Does your company's business strategy and CEO drive talent needs, or does HR?
I was recently talking with a CEO of a small- to mid-sized business the other day about how to build out her executive team. She contacted me based on my Inc. post regarding the four work types: thinkers, builders, improvers and producers.
In the post I contended that these four work types needed to be considered as a company grows and matures. In this case thinkers and builders are needed to dominate the types of people hired during start-up and rapid growth, with a shift to more improvers and producers as growth stabilizes.
She then asked how business strategy impacts the hiring decision, since she sensed that this needed to be integrated with the company's growth phase.
This prompted a discussion around the following four primary business strategies:
1. Product excellence
This is comparable to Apple's strategy driven by Steve Jobs to be a market leader at the product level. This strategy allows for high prices and higher margins.
Based on this point alone, she suggested that maybe putting Steve Ballmer as the head of Microsoft was a bad strategy decision, since he wasn't product-focused enough, and as a result, the company lost its way. True or not, from a talent selection standpoint, if a company's strategy is driven by product excellence it can't compromise on the quality of the people hired who lead this effort, whether it's the CEO or the product designer.
2. Operational efficiency
Consider UPS, Costco, Lenovo and any company that needs to watch its margins closely to see this strategy in action. It means being great at execution, cost control and process efficiency. These companies require Six Sigma thinking at every step, even during startup. Obamacare is a perfect example of this strategy gone awry. It didn't take much hiring insight to know what was going to happen from day No. 1, with the wrong people selected to lead and implement the effort. Now consider the people who came in to fix the problem: They all have a proven operational efficiency mindset.
3. Customer focus
This strategy emphasizes meeting customer needs in some way with the emphasis on market share and sales growth. I suggested Twitter, LinkedIn and Amazon as prime examples of this business strategy. We debated whether Amazon should be in the group, since it also has an operational efficiency component as part of its business strategy. Sometimes a customer driven strategy requires giving up margin to gain share, but eventually the variable costs need to be big enough to cover fix costs. Marketing, advertising, and sales leaders need to drive this type of strategy.
4. Financial maximization
Think private equity, venture capital or turnaround groups who invest in companies with the prime goal of receiving a huge return on investment. The CEO I was speaking with took it a step further, suggesting that for some companies this is a prime strategy. For others, like hers, it would be the result of successfully delivering on one of the other strategies.
However, when this is the driving strategy, the people hired need to immediately consider what it takes to deliver significant financial rewards in the short term. If it's a secondary strategy, the people hired need to think about building long-term value as part of their ongoing decision-making.
While most companies have a blend of all of these core strategies, one or two usually dominate. And selecting great people to build and lead a company is a strategic decision that few hiring managers and human resources leaders fully appreciate.
I suggested this might be the fault of CEOs, since most only give its importance lip service. The CEO I was speaking with pondered this point, and then asked me for a suggestion on how CEOs like her might operationalize it.
"What about making hiring great people the No. 1 performance objective each manager is measured on, rather than having it implied?" I said.
And she agreed, that it might even be the most most important thing she could do grow her company within the next few years.
No doubt she'll make it. While many business leaders understand the importance of hiring the best, most delegate the process and the strategy to their HR group. While many good people will be hired as a result, their focus is on avoiding mistakes, not hiring the best.
This is a big shift in thinking, but this is where the CEO needs to get involved and make sure everyone walks the talk, not just talks about it.