Should I Hire an Overqualified Employee?

Yes and No. (I know you hate when I say that.)

No. You shouldn't hire an overqualified person if there is absolutely NO room for advancement and flexibility in the role. If you need someone to count items floating on a conveyor belt and they can never grow in that position or another in the company, don't hire someone with an MBA, no matter how much they beg. They will leave you when the job market becomes friendlier.

You should also NOT hire an overqualified person if you don't have a history of high retention. If people typically leave you for all kinds of reasons, you likely have no benefits to retain an overqualified employee in the future.

Yes. You should hire an overqualified person if you have ideas or an existing pathway for great talent to grow and evolve in your company. The overqualified person will likely lend him/herself to developing a key, and perhaps unforeseen, role in your company utilizing his/her talents. You'll win and so will they. In this job market, and in the past, there are overqualified candidates that are seeking the positions you have to offer. The question is "why are they seeking your job?". Ask them. Are they haphazardly applying for EVERYTHING? If so, you don't want them and never did. But if they can succinctly tell you why they want to work for you and they know full well what the job entails (and pays). You may want to give them a shot. It's a added bonus if you have longevity with your employees and use their talents to make your company better. Again, everyone wins when this happens. Too often we try to fit a person into a job. When we do it the other way around we most likely gain exponentially. Fit the role to the person and his/her talents.

I remember applying for a job with a well respected think tank (back in the late 90's). I was told I was overqualified and they wouldn't even entertain my application. I begged them. I pleaded my case telling they why I was ideal for their company and assured them I'd be willing and able to perform in that role for a couple of years. Still no. So, years later I got in through a back door. I found a director-level employee at a conference and asked for a meeting over coffee. I got my meeting and I got a job offer. Although I got the job in the end, I still wish that I had the opportunity to work there in the interim. I was passionate about the company and could do the work with my eyes closed. And, maybe I would have used those extra years to work my way up higher than I did when I ultimately left.

Consider why an applicant wants to work for/with you. It should be stated on their cover letter. You may want a 5 minute phone screen to firm your understanding.

Hire them if you have a plan to keep them and will utilize their talents.

Don't hire them if you don't plan to cultivate your talent and if you just want a person to strictly fit a role.

As an aside: There was a great NY Times article on this topic. http://www.nytimes.com/2010/03/29/us/29overqualified.html?_r=1&emc=eta1.