putting letters on everybody, saying, "As hire As and Bs hire Cs and Cs hire Ds." It's definitely an oversimplification. The way that Bs get hired in the first place is that sometimes Cs end up being Bs, and sometimes As turn out to be Bs. There are Bs everywhere, if you even want to use these letters.

Brooks: Bees! There are bees everywhere! [laughs]

Gardner: [laughs] Sam's last point, Mark, and then I'll let you go: "I'd like to expand this concept to companies as a whole," he writes. "A companies hire A employees. B companies hire C employees. C companies hire D employees. I believe this gets at a very underrated advantage that great 'overvalued' companies," we would call those Rule Breakers on this podcast, "have, which is that they have and are able to consistently hire great employees, sometimes even at below-market prices, because those people want to work on interesting challenges with awesome people.

"I think profound investing insight could be gleaned from talking to some college students at high-quality colleges and asking them where their most talented friends are working or want to work." Sam signs off with, "Fool on!" Mark, closing thoughts?

Brooks: Fool on, Sam! I think that's true. I think we may look back on the last five to ten years and see what has happened, in terms of talent coming out of universities, or directly out of high school, with Silicon Valley and the start-up culture. I think a lot of people will go off and try to solve interesting problems with companies that will rapidly become insolvent. Part of our job in Rule Breaker s and in our other services is to suss out which is which. But, I think it would be interesting, and my hope for those young kids is that, even going to those companies that end up crashing, they learn valuable lessons about how to run a profitable business, etc.

I think it will be interesting to look back. I think Sam is largely right. I think, right now, you have a lot of companies, who will eventually be insolvent, who are hiring some really great talent. What those folks learn from that, and what they take to their next employer, I think, will be an interesting thing to look back.

Gardner: Awesome. Thank you, Mark. Similarly, Sam -- I said this to our summer interns this summer -- as you graduate, if you feel prepared and equipped and you want to take the risk, find the bleeding edges of technology across all industries, and just try to find yourself there.

At the age of 52, now, back when I was coming out of college, the internet was just starting. People used to use the phrase "internet time." The idea was, a single month at an internet company was worth a year if you went to work for, I don't know, General Electric or Bank of America. The idea of internet time, if you buy into that, suggests that your time is more valuably spent when you're innovating, even, Mark, if those companies seem to be going out of business, [laughs] which sometimes they will, I guess.

Brooks: Yep, true.

Gardner: Mark Brooks, thank you!

Brooks: Happy to be here! Thanks, David!

David Gardner has no position in any of the stocks mentioned. Mark Brooks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.