Profit Insights #7: First Who Then What

Strategy, vision, and technology all matter. But according to Jim Collins, David Packard, Warren Buffett, Steve Jobs, and Jeff Bezos, none of it matters more than who you put on your team. In this episode, Alex Franklin builds on his Level 5 Leadership column to examine the single most important factor in organisational success: getting the right people on the bus before you decide where to drive it.

Practical, honest, and grounded in hard-won experience.

Read the full article: ithacacybersecurity.com/first-who-then-what

Work with Alex: ithacacybersecurity.com | penpole.co.uk

References and Further Reading

Collins, J. (2001). Good to Great: Why Some Companies Make the Leap… and Others Don't. Penguin Random House.
Sanchez, C. (2024). Main Street Millionaire: How to Make Extraordinary Wealth Buying Boring Businesses. Penguin.

Read all Profit Insights: https://www.ithacacybersecurity.com/insights/

Work with Alex: alex@ithacacybersecurity.com

penpole.co.uk | ithacacybersecurity.com

Transcript

SPEAKER_00 0:00

Hi, it's Alex at Ithaca Cybersecurity, and this week's edition of Profit Insights is all about hiring and firing. So, first who and then what. In a previous column, I explored the traits of level 5 leadership and how to incorporate these principles into our daily work. Today I want to build on that foundation by examining the single most important factor in organizational success: getting the right people on your team. David Packard, level 5 leader, and Hewlett Packard, co-founder, established what is known as Packard's law. No company can grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company. End quotations. So this principle isn't just theoretical. It's echoed by virtually every successful business leader throughout history. And Warren Buffett puts it very succinctly, open quotations, the best asset to any company is its people. Hire the right people, invest in their development, and empower them to succeed. End quotations. So pay attention to what investors emphasize during due diligence. They will consistently tell us that they invest in management teams over underlying assets. A great management team is fundamental to is a fundamental truth of how value is created and sustained. Indeed, Silicon Valley's most successful entrepreneurs attribute their outcomes to just a handful of critical hiring decisions. The most effective CEOs view their role as 90% talent acquisition and 10% enabling that talent to thrive. And Steve Jobs makes a very interesting observation. So he observes that when you hire exceptional people, you can trigger a very, very powerful chain reaction. So Jobs observes that tops performers relish working alongside other high caliber colleagues, which then creates a very natural retention. They also attract and then hire similarly talented individuals, building a self-reinforcing ecosystem of excellence. So this approach creates a natural filtration system, of course. When a mediocre performer somehow makes it through the hiring process, they typically stand out immediately and either very, very quickly improve or probably more likely exit that organization. And great companies often experience higher initial turnover as poor fits are identified and addressed, followed by remarkable stability as the right team coalesces. And perhaps the most compelling is what happens when you build a team exclusively of high performance. So bureaucracy, artificial, artificial culture building incentives, internal politics, well, they all simply just become a thing of the past. They become unnecessary. Organizations that compromise on talent, inevitably, they create complex systems designed to manage that mediocrity and policies and procedures that so often penalize those top 20% of performers to accommodate the top, top the bottom 80%, going back to that 80-20 rule that I've that I've banged on about so much. So Jeff Bezos also emphasizes, and then it's a quote from Jeff, I can't do his accent. I'd rather interview 50 people and not hire anyone than hire the wrong person. So end quotations. And similarly, Jim Collins' landmark study, which we've we've again spoken about in Profit Insights, good to great, revealed a consistent pattern among companies that achieved sustained market outperformance. So those companies prioritise getting the right people, as he puts it, on the bus before determining where to drive it. So it's the first who and then the what. And personally speaking, having experienced both the pain of hiring mistakes and the extraordinary rewards of getting it right, I can attest that Collins' observation is profoundly true and hopefully resonates with a lot of the listenership, readership of Profit Insights. If hiring decisions are so important, then well, what can we do to give us the best chances of success? Number one. First of all, we've just got to recognise that hiring decisions are really, really important. So listen to the sage. If David Packard, Steve Jobs, Jeff Bezos, Stephen Bartlett, Richard Cox, Jim Collins, Cody Sanchez, Warren Buffett, and many, many other successful investors, CEOs, writers, academics, they all stress the importance of making the right hiring decisions. Well, if they're stressing it, it might well be prudent to heed to their advice. I've spent most of my career to date working within and running professional services organizations that do specialize in the supply of exceptional services by giving our clients access to exceptional individuals. Pretty simple business model. The irony is though that if our client base had heeded the advice of the champions of industry that I've