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The 5 C’s of Hiring

May 23, 2023

It’s always about more than the numbers.

Recently, I had a conversation with my good friend Larry Grays. He has a friend in the banking industry, and we were discussing how banks make lending decisions for businesses. I found it interesting that, even in financial institutions (where it’s all about the numbers), eligibility to receive a loan is determined by much more than just the amount of money in their bank account or their profit and loss statement. In fact, Larry shared with me that there are five things they evaluate before lending a person money.

In many banking circles, these are referred to as the 5 C’s of credit: character, capacity, capital, collateral, and conditions.

Before loaning money, a lender wants to ensure that the borrower meets the benchmark in all of these areas.

Though the five C’s of credit were created as a metric for financial institutions, I believe that they apply far beyond a person’s eligibility to receive a loan. Below, here is my adaptation of these five C’s when it comes to hiring great talent. 

1. Character
This is the first and most important factor lenders consider before giving a loan. Banks often look at a person’s credit score to determine their character—how a person spends their money says something important about how they view the world around them. Billy Graham used to say, “Give me five minutes with a person’s checkbook, and I will tell you where their heart is.” The term checkbook might be outdated, but the principle holds true. Show me where a person spends their money, and I will show you their values. When it comes to hiring, character counts. No amount of competency will compensate for poor character.

2. Capacity
In the banking world, capacity is the borrower’s ability to pay the loan based on their debt-to-income ratio. If much of their salary is already going toward paying off other debts, they might not have the capacity to pay off a new loan comfortably. When you’re looking for top talent, you’ve got to see how much capacity they have. Do they have the ability to perform the role you’re hiring for in the short term? Equally important, do they have the capacity to grow in the future?

3. Capital
This would be the downpayment on a loan—it’s the amount of money an individual has saved over time for this specific purchase. From a hiring perspective, this would be the individual’s work experience and skills they have developed up to this point in their lives. What can they bring to this role right now? We often think of capital in the financial sense, but what emotional and mental capital can someone put into what you’re doing. Capital shows commitment. 

4. Collateral
Collateral is what a person has to offer if they default on a loan. For example, auto loans are secured by cars while mortgages are secured by homes. From a hiring perspective, collateral would be the intangible benefits they have to offer. What do they possess beyond skills required for this role that would benefit this position and your team as a whole? This could be an aspect of their personality or a passion outside the workplace that would be helpful.

5. Conditions
Conditions are what a person plans to do with the loan and the outside factors at play (i.e. the state of the economy, industry trends, current legislation).

When hiring someone, you need to ask if it’s the right individual for the right role at the right time.

They may be the perfect hire, but it might be the wrong time. 

In any organization, you need more than just competent people. You need people with integrity, capacity, the right experience, unique skills and talents, and what it takes to fill this gap in your team. To know if it’s the right person, look at the whole picture and use these 5 C’s as a guide.


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