If you can remember your old elementary school days, today’s employee talent is often described by the term A, B, or C player. With a B-level employee who is a basic and quite capable “Stable Eddie,” the The zenith of employee types is Player A. These are the people who are already proposing solutions before most have even identified that a problem exists. They are the “holy grail” of employee types and coveted by everyone. But why might you ask, and how do you quantify the value an employee A brings to the table compared to a B or C? McKinsey (of War for Talent fame) actually created an employee value index based on a set of criteria they use to separate the best from the rest. What they found is that companies that had more A-players were historically able to offer a 22% higher return to shareholders compared to companies with lower-type employees. The bottom line is that better employees increase your bottom line.
Suppose in a sales organization, an average good employee or player B was producing at 100% quota (say $500K per year). Using that as a reference, that would mean Seller A could be producing at 125% (or $625,000), while Seller C could be producing at 75% (or $375,000). Given that a company’s sales target is $3 million dollars, the question is how many employees of each type would you need to reach your sales target? The answer would be:
4 A’s or $3,000,000 / $750,000 in sales per employee
6 B’s or $3,000,000/$500,000 in sales per employee
8 It is 0r $3,000,000/ $375,000 of sales per employee
Commissions aside, if you only consider that a base salary could amount to $80,000, that would mean it would cost you $160,000 more to achieve the same sales result with all the B players and $320,000 more if your entire sales team consisted of in C players. Of course, no one deliberately sets out to hire an underperforming employee. The fact is that every organization tends to be a mix of all types of employees. The point here is that those organizations that are good at figuring out what the characteristics of their A-players consist of are the ones that can move the fastest and be profitable the fastest.
In large companies with perhaps hundreds of salespeople (or computer engineers or programmers), the productivity lapses of one or two underachievers tend to be masked by the outstanding employees who make the difference. In fact, some would argue that these companies can even afford to see if their underperforming companies might be latecomers and worthy of a longer look. Early-stage company founders generally don’t have those luxuries. In fact, if the addition of each new employee isn’t producing additional results quickly, spending cash to keep these people around and see if they flourish is generally a luxury owners simply can’t afford. When talking about the difference between break-even or profitability, every new hire by an early-stage business owner could be a make-or-break proposition.
Many of us have been there. It’s the old David and Goliath story, right? As the “little guy,” I need the best of the best talent to get my business off the ground. I need the person that GE is looking at or that Merck is making an offer to. The problem is that the market compensation value of that person is outside my price range. If I bring them on board, I could be spending a cash spend rate that is unsustainable. Many early-stage business owners face this daily dilemma of hiring what they need versus what they can afford. Is there any way you can overcome this obstacle?
I may be dating myself here, but the guys of my generation, when faced with some tough decisions, routinely resorted to creating their Ben Franklin lists. The Ben Franklin is nothing more than a list that you create by looking at all the positive and negative impacts of your choice. By completing both sides and reviewing them, you help crystallize what your decision should be. So with the question “what can I offer new hires who might be comparing my company to more traditional employment options?”, you may want to build your Ben Franklin list. I will assume that as the owner, you are passionate about your business. I’ll assume you don’t see many negatives in joining your team. That’s a good thing because if you’re not excited about what you have to offer, it will come through loud and clear in your communication with prospective employees. So let’s talk about a list of positives that might reveal why your job offer is attractive to top talent.
- Your company is a fun and exciting place to work – If any of you have worked for big companies, you know that some days it seems like you go from meeting to meeting talking about what you want to do, but somehow never get there because of “big company roadblocks.” I read somewhere that once a company gets over 100 employees, it generates enough communication and paperwork between them to consume most people’s working days. The problem is that nothing is being done to serve a customer or minor things like that. The reality is that employees are looking for work environments where their work makes a difference and they can be a part of something great. If you have one in your company, let them know.
- talking about the office – If you read the headlines, you may have noticed that we have a little yo-yo fuel crisis in this country. It seems that many are working just to be able to afford to commute from work to home. And why travel to the office? Well, because that’s where “Big Brother” says you need to be so they can determine if you’re effective or not. Imagine if you were an employer who didn’t care where you work from or what time of day you work. Maybe he only requires three days a week at the office instead of five. Or maybe there was no office and everyone was working from virtually anywhere in the world. Just as the marketing of products and services is becoming more personalized to the individual, so is employment. If you have an employment brand that says we trust our employees to do their jobs no matter where you are, you have a very attractive option to consider.
- small is not bad – In many work circles, the small transmits instability or high risk. It is an environment that scares many potential employees. Trust me, as a new business owner; these are not the people you want anyway. Those kinds of people could spend a 30-year career with a company and finally make a decision in year 30 that you need them to make on their first day of employment with you. There are many employees who want to make decisions now because they know that this is how they will learn a business. You just need to communicate that decision-making and ownership of your role is welcome and encouraged.
- Don’t forget about the boomers – People tend to generalize about new ventures and think that it is a game for young people. You know; It requires a lot of energy and a lot of moving parts. Guess what? If you were to follow workforce demographics like I do, you would realize that the fastest growing segment of the workforce between now and 2016 will be employees age 55 and older. In fact, although this group is expected to grow by around 70%, those under 55 will only grow 2.4% and those under 24 will decrease by 6.9%. Boomers not only represent a job offer with some of the best brainpower on the market, they are leaving the traditional workplace with huge portfolios looking to invest in and work for new companies.
- It’s not always about the money – I’ve been in the talent acquisition game for a long, long time. I have never seen a survey of workers in 30 years that ranked compensation as the number one reason employees were drawn to or stayed with an employer. Usually it comes down to opportunity and someone who values what he does. As an early-stage business owner, you have a powerful weapon at your disposal in the war for talent. It is more powerful than the best salary that can be offered to someone. What is this magic weapon? Equity in your young company. More to the point sweat fairness.
Think about it. Knowing what we all know now, who wouldn’t have accepted an offer from a college dropout geek like Bill Gates who joined Microsoft? We all would, but back then, if you sat across from him not knowing what the future held, you’d have your doubts. During my days in the staffing industry, I actually had Microsoft as an account and made a lot of trips to Redmond, WA. I had the opportunity to meet many “Microsoft Millionaires”. And who were these people? Well, people like you and me who sat in front of Bill Gates, listened to his vision and accepted the only thing he had to offer, which was a piece of his company in exchange for his sweat. The rest is history and the American dream. So the next time you think you can’t compete for top talent, think again. Who wouldn’t pass up an additional $25,000 base salary compared to an equity stake in Microsoft, or his company for that matter? It’s all in your presentation of the opportunity and the possibility of wealth creation. The tendency may be not to want to part with equity, but it’s rare that one person can do it all on their own. When inviting others to the party, you need to surround yourself with people who praise the things you can’t do but desperately need.
It’s a little-known fact that early-stage startups have accounted for 65% of all net new job growth in the US over the last 17 years. In fact, if you look around the world, some 250 million people were involved in business activities in about 80 different economies. If you’re a new business owner, you’re not alone. You belong to a very large community of people who are brainstorming and helping to create not only the products and services used by the world’s consumers, but also equity for the many of your people who choose this path of employment over all others.
