The Rule of Seven and Eight
Keeping mediocre performers drives away your best people
The Rule of Seven and Eight is a talent management decision framework that addresses the most painful blind spot in organizational leadership: what to do with people who are middling performers. On a scale of one to ten, sixes and below are obvious terminations, while nines and tens are stars you must retain. The dangerous zone is seven and eight, where people can do the job but cannot be consistently relied upon.
Squibb's rule is stark: if you keep sevens and eights, your nines and tens will leave. When you accept and reward mediocre performance, your best employees conclude you do not fully value their contribution. They see people less capable than themselves receiving equivalent treatment and decide to go somewhere that takes them more seriously.
The framework also covers hiring (purpose alignment plus commitment testing), retention (equity sharing as nonnegotiable), and the ethical approach to firing (clarity, compassion, and speed).
- If you keep seven-and-eight performers, your nine-and-ten performers will leave
- The faster you rise, the quicker you fall: hire for ethics and moral code, not just skill
- Good hiring is about employees and employers who both make a positive choice to choose each other
- Ownership conveys freedom: if you want good people to stay, give them equity
- Many people who are underperforming are secretly looking for a way out and may thank you later for firing them
- Hire for Purpose Alignment and CommitmentUse your business purpose as a litmus test in hiring. Check that candidates genuinely believe in your mission by verifying their claims through social media and references. Test commitment by asking candidates to complete a small project as part of the interview process. Use Squibb's ethical test question to screen for moral code alignment.Pro tipAsk candidates the hypothetical: would you accept a perfect life until seventy at which point you are revealed as a fraud? Those who accept are not necessarily bad people, but they are misguided about how success is achieved and may not be the right fit.WarningAnyone can pay lip service to purpose during an interview. You have to look deeper through commitment tests and reference checks to see if they really mean it.
- Rate and Evaluate Your People HonestlyContinuously assess where each team member falls on the one-to-ten scale. Pay particular attention to those in the seven-to-eight range. Track how often their name comes up in management conversations and whether those mentions are praise or problems. If you hear their name multiple times per week and it is not in praise, you have a problem.Pro tipOccasionally, the problem is the role rather than the person. A few times, Squibb moved a seven or eight to a different department and watched them transform into a nine or ten. But this is the exception, not the rule.WarningDo not rationalize the situation by hoping the problem will go away or convincing yourself the person is not doing so badly. The longer you delay, the harder the eventual conversation becomes for everyone.
- Retain Stars Through Equity and Fire DecisivelyGive your best people real ownership through equity, options, or profit-sharing. Make the path to ownership transparent for those who do not yet have it. When you must fire someone, be clear that the decision is final, be compassionate, offer to help them find their next role, and execute quickly. Tell the rest of the team what happened and give them space to ask questions.Pro tipThe question is not whether you will lose some ownership by giving equity, but whether you would rather own one hundred percent of a struggling company or fifty-one percent of a thriving one.WarningSaying you pay well, give bonuses, and have a strong culture is not a substitute for actual ownership. People who create value for your business know exactly what they contribute, and anything short of a real share will eventually feel like a shortchange.
A candidate for a marketing role at Fluid offered to bring his previous employer's entire client database. The shortcut would have transformed Fluid's business overnight, leapfrogging years of organic growth.
Initially, Squibb hired young graduates untainted by corporate experience. But after a few years, they consistently left for larger competitors to gain the corporate experience they lacked. He adapted by hiring people who had already done two years at bigger firms and were jaded by it.
Squibb developed this framework over decades of running businesses and hiring hundreds of people. He observed that the most damage in organizations always came from the middle tier: people who were not obviously failing but were not truly contributing either. These people dominated management conversations and HR meetings without ever being definitively addressed. Meanwhile, star performers would quietly leave for competitors who valued them more. The pattern repeated so consistently across his businesses that he formalized it as a rule.