Elite talent – what is the purpose?

110What is the purpose of this article?

Enable the investor, founders, board of directors and C-Suite to discuss the role of elite talent in their company’s success.

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What are the critical learnings in this article?

  • Elite talent and elite company performance are rare.
  • Beating the competition requires talent that is better than the competition.

What is the value and need for elite talent?

In today’s competitive business environment, there is unlimited capital for companies that have major competitive differentiation. This requires competitively differentiated talent

What are the characteristics of the elite talent that can create and transform companies?

#1 Leading strategy firm (when hiring MBAs) and global early stage investment funds (when assessing startup founders) are looking for the same type of talent”.

  • Ability to quickly learn and unlearn: paradigms, frameworks, methodologies, data, facts, knowledge. The founders of the majority of unicorns (startups which achieved a $1 billion valuation) had no previous domain experience.1 Roche paid $1.9 billion US for Flatiron Health, a cancer electronic records company.  The Flatiron founders (Nad Turner and Zach Weinberg ) had no background in cancer. They came from advertising. 2
  • Fast and deep analytical skills.
  • Fluid intelligence: the capacity to think speedily and reason flexibly in order to solve new problems without relying on past experience and accumulated knowledge. For example, successful startup founders, identify problems and needs that have not been well addressed before and create solutions that have never existed before
  • Curiosity – the passion to learn about the world around them and not be silo focused. This broader ecosystem knowledge provides a context for their deep ecosystem knowledge.

#2 Early stage investment funds also look for:

  • The drive and ability to deeply understand customers and users – their problems, issues, emotions, and what influences behaviours.
  • Perseverance: passion and energy to overcome all odds and difficulties to achieve goals. For example, Airbnb was short of cash in the early days. To make money they sold Cap’n McCains and Obama O’s cereal during the Obama McCain presidential run.  The following is a link to the current Airbnb site which still contains the original advertising. (https://www.airbnb.ca/obamaos)
  • Values, morals, and integrity: Warren Buffett supposedly said “..looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you.”

Business performance follows the power law distribution, not a bell curve.

If you want your company to enable your customers to achieve 10 times more value than the competition, some of your key talent must be 10 times better than the competition’s talent.

  • The distribution of company economic profit follows a power law. McKinsey’s study of 2,393 large corporations from 2010 to 2014 showed that the bulk of the economic profit was made bay a small number of companies e.g. the top 20% earned 90% of the total economic profit with the top 2% earning more than the next 8%. 60% of the companies earned little economic profit.3
  • People performance follows a power law distribution, and not a bell curve. Top 1% of workers generate 10 times average output .4
  • Half of all senior hires fail within 18 months.5

How do you recruit elite talent?

  • The best predictor of how someone will perform in a job is a work sample test (29%) 6 For example, when recruiting board directors, they should serve for one year as a board observer, to enable assessing them.
  • The two second best predictors are: are tests of general cognitive ability (26%); 7 and structured interviews (behavioural (tell me about a time) and situational (what would you do if) (26%). 8
  • Four interviews predict whether to hire someone with 86% confidence and each additional interviewer adds 1% confidence. 9 This assumes that you are clear on what value the role provides, the specific characteristics of people who can deliver that value, and do a combination of work sample and structured interviews.

Can your company be competitively differentiated without a competitively differentiated board of directors?

Some people believe that a company can succeed in spite of the board of directors.

What if the board:

  • Appoints the wrong CEO?
  • Has poor decision making regarding major transactions (e.g. M&A), plans, and policies?
  • Demonstrates poor values, morals, and ethics to employees and other members of the companies ecosystem?
  • Etc.

A poor board can certainly impact your company’s success.  However, I have seen cases where an extraordinary CEO has enough influence, persuasion, and guidance to overcome a poor board. I can recall one partner from a major private equity firm saying that with one board seat, he can turn the company around.

What are the implications for your company below the board and C-suite level?

  • With the right processes, technology, and development programs, your average employees can enable your customers to achieve more value than the competition. What’s key is hiring people at all level who have the potential to learn and unlearn.
  • When Google first built their Human Resources team, 1/3 of hires came from traditional HR background, 1/3 from top tier strategy consultants (because good at figuring out problems), 1/3 deeply analytic, with at least a masters degree in analytical fields (physics to organizational psychology).10 Google took the approach building HR practices with ongoing fact-based analysis rather that commonly accepted best practices. Many best practices are actually myths rather than facts.

What are your next steps?

  • Document the past performance of the company, including economic profit, and impact on key ecosystem members such as customers.
  • Outline the future scenarios for your company.
  • Define the required skills, knowledge, experience, networks, values, morals, and ethics required by each board director and C-Suite member to enable success in the future scenarios.
  • Assess your board and C-Suite relative to the above requirements.
  • Assess your competition’s board and C-Suite relative to the above requirements.
  • Identify: improvements to be made to existing directors and C-Suite, members to exit, and members to appoint.

 Footnotes:

1 Ali Tamaseb, Super Founders, New York, New York , Hatchette Book Group, 2021, 49

2 Ibid., 53

3 Bradley, Martin Hirt, and Sven Smit, “Strategy to beat the odds”, McKinsey Quarterly February 2018, https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/strategy-to-beat-the-odds)

4 Laszio Bock, Work Rules (New York: Hatchette Book Group, 2015), 182

5 Ibid., 294

6 Ibid., 91

7 Ibid., 91

8 Ibid., 91

9 Ibid., 103

10 Ibid., 361