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1 Company's Key to Success: Hire Nice People

By Motley Fool Staff and Tom Gardner – Mar 16, 2014 at 12:45PM

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Why hiring “the best and the brightest” was not the firm’s top priority.

John C. Bogle is the founder and retired CEO of The Vanguard Group, the largest mutual fund organization in the world, comprising more than 160 mutual funds with current assets totaling more than $1.4 trillion. Since his retirement from Vanguard in 1996, Bogle has spent his time studying, writing, and speaking on the financial markets and mutual funds. He is president of the Bogle Financial Markets Research Center, created in 2000 to support his ongoing work on behalf of investors.

In this video segment Bogle recounts an anecdote from Vanguard's history, when it first grew large enough to require a personnel department. He describes his initial strategy as simply, "Hire nice people and then make sure that they hire nice people."

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Tom Gardner: I want to just talk in the end a little bit about the fact that you've been a business leader. We talk about investments, but you started a company and ran that business, and it has $2 trillion in assets today and 14,000 employees. It's massive. I'm sure it's way beyond what you would have dreamed of in 1974 -- although I'm sure you were optimistic about your chances, given the solution you created.

How do you evaluate talent -- the people that you work with? What were some of the cultural features of Vanguard during your leadership?

Jack Bogle: One of them is exemplified by a story I tell about the time we got to around 200 employees. I thought, "We really ought to have a personnel department" -- human resources, it's called now -- it seemed like a good idea.

I was really a dictator, so I looked around and tried to see who was not busy in the office; we were very strapped for being able to spend any money. There was a secretary in the legal department, a very lovely woman. I talked to our lawyer. We had one lawyer then -- we have 140 now -- that's called progress!

I said, "Could I use her to run a little personnel effort -- interview people and things?"

He said, "Yeah, I think she can do that."

So, she comes into my office. "I'd like you to do this."

"Whatever you want, Mr. Bogle."

We talked a little bit, and she started to go out of the office. She was about to walk out the door and she turned around, came back in and she said, "I want to do whatever you want me to do, Mr. Bogle, but I don't know what it is you want me to do."

I said, "Well, I'm not sure I know either." This is what happens when you're a very small company. I had a lot of things on my mind, of course, and I said, "I don't know what it is that I want you to do, but let's start with this. Hire nice people and then make sure that they hire nice people. And that's the best I can do on this."

Most of the jobs at Vanguard -- some of the technology jobs require a whole lot of professional skill. Most jobs can be done by intelligent human beings with a little experience and the motivation to do them.

I look at Vanguard as not being some, "Can we hire the best and the brightest?" I'd say -- it's a big universe -- we probably have our share of them. But you try and get people that you can work with, that can work well with others. They're going to try and not make the same mistakes you did.

The change from a tiny, embryonic organization, where there is a captain and the rest of the oarsmen down below in the galley -- that's obviously oversimplified -- but our mission is very simple. Our presentation is very simple.

When you think of what we can explain to people, and what they should do in investing, it's right out of the proverbial hornbook, the ABCs of the old days. It works, it's understandable, and it's guaranteed to give you your fair share of whatever returns the stock and bond markets are generous enough to give us -- or mean enough to take away from us.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. The Motley Fool recommends and owns shares of Chipotle Mexican Grill, Costco Wholesale, and Whole Foods Market. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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