Is Wall Street overheated, or are those red-hot new issues really worth the money? You may know how to tell the difference in the stock market - but can you make a smart decision in the talent market? For those who find themselves on the buy side of the equation, here are six tips on how to be a smart investor in human capital.
1. Buy early, buy low.
Yes, the world of business is changing - but the last time we checked, nobody had repealed the law of supply and demand. In other words, bring in that free-agent guru to solve your Web problem before everyone else starts looking for a consultant.
2. Decide how much risk you can tolerate.
"Assess what is at stake," recommends Lori Perlstadt, VP of marketing and sales at M2. "If the risk of failure is high, don't take a flyer on lower-priced talent with a short track record. Go with a higher-priced blue-chip person." But if you think that a promising talent "startup" can produce big results, grab the bargain - and await congratulations for your foresight.
3. Don't trust your brother-in-law.
Remember that hot stock tip from your brother-in-law - the one about "the next Netscape"? Remember what happened? Don't make the same mistake in the talent market. "To ensure that you access the best available talent, look beyond your personal Rolodex," says Perlstadt. "Check your tendency to bring on a friend of a friend."
4. Scrutinize past performance.
In the talent market - as in the stock market - past performance is no guarantee of future success. But it can be a pretty good guide. IMCOR's John Thompson suggests looking for the "been there done that" candidate. M2's Anne Fischer Hecht says, "If you need an acting CFO to get your company through a merger, then get one with merger experience. Forget years of service in your industry, forget long-term IT planning, forget mentoring skills. Find someone who has been through a merger or two."
5. Agree on deliverables.
Thompson says he's seen it time and again: "He thinks he did a great job, and he wants a bonus. You think he underperformed, and you want a refund." Spelling out expectations at the beginning of an assignment, and then frequently reviewing progress and making midcourse corrections, will ensure a meeting of the minds.
6. Factor in nonfinancial payoffs.
Sometimes bringing in a free agent can invigorate an organization in nonmonetary ways - by injecting a shot of energy, introducing a new perspective, or transferring knowledge to others. As Thompson says, "You can always use another mentor." Think of such benefits as dividends.
A version of this article appeared in the August 1998 issue of Fast Company magazine.