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Which is better? Short-staffed with great employees, or full staff with mediocre employees?

Is it better to have a full staff of employees where only half of them are productive, or be short-staffed in a department where all of them work? I have had this discussion with administration several times, where they feel it is better to fully staff with bodies that are present, rather than hold out until the right employees apply and hire them? Which one is the right choice?

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