Talent: The Rocket Fuel For Sustained Revenue Growth

Fast-growing companies need a lot of talent to grow and to sustain that growth. I’ll kick off this chapter with specific processes I recommend for hiring your executive team. Then I’ll shift to how hiring and managing people at all levels of the company should be done.

The Four Keys To Staffing the Executive Team

  • Key #1: Know yourself before you start assembling your executive team. This may seem an odd place to start, but it’s an important part of the process. You need to have an accurate assessment of your own strengths, weaknesses, and biases.
  • Key #2: Plan to spend your time day-to-day using your exceptional talents, and staff a team around you who will cover your weaknesses, including those things you’re competent at but don’t perform exceptionally well.
  • Key #3: Keep in mind that when you’re staffing your executive team you are not hiring executives who will stand alone—you’re hiring people who will work as part of a team. This means not isolating your evaluation of a prospective hire but basing your evaluation in part on who is already on the team—a very important distinction.
  • Key #4: Hire people for their strengths and be willing to tolerate their weaknesses, particularly if other members of the team can offset their weaknesses.

Here’s why using these four keys to staffing your executive team makes a difference: In highly competitive markets, all else being equal, average talent gets you average results, while exceptional talent gets you exceptional results.

Here’s the odd thing about people with exceptional talents—they often come with great weaknesses. If you simply avoid the people with weaknesses you end up missing out on hiring exceptional talent.

The key to getting the most revenue growth out of a pool of talent is to put people in roles that leverage their exceptional talents; this means matching people with their highest producing activity.

Don’t worry too much about their weaknesses—especially if their weaknesses do not impact the results they deliver while in the role you’ve assigned them to. Each member of your executive team should have his or her weaknesses offset by other team members’ strengths—and vice versa.

For example, if your VP of Sales knows how to “hunt the big deals” but is somewhat weak on the administrative side of sales forecasting, it doesn’t mean you shouldn’t hire her. You could have a Chief Financial Officer (CFO), or perhaps a Director of Sales Operations, who is very good at sales forecasts and have the two work together.

Inside Talent vs. Outside Talent

You will want to have talent in-house, as employees, whenever the nature of the work is predictable, consistent, and repetitive. You want to leverage outside advisors, vendors, and contractors for work that tends to be:

  1. One-time in nature, or
  2. Requires expertise not in your company’s “core” area of expertise.

Everyone in your company should be spending their time using his or her exceptional skills and delegating the rest, just as you should.

Know what your company is good at and stick to it. Outsource the rest of the work (things your company is not good at or is merely competent in performing) to those who are exceptional at doing that kind of work. This way, you maximize your valuable resources by having your team focus exclusively on what your company does best.

A-players vs. B-players

Fast-growing companies require A-players, and lots of them. So what exactly is an A-player, and how is that person different from a B-player? A B-player does what he or she is told, does it well, and does it on time. If something unexpected happens, however, the B-player comes back and asks, “What do you want me to do now?” In contrast, an A-player solves any unexpected problems that pop up in the course of achieving the results you desire and tells you about it after the fact. Or if an A-player comes to you with a problem, she’ll come with a recommended solution too.

In other words B-players focus on getting activities done, A-players focus on getting results done. I’ve always said that one A-player is worth five B-players.

I once heard something attributed to Steve Jobs—a comment that I haven’t been able to verify. It goes, “Whoever said one A-player is worth five B-players is dead wrong. One A-player is worth 50 B-players!”

Several Characteristics of A-players and B-players

  • A-players like working with other A-players.
  • A-players like hiring other A-players because it means there’s less work for them to do.
  • A-players are motivated by exciting work, a peer group of other A-players, and an opportunity to grow their skills.
  • A-players value winning more than ego, power, and politics.
  • A-players’ salaries are only slightly higher (10 to 40% is common) than B-players, but deliver 300 to 500% greater results.
  • B-players do not like hiring A-players for fear of being shown up.
  • B-players like hiring C-players so they feel smart in comparison (and C-players like hiring D-players for the same reason).

A-player Roles vs. B-player Roles

Here’s an interesting question: Should you aim for a company full of A-players, or is having some B-players acceptable, even preferable?

As a general rule, the answer depends on the kind of growth rate your company intends to pursue. If you are in an industry that’s not growing, and the company itself is not growing, having A-players in key positions and B-players in labor-repetitive roles can make sense.

In fast-growing technology fields you’re always going to have a shortage of talent. Seeking to have A-players in all functions of your business makes sense. Let’s take the role of customer service agent.

In a mature company, a B-player is going to be fine for that role. In a fast-growing company, there are going to be all kinds of department projects, cross-functional projects, and numerous growth engine opportunities that have a customer service component. Having A-players in customer service who can be peeled off for special projects is essential. Further, as the company grows, the department itself will grow, which means there will be a need for team leaders, shift leaders (for 24/7 operations), and numerous other leadership roles that will be required for growth. Having a pipeline of A-players will be an asset.

You can argue that you can always go for an outside hire when you need an A-player. That’s true. However, in an extreme revenue growth company you need to do both: promote A-players from within and hire them from outside the company. As I said, you simply can’t have enough A-players.

