The Curve of Talent

May 17, 2011

Back in 2005 at Brontes, I was working hard with our VP Engineering, Ed Tekeian, to convince a talented engineer to stay at the company and not take another job offer.  I was struck when the engineer said to us, “guys, I respect you, but I really don’t know why you’re making such a fuss out of my leaving.  I did a fine job here, but really only did what I was asked.  In truth, I’m very replaceable.”  Ed responded, “The more that you manage people in your career, the more you’ll find that it is very hard to find people who can execute well on what they are asked to do.  Don’t underestimate how valuable you are and how hard it will be to find a replacement.”  It was a very candid moment of talent assessment in which the bar of performance wasn’t innovation, but simply competently executing the expected job.  Ed was right, finding people who can do the job that is asked of them is quite hard.

When it comes to assessing talent, I’m not a believer in grade inflation.  Most people are C performers. C performers struggle to competently fill their role, but are somewhat productive with sufficient coaching. Hard to admit, but most people in the business world don’t have a particularly clear idea on how to do their job well.  It’s not just a question of experience.  I’ve seen very inexperienced people have a very clear idea of their objectives and find ways to deliver way above those objectives.  I’ve also seen extremely experienced people, who have been previously considered successful in a number of roles, but really don’t have a clear idea of how to deliver on their objectives within their function and be successful.  In many of these circumstances, when failing, these folks hide behind their experience to suggest that the objectives were unreasonable.  This problem isn’t limited to any particular type of job.  I believe this problem is true whether talking about senior executives or junior engineers.

The large company corporate world is filled with C players.  The term “Peter Principle” was coined to describe this phenomenon in which people in large companies are promoted exactly one pay grade beyond what they can competently do and then stay in that role for the rest of their careers.  Large companies thrive on inertia and the core job description of a large company employee is to keep that inertia going and do nothing to screw it up.  If last year’s top line grew 8%, the job is to grow it 8% again, not to figure out how to make a step function change and grow it 20%. In attempting to achieve that 20% step function change, there is high risk of a misstep that could lead to a decline in sales.  That’s simply unacceptable. 

Large companies fire those who get F grades, because they are not at all productive.  They accept C players, because they are somewhat productive with guidance and B players are hard to find. It is very easy for a C player to seem moderately successful when progress is largely based on inertia.   Large corporations celebrate B players who can competently complete their job with minimum coaching and maintain inertia.  These are the heroes of large corporations. Innovation within a function is risky and can threaten inertia.  

Large companies have very few A players.  A players don’t want to be at large companies because, more often than not, corporate bureaucracy and process not only fail to reward, but actually punish A players.  By putting the objectives ahead of process and politics, A players step on bureaucratic toes and don’t retreat based on false territorial claims.  Though there are exceptions, few large corporations create cultures that give A players room to win.  It’s not fun trying to innovate at a large company when co-workers feel that you’re threatening the core inertia on which the business is based.  They’ll say things like “that’s just not the way things work around here.” 

By contrast, startups have no inertia and need to create momentum from nothing.  This is a very different job. Startups don’t succeed with people who deliver at a minimum acceptable level.  There really is little room for C players in a startup.  Employees who are somewhat productive, with lots of coaching, take a spot away from potential A players that can make a major impact on the success of a startup.  Startups generally don’t even succeed with a team of only folks who understand their objectives well and deliver them competently – the B players.  Competence across a team is simply not enough to build momentum from a standing start and learn quickly to iterate on strategy and tactics.  To succeed, most startups need some core team of A players; folks who can “write the book and not just read it.” These are an incredibly rare breed of people who not only have a clear idea how to competently accomplish their functional objectives, but actually lead the organization to innovate and be world class within their functional area.  They raise the bar on the entire organization.

Those who suggest that startups should only hire A players are grade inflators.  They’re calling B players A players.  The actual A players are too rare for this to be a practical hiring plan.  I advise my portfolio companies to be cautious when hiring candidates from large companies and focus on people who have already proven they can be successful in startup environments.  Another successful strategy is to hire less experienced candidates who show enormous upside in their ability to innovate.  When managing talent, startups need to help C players transition out of the organization and coach B players on the need to not just competently deliver their function, but drive toward innovation within that function.  Most of all, celebrate the A players and give them the room to explore hypotheses and make mistakes.  When interviewing, seek hires that not only understand how to competently deliver functional objectives, but also want to innovate within their function to build momentum from nothing.  One way these candidates can be identified during an interview is when they actually teach the interviewer something about how the company can win.  The best hires are those who have time and again proven they can innovate in a startup environment.  That’s startup gold. When you find those folks, don’t let them out of the building.