Hiring people is a little like buying stocks. You may be ready to buy (as in hire a candidate) thinking the value of that investment is likely to increase. Unfortunately, you’re sometimes buying from, or away from, someone (the current employer, another company interviewing the person), who may be equally convinced the value is likely to decrease, or worse yet, was not even there to begin with. Isn’t that like buying a stock when someone else is selling it? You think the stock value will go up, when others are thinking the stock is already overpriced and therefore will drop in value. In our hiring example, you are betting that the person being hired will produce a positive return on your hiring and salary investment when, in fact, he or she may not live up to your performance expectations. The return may not justify that investment.
This really means that your selection criteria and ability to “pick stocks” have to be so good that you pick far more winners than your competitors, who oddly enough are investing in the same market. Your ability to make wise selection (human capital) investments can be a distinct competitive advantage, just like your ability to make sound financial capital investments. So here are the obvious questions: is your selection system that good? Can you pick stocks that will appreciate in value over time and can you do it better than the next investor?