William A. Sahlman: Challenges of Hiring Good People | Summary and Q&A

May 24, 2011
Stanford eCorner
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William A. Sahlman: Challenges of Hiring Good People

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In this video, the speaker discusses the challenges of hiring and the importance of selecting the right people for a company. Bad hires can have detrimental effects on a company, both financially and in terms of decision-making. Therefore, entrepreneurs must be diligent in their hiring process and quick to identify and address mistakes.

Questions & Answers

Q: Why is hiring considered a risky business?

Hiring is considered a risky business because there is always a level of uncertainty in selecting the right candidate. Since we don't want to interview numerous individuals for a position, we tend to assume that the person we choose is the right one. However, this approach is not foolproof, and there is always a probability of hiring the wrong person.

Q: What percentage of mistakes do entrepreneurs typically make when hiring?

It varies for different individuals, but it's important to reflect on our hiring history and evaluate the mistakes made. While there is no concrete figure, the fact remains that hiring is a risky venture, and entrepreneurs should be prepared to make mistakes in their hiring decisions.

Q: What are the potential consequences of hiring the wrong person?

Hiring the wrong person can have significant repercussions for a company. In a study conducted with young presidents' organization people, it was estimated that a bad person hire could cost around $500,000. However, the impact can be even more severe, potentially leading to the downfall of the entire company. When bad people are in positions of power, they tend to make poor decisions and hire other inadequate individuals, which can ultimately lead to the company's demise.

Q: How can entrepreneurs mitigate the risk of hiring mistakes?

Entrepreneurs must be proactive in minimizing the risk of hiring mistakes. It is crucial to dedicate sufficient time to the hiring process, ensuring that thorough evaluations and assessments are conducted. This includes conducting interviews, checking references, and conducting comprehensive background checks. Taking these measures can significantly reduce the likelihood of making a hiring mistake.

Q: What is the significance of recognizing and addressing hiring mistakes?

Entrepreneurs need to be aware that they, too, can make hiring mistakes. It is vital to recognize these mistakes and take swift action to rectify them. Bad hires can lead to detrimental effects on a company, and leaving such individuals in positions of influence can result in further poor decision-making and the hiring of more unsuitable employees. By recognizing and addressing these mistakes promptly, entrepreneurs can mitigate potential damage to their organization.

Q: Can people change if given the opportunity?

While it is essential to treat employees with respect and provide them with opportunities and feedback, it is also crucial to recognize that people generally do not change. Rather than relying on the hope that individuals will change, entrepreneurs should focus on recruiting and retaining great people from the outset. This approach ensures that the organization can thrive and avoid the negative consequences associated with bad hires.

Q: Why is it important to be ruthless in the hiring process?

The success and well-being of an organization heavily depend on having a team of exceptional people. Therefore, entrepreneurs must adopt a rigorous and unforgiving approach to the hiring process. By being ruthless, entrepreneurs can ensure that only the most qualified and suitable candidates are selected, minimizing the risk of bad hires and setting the company up for success.

Q: How should entrepreneurs handle employees who are not meeting expectations?

Entrepreneurs should handle underperforming employees with respect and fairness. Providing them with feedback and opportunities to improve is essential. However, if efforts to rectify the situation prove unsuccessful, entrepreneurs must make the difficult decision to part ways with employees who consistently fail to meet expectations. The overall success of the organization should take priority, and holding onto employees who are not performing can compromise the company's potential.

Q: How can entrepreneurs maintain a focus on hiring great people?

To maintain a focus on hiring great people, entrepreneurs must prioritize the hiring process and invest ample time and resources into it. This includes implementing a comprehensive screening process, conducting thorough interviews, and seeking diverse perspectives when making hiring decisions. Additionally, entrepreneurs should establish a strong company culture that emphasizes the importance of hiring exceptional individuals, thus promoting a collective commitment to maintaining a high standard of talent within the organization.

Q: What is the key takeaway for entrepreneurs regarding hiring?

Hiring the right people is crucial for the success and sustainability of a company. Poor hiring decisions can have significant financial and operational implications. Entrepreneurs must recognize the risk involved in hiring and be diligent in their selection process. They should be prepared to address any mistakes promptly and be willing to make tough decisions when necessary. By prioritizing the recruitment of great people, entrepreneurs can cultivate a strong and high-performing workforce, ensuring the long-term success of their organization.


The process of hiring can be a risky venture for entrepreneurs. Bad hires can have severe consequences, with potential financial costs and a negative impact on decision-making. Entrepreneurs must dedicate ample time to the hiring process, diligently evaluate candidates, and be prepared to address any mistakes promptly. By recognizing the importance of hiring great people and being ruthless in the selection process, entrepreneurs can build a strong, high-performing team that will drive the success of their organization.

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