No, this is not a real bulletin (sorry Mr. Blank), but imagine if it were. If we assume that the main goals of the Atlanta Falcons are: 1) to be profitable, and 2) to win championships (which tends to help with profitability), then recruiting really cheap players makes no sense at all.
And yet I’ve seen CEO’s do this all too often. They treat personnel costs as a line item in a budget (which, of course, it is) that needs to be minimized to “save money” and “increase profitability.” But keep in mind the old maxim, “You can’t save your way to business success.”
For example, imagine the Falcons recruiting a new quarterback (this isn’t likely to happen, of course, since Matt Ryan is one of the best in the game). Do they go after an “A Player” (top 10% performer; e.g., Tom Brady) or “A Player Potential” (has the potential to be a top 10% performer in a short period of time; e.g., outstanding college recruit), or do they look for the cheapest quarterback available to save on personnel costs?
You see where I’m headed with this. Think of all your financial decisions from a Return On Investment (ROI) perspective. Sure, it costs more and takes longer to recruit A Players for your team, but you will get a much higher ROI for your investment if profitability is your final goal.
I help companies hire C-Suite team members for their organizations. The search begins with “What ‘Player Level’ do you need for this position?” Since everyone seems to understand conceptually that leadership performance determines financial performance, the answer is almost always, “We definitely need an A Player for our new CFO (or whatever).”
So, what Player Level do these folks typically hire? High C to B. Why? Lots of reasons, like being in a hurry, not wanting to pay what an A Player costs, or emotional attachment to a candidate because of personal relationships (this happens a lot in family businesses).
You’re the boss, and there’s certainly nothing wrong with running your business any way you see fit, but it’s very predictable that you’re going to get C or B financial results if you hire C or B team members, especially in your leadership ranks. In football parlance, if your competition is fielding a Pro Team (A Players) and you’re fielding a College Team (B Players), then the outcome of that contest is a pretty much a forgone conclusion.
“Yes,” you say, “but I can’t afford to hire A Players for every position in my company. It would break the bank.” That’s a fair point, and there is a good solution: slow down your growth rate.
More businesses go out of business from rapid revenue growth than from revenue starvation. You can run out of cash from growth expenses or lose control of your quality, ruin your brand in the marketplace, and lose virtually all your customers at once. The goal is to create long term sustainable financial success, not an exciting (but failing) crash and burn comet scenario.
So why not go a little slower and build a team of A Players as you grow? Hearkening back to the Falcons analogy, maybe you wait until you have enough cash to put together a truly competitive team before you launch your franchise. Once it’s launched, then you recruit all the A Players you can get your hands on to win championships and make money.
After 25 years of helping CEO’s achieve financial success, I’ve come to believe strongly that a solid business model and the quality of your team (starting with you) are the major predictors of this financial success. So, go after Matt Ryan or Tom Brady next time…
- Recruit A Players and A Player Potentials for your team, especially in the leadership ranks.
- Take the time and pay the money required to recruit and retain these A Players; this will give you a great ROI in the long run.
- Slow your growth rate to whatever’s required to build a quality team as you go; this will give you a great ROI in the long run.