just listed above, uh, when hiring, of course, their own in-house substantive teams, our clients' dependence on the businesses I own and operate would be significantly reduced and, in of course, some cases completely eliminated. They wouldn't need us. Number two, you've got to act like it's important. And I've been on the receiving end of this plenty of times, and hiring is something that we try to fit around our day jobs. So we fill our 9 to 5, firefighting today's emergencies, and then give the briefing call to the headhunter while shuffling along the M25, eating our dinner all at the same time. So pause, reflect on what's important, and deploy the 80-20 principle and allocate your limited resources, specifically your time and your ability to delegate accordingly. Number three, fail to prepare. Well, you can prepare to fail. So before engaging with a single candidate, develop your complete hiring ecosystem, including number one, detailed job specifications, a compelling employee value proposition and EVP, talent acquisition plan and associated documents, perhaps an advert, uh clear probation plans, performance metrics, comprehensive onboarding and offboarding procedures. So for an exemplar approach to hiring, I can really, really recommend Cody Sanchez's framework in her book, Main Street Millionaire. So, particularly the chapter step three C is for command, which I've referenced in this column, and I'll put it in the footnotes of this video or podcast, however, you're getting this. So before proceeding, ensure you can answer these critical questions. What does excellence look like at 30, 60, and 90 days? How do we measure success objectively? How does this role directly improve productivity or profitability? What's the complete, so the rounded value proposition for the employee? And that definitely goes beyond compensation, although compensation, of course, is an important part of it. Do our incentives align with our core values? It's going back to something I've I've gone on about. Are we hiring a salesperson and expecting sales from them but not giving them a commission? What are the precise accountability structures? What are the cash flow implications if the hire fails? If you can't answer these questions with clarity and conviction, then you're not ready to get to begin recruiting. Go back and do your homework. Number four, maintain uncompromising standards. If there is a doubt, there is no doubt. So this is a principle I've borrowed from a former mentor, former boss of mine, actually, and it's served me exceptionally well when making hiring decisions, both for myself and for my clients. So while compromise has its place in many contexts, and I definitely found this as a side note very useful domestically, it's fundamentally very, very destructive when it comes to hiring. Every time I've proceeded, despite even a little niggling reservation or settled for the second best candidate, I've created problems that far, far outweigh any short-term relief of, of course, getting that position filled. Number five, build quality relationships with professional headhunters and recruiters. So retain them. And this means paying at least part of their fee or a typically around 20% of their fee up front, called a retainer. Treat them with egality and pay them well. Take time to develop a relationship with the top-performing recruiters within your industry before you go to market, they'll save you very, very, very many hours. And if you retain them, and that's the critical part, only if you retain them, they will provide invaluable and impartial advice. So if you put again, it's going back to incentives on delivery, incentives aligning with values. So if you retain them, they're going to provide that impartial advice. If you pay them all once they've just put any old candidate in, they're just going to try and sell you any old candidate, aren't they? So have a little think about the engagement model and retain them. If you retain them, they'll have impartial advice, and that helps you avoid some very, very expensive mistakes. Borrow, of course, not just their network, but their experience. Okay. They're very, very experienced at making the right long-term hiring decisions. So they should be very, very much listening to you. You need to do the same. You need to listen to them. Number six, act decisively when mistakes occur. So this is the old high slow, fire fast. You've got to fire fast. Even the most diligent hiring processes sometimes fail. And when this happens, swift action is really, really essential. The most successful leaders, well, we all make hiring mistakes. I've made dozens of them. What distinguishes them is their willingness to acknowledge and address these errors promptly. Remember that keeping someone in a role for which they're fundamentally unsuited serves absolutely nobody. Okay, so definitely not the individual because they're in the wrong role, not their colleagues, and certainly not the organization. So as difficult as these conversations and awkward as they can be, they're far, far less damaging than allowing a poor fit to undermine your culture, your performance. And getting the right people on your bus isn't just one aspect of leadership, it's the foundation, the very foundation upon which everything else rests. So by approaching hiring with the strategic importance it deserves, you create the conditions for sustained excellence and remove the obstacles that typically constrain organizational performance. Hope you enjoyed that. If you have anything you want to add, please do so in the comments. I look forward to hearing from you. Look forward to seeing you next week.