Sometimes the content for these blogs gestates over a period of time with various ideas coming together. Other times it just springs out of somewhere, often a conversation I’ve had with someone, and that was what happened today! So this blog is dedicated to you, David. I hope you find it useful.
We were talking about the problems of running a business and in particular finding really good people to be able to drive things forward for you. He had found a potentially really good candidate who could really take his business forward with lots of knowledge and industry expertise; but the asking price was too high. So what is reasonable to pay for a highly productive member of staff?
To help answer this question I turned to some of the people that I’ve found helpful in my quest over the years and the first one of those was Jim Collins. Jim has written a couple of books, one of which I found extremely helpful in formulating some of the philosophies in my business. It’s called ‘Good to Great,’ and it’s a classic. Some of the key ideas from the book are listed on Jim’s website at www.jimcollins.com . Let me take just one of those for you now.
It’s headed ‘Disciplined people – ‘Who’ before ‘What” and the way that Jim Collins describes it is to imagine yourself as a bus driver. The bus – your company – is at a standstill and it’s your job to get it going. You have to decide where you’re going, how you’re going to get there, and who’s going with you. Most people assume that great bus drivers (read: business leaders)immediately start the journey by announcing to the people on the bus where they’re going; by setting a new direction; or by setting out a fresh corporate vision. In fact the leaders of companies that go from ‘good to great’ start not with ‘where’ but with ‘who’. They start by getting the right people on the bus, the wrong people off the bus and the right people in the right seats; and they stick with that discipline – first the people, then the direction – no matter how dire the circumstances.
Collins illustrates this principle by telling the story of the CEO of Fannie Mae, the big mortgage Corporation in the States, David Maxwell. Fannie Mae was losing $1 million every business day and the board wanted to know what he was going to do to rescue the company. Maxwell’s response was to say, you’re asking the wrong question. To decide where you want to drive the bus before you’ve got the right people on it, and the wrong people off it, is absolutely the wrong approach.
He told his management team that there would only be seats on the bus for ‘A-level’ people who were willing to put out ‘A-Plus’ effort. He interviewed all of his team and told them all the same thing; this is going to be a tough ride, it’s going to be demanding. If you don’t want to go along, that’s fine, just say. But now is the time to get off the bus. No questions asked, no recriminations.
When he put that to all of his executives, 14 out of 26 got off the bus. He replaced them with some of the best, smartest and hardest working executives that he could find, and with the right people on the bus in the right seats he then turned his attention to the ‘what’ question, and only then did he try to address that. By the end of his time with Fannie Mae, Maxwell had turned a performance of losing $1 million a day into earning $4 million a day at the end. Getting the right people on board was crucial to that success.
Here’s another article by Jim Walton, President of Brand Acceleration Incorporated in America. He describes how a great business friend of his was running a highly successful organisation with just two support people in his office. When asked how they managed that work load the boss had one simple answer; ‘These are the best people in the industry. I make it a point to hire great people, pay them very well, and then get out of their way.’
He gives the example of another boss with a similar style. On one particular day, he says, he had a management related question that he reluctantly took to the boss. After asking his question, the boss calmly walked across the room, closed his office door, and came back to his desk. Sitting down he said, ‘Jim we hired you because you’re very good at what you do. You’re paid very well and I’m pleased with your performance. However; if I have to handle management issues for youthen I don’t need you. Other than our regular P&L meetings and occasional chitchat at the coffee machine, we don’t really need to talk. Do we?’
That’s what it means to hire great people, pay them well, and then get out of their way. If you can find someone who can be creative, productive, intelligent, efficient – and those people are out there – how much are you prepared to pay them? That’s the question I would ask. Because when you find someone like that you really don’t want to stint.
So really there are two questions here. Firstly how deep are your pockets; but secondly -and this is actually much the bigger question – are you the sort of person that can pay them well and thenget out of their way? That takes a lot of confidence, a lot of trust, a lot of discipline, but in my experience it’s the way to riches.