Fire the Bottom 10% Every Year

The process of hiring talent is an imperfect one, and, invariably, bad hires linger longer than they should. While bad hires, or even just “so-so” hires, should be let go immediately, often so many things are going on that the firing gets delayed.

Here’s a process for managing top talent that I happen to like a lot. It’s a bit controversial and I personally don’t understand why. The practice is to fire the bottom 10% of your staff once a year.

I first discovered this practice when I worked at McKinsey—a company known for its ability to recruit and retain exceptionally talented people.

For example, the interview process I went through to get into McKinsey was pretty intense—a total of 13 interviews. Out of 400 people who applied from Stanford University, they rejected 396 of them. They believed in hiring the “best of the best” and their selectivity numbers certainly backed up their claim.

What was most interesting about McKinsey was what they did with the “best of the best” after they hired them. Every two years the firm fired the bottom 25% of the consulting staff, at every level of the firm (roughly 13% each year). To most outside observers this seemed pretty harsh, but it had several good consequences that were not always obvious, or appreciated.

Every two years there were suddenly a lot of vacant roles that needed to be filled. This allow high-performing, up-and-coming super stars to move up and kept the most talented people interested in staying with the firm. If the bottom 25% weren’t fired then there would be no room for promoting the up-and-coming stars and the best people would become frustrated by the lack of opportunity and leave to work elsewhere. This process focused people on performing at their best and delivering results.

To some this apparently harsh process seems like some version of “survival of the fittest.” There’s no question it was, but my response has always been: “In your industry, my guess is that only the strong survive.” It’s just marketplace reality. If you don’t manage your people in a way that reflects marketplace reality, and your competitors do, you’re at a major disadvantage.

Since working at McKinsey was my first job out of college, I simply assumed all companies managed their people this way. I later discovered that this was far from the truth.

Here’s why I like the tough people-management process at McKinsey: First, I like the process because it’s a “process.” It’s a specific activity, on a specific schedule, to achieve a specific result. And second, I believe retaining “so-so” hires is like keeping clothing that no longer fits you or isn’t in style; it just accumulates in the back of the closet, taking up space. You then have to periodically “spring-clean” to free up room for new stuff (or to free up the budget to hire new people—preferably A-players).

Hire Slow, Fire Fast

As a philosophical rule you want to be very careful when hiring; it’s a critical decision, and you want to guard against the temptation to get a “warm body” into the role because you’re growing so fast. If you fall for the temptation of putting mediocre people in key roles your “growing too fast” problem will solve itself. That’s because B-players will under-perform and slow down that growth for you.

How to Hire Right

Hiring right a key skill that you need to master. I’m going to describe a five step hiring processes that I personally use and recommend to my clients.

Hiring Step #1: Define Results You Want From a Role Before Recruiting For It.

The number one reason for making bad hires is that companies do not have a clear understanding of what they expect from the role. Most companies write “job descriptions.” I insist that all my clients write “results descriptions.” After all, you’re not looking to hire someone for a “job”—you’re hiring someone to produce results. If you’re not clear on the result you want then don’t complain if your new hire doesn’t achieve it.

A job description tends to focus on specifics, like “years of experience” or “must have X degree.” I look at those job descriptions and I just laugh: Who cares about all that stuff? I usually cross out all the “human resource” language and write the words, “Must produce these results,” and I tack on a list of all the results that person must produce within six months or they’re fired. (I don’t literally do it, but it’s what I’m thinking.)

Every time I’ve used this type of results description (in lieu of the traditional job description), I’m surprised by the compliments I get from the candidates themselves—especially the A-player candidates. They’re surprised at the precision and clarity of what will be expected of them. Often, in the interview process they will point to specific experiences of theirs that demonstrate they can accomplish every desired outcome.

The “result description” excites A-players because it conveys to them the idea that the hiring company has their act together. It leads them to think, “If a company is this on top of things in the recruiting process, it must be filled with other A-players.” This is especially appealing to A-players.

The other reason this recruiting process appeals to A-players is that there’s a sense of objectivity about it. It makes it clear to the A-player that, to succeed, he or she will need to accomplish X. There is no brown-nosing, kissing up, or politics needed to get ahead; you just get these seven things done within six months and you’ll be a hero. They love that stuff.

Hiring Step #2: Identify the Key Skills and Knowledge Needed to Produce Each Result

Once you have a written “results description” written you want to systematically analyze each particular outcome you want, and then list the specific skills or knowledge required to produce each desired outcome. For example, if you want someone to open up your Spain sales office and produce $5 million in the first year, the specific skills might be:

  • Proven fluency in Spanish, written and verbal
  • The ability to attract, recruit, and retain top-producing sales people
  • Telephone skills for securing meetings with C-level prospects
  • General familiarity with telecom networking products

These would be the minimum required skills needed to produce the outcome you want. You might notice that you’ve deliberately omitted “must have intimate familiarity with gigabit networking products.” It’s appropriate to omit certain types of knowledge if you’re willing to train the new hire in this area.

