The Right People-Why one great hire is better than three good ones.

For 2000 and 2001, FORTUNEmagazine chose the Container Store as the number one firm on its list of Best Companies to Work For. The Container Store was number two in 2002, beating GE, Microsoft, and Cisco Systems. A 25-store retail chain that sells various products that helps you organize your home, it was launched 23 years ago by Kip Tindell and Garrett Boone, whose philosophy in hiring is simple: they firmly believe that one great person can replace three good people.

FORTUNE SMALL BUSINESS

By Verne Harnish

To attract great people, the Container Store pays higher salaries than typical retailers. Because this company isn’t a corporate behemoth with a matching budget, it manages this by hiring proportionately fewer people. It also provides them with 175 hours of training their first year vs. the seven hours that are standard in the retail industry, given them an incentive to stay.

With thousands of talented people hunting for jobs in the wake of the recent wave of corporate downsizing, it’s easier to attract talent now than at any time in the past three years. As a result, many managers are asking themselves if they have the right people on staff. It’s not hard to determine if you should try to trade up. You’ve got the right people if you would rehire each person on your team if given the opportunity and if each of them has the potential to be the best in his or her position — or another one — within three to five years. If that’s not the case, replace them with more suitable people. If you want to build a sustainable company, you need "A" players on your team. Don’t settle for anything less.

Hiring: Selling the Vision

Even the most talented managers have had the experience of hiring someone who seemed perfect for the job but turned out to be disappointing. What many discover over time is that hiring is a numbers game. The firms that attract the best people tend to have a lot of people applying for each position. The general quality of the pool is so high that if you had to choose someone by throwing a dart at a list of names, you’d likely wind up with a winner. Because managers at these firms interview so many great candidates, they know how well each applicant compares to his or her peers and can make an informed decision.

So ask yourself the question: did you get a lot of high quality people to apply for the last opening at your firm, especially if it was an executive position? Generally speaking, you or your headhunter should have been able to choose from an initial pool of 50 high quality people. If that wasn’t the case, you may need to ask colleagues at fast-growth firms to refer you to a new headhunter.

Those who rely on their networks to find qualified candidates should make sure they’re tapping "A players" only. Talented people tend to surround themselves with people who are similar. This is why a firm that has established a stellar reputation in its industry (or even in a particular town if you primarily hire locally) is able to continue to hire outstanding people.

To get started on your search, list at least 10 people (20 is best) you could e-mail tomorrow who would have contact with the kind of person you want to hire. Send them a two-paragraph message describing your firm, the kind of person you want to hire, and the type of position you want to fill. Make it a point to call them as quickly as possible and let them know you’re sending over the summary e-mail. Follow up a week later by phone. This, by the way, is what headhunters essentially do, so if you’re unwilling to do this, hire a headhunter.

Whether you’re sending out an e-mail, placing newspaper ads, using a headhunter, or utilizing online services like Monster.com, make sure you’re truly selling the company and its vision. You need to market your firm to potential employees with the same vigor you use to attract potential customers. One client simply changed its ad from the first one to the second one below and increased the number of job applicants three-fold:

>Advertisement #1

Exceptional opportunity! Rapidly growing promotional marketing agency with Fortune 500 clients seeking: ACCOUNT EXECUTIVE.

Advertisement #2

When Was the Last Time You Had Fun At Work? It’s a great time to join our promotional marketing agency team. Get all the benefits of working with Fortune 500 clients in a small agency environment. Not only do we take pride in what we do, we have FUN. Your creativity & energy are what we need. (This was followed by a job description for a promotions manager and account executive.) Enjoy coming to work. Send resume to:

The Selection Process

Contrary to what many bosses think, there is a slight negative correlation between who you would likely hire based on an interview and whether they would be a great fit at your firm. The only type of interview that is effective is a behavior-based structured interview. The expert in this field is Bradford Smart and his must-read book is called Topgrading. The book offers a detailed interview process for selecting "A" players that has been used successfully by firms including Dell, Cisco, GE, and many venture capitalists.

But even the most qualified candidates won’t succeed if they don’t fit into your company’s culture or don’t have a positive outlook. Both of these can be determined through formal personality testing, which can measure these factors and other important ones, like emotional maturity. My firm recommends that all of its clients use Bartell & Bartell (814-861-6606) to screen their manager and executive hires. It will cost you roughly $600 per candidate, so we recommend doing the testing on the top three picks only. (You’ll need to have yourself tested so they can check for compatibility.)

For the rest of your hires, we recommend Bigby Havis & Associates’ (972-233-6055) online testing products. I’ve interviewed candidates in the afternoon and had them go online in the evening to complete the tests. We had the results available immediately so the decision could be made the next morning.

But your initial interviews and formal tests won’t tell you everything you need to know about a candidate. As a final step, I recommend outlining three or four challenges you’re expecting the candidate to face when hired and then giving him or her 30 minutes to an hour to come up with solutions. Then spend another 30 minutes discussion the applicant’s recommendations, to see how he or she thinks and get a sense how you might work together. If nothing else, when I’ve employed this technique I’ve picked up some great insights into business challenges I’m facing from the candidates I’ve not hired.

Though it’s not always possible, having someone work with you for several weeks or more doing the work you’re expecting him or her to do is always a good idea before committing to a permanent hire. "Temp to perm" placement firms are popular in certain fields because they allow you to test-drive the candidate. Testing management hires is trickier, but they may be able to work with you in the evenings on a consulting basis.

Getting the right people in the right positions is the first and most important job of the CEO and executive team. Equally important is getting the wrong people out as quickly as possible, though this is one of the hardest aspects of running a business. Once you commit to building a team of A players, you’ll be surprised by how quickly your company is able to reach the goals you set and exceed your expectations for profitability.

Excerpted from Mastering the Rockefeller Habits: What You Must Do to Increase the Value of Your Fast Growth Firm by Verne Harnish. Harnish is the founder of Gazelles, Inc. (www.gazelles.com).

http://www.fortune.com/fortune/smallbusiness/articles/0,15114,360937,00.html