You don’t want to have a laundry list of required skills and knowledge—just the mandatory items. The acid test is this: If the candidate is missing any of the items on your list of mandatory requirements you’re certain it will be impossible for the candidate to succeed within your specified time frame.

That’s the standard you want to aim for because it’s clearly screens out people who can’t get the job 100% done (even if they can get close). At the same time, it provides a high quality standard that still includes the broadest possible range of people who could get the job done.

Hiring Step #3:  Don’t Hire the Best Candidate For the Role, Hire the Candidate Who Is 100% Qualified

Once you have your list of mandatory skills and knowledge you hire only someone who meets all of the criteria. Because the list defines the minimum level of skills and knowledge required, if you hire someone who doesn’t meet all of the criteria you’ve just guaranteed that the outcome you want will not be achieved.

A candidate is either 100% qualified or not. There is no middle ground. Don’t hire the best available candidate (i.e., the “least worst” candidate); hire the person who meets all the mandatory requirements and is 100% qualified.

Hiring Step #4:  Look For Specific Proof of Skills Needed to Deliver The Desired Outcome

When evaluating candidates, you want to use a “proof–based” approach. Look for three examples of how the candidate has demonstrated each specific skill, or knowledge area, that you require.

Continuing our previous example of looking for someone to open your Spain sales office, and referring to the mandatory requirements listed above, you would ask for up to three specific examples that prove the candidate’s ability to in each mandatory area.

For proven language fluency you might discover that the candidate graduated from high school in Spain—that’s probably sufficient.

For the requirement regarding attracting, recruiting, and retaining top-producing sales people you’d ask for specific examples that demonstrate that skill. Then you want to drill down into the specifics—much like how a criminal defense attorney cross-examines the prosecution’s star witness.

You might ask these questions:

  • Specifically, how many people did you manage when you were the head of Eastern Region Sales for Mega Corp?
  • Of those people, how many did you personally hire?
  • What was the specific revenue performance of your hires compared with the performance of hires by others?
  • What was your individual sales representative quota?
  • What percentage of your reps was above that quota?
  • How many of the people you managed did you fire?
  • On what basis did you decide when someone needed to be fired?
  • What was the overall revenue performance of your group during the 12 months prior to your starting?
  • What was the revenue performance during the final 12 months of your time running that region?

You’ll notice that these are factual questions. All of them ask for a specific factual number. If the candidate legitimately performed well in his or her former (or current) position the candidate will have no problems answering these questions. Each question can have only one factually correct answer.

After you get one specific example proving the candidates ability in one skill or knowledge area, you want to repeat the process two more times. “Okay, give me another example of when you were able to attract, recruit, and retain top-producing sales people.” Then, “Give me a third example.”

While the transcript of such an interview seems adversarial, for a strong applicant it’s an easy interview. All they have to do is remember what happened. They don’t have to sell you on anything. They don’t have to guess what answer you want to hear in response to some open-ended question.

In contrast for an applicant that’s trying to “fake it,” it becomes painfully obvious quickly if they’re trying to “B.S.” you. First of all nobody can lie that quickly and have all their lies tie together in a natural way.  Also by asking for three examples that demonstrate each skill or knowledge area, you blow past any “prepared” answers the candidate had anticipated needing to give and you really get to see if their track record in an area runs deep. The bottom line is in this type of fact-based interview, it’s really hard to hide.

These facts provide you with the objective data you need to reach a conclusion regarding the applicant’s track record relative to a specific set of skills.

By using this rigorous and systematic process you will uncover enormous amounts of factual information. With this information you can make a fact-based assessment of the candidate’s likelihood of producing the outcome you desire.

You’ll notice that this process is much more rigorous than concluding that you “like the person.” Sure, liking someone is important if you’re going to be working with them; other than that, the only thing that matters is can the person produce results? It’s all about results, results, results.

Hiring Tip #5: Hire People With Upside Potential.

Another factor that’s important to consider in fast-growing companies is the “upside potential” of a candidate. Upside potential is the estimation of how much more skilled and knowledgeable the candidate can become over time. In a nutshell, ask yourself if this candidate will continue to grow with more experience, or has the candidate already reached the ceiling of his or her career skills?

While this may seem subjective, the easiest way to empirically verify upside potential is to look at career trajectory. Has the person been in the same role for the past 20 years or has each role been more complicated, larger in scope, and more challenging? Has the person experienced diverse roles and situations that improved his or her skills?

In a company that’s not growing this is not very important. However, in a fast-growing company you’re going to need talent to drive more revenue growth engines. For this reason you deliberately want to favor 100%-qualified candidates who have the ability to grow into even bigger roles.

A corollary to this rule is: Hire the people you want to have running your companies three years from now and not the company you have today. This practice of “hiring for where you want to be—instead of where you are” approach is a good one to keep in mind.

Closing Thoughts

We started this section of the book talking about the three key areas that you, as the CEO, must focus on. We’ve covered managing the portfolio of revenue growth engines and managing talent. In the next chapter we’ll discuss what you do with the talented hires once you have them on board—namely holding them accountable for producing results.

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