The Secret to a Billion-Dollar Business
WHY YOU SHOULD CARE
Keeping your top employees engaged during their prime years is the ultimate force multiplier.
CEO and co-founder of OZY
One of my favorite lines from the Dirty Harry films is not the “make my day” classic; it is the peeved response given by inspector Harry Callahan, played by Clint Eastwood, upon being informed that he is being transferred from active homicide duty to personnel. “To personnel? That’s for assholes!”
Regardless of whether you share Harry’s view of the human resources profession, one thing is increasingly clear: Investing in HR and integrating it into your operations not only saves your business a lot of headache, it also vaults your business way ahead.
If you want to have a prayer of growing your business into a billion-dollar player, then you must retain your top talent during their peak performance years.
I asked some folks who have spent years advising major companies about the secret to building a billion-dollar business. Eric Dobkin, founder of the equity capital markets unit at Goldman Sachs and an expert human resources manager, summarized the surprising consensus like this: If you want to have a prayer of growing your business into a billion-dollar player, then you must retain your top talent during their peak performance years. Otherwise, forget it.
Recognizing talent early and keeping your best employees during their prime years is common sense in the sports world, even if you have to overpay in the immediate term. Savvy franchises like the Tampa Bay Rays, run by a few former Goldman execs, try to lock up their most talented young players (e.g., Evan Longoria) for their prime years, handing out long-term contracts early on.
Just as in sports, the difference between running a mediocre franchise and being a perennial winner in the business world is retaining your best people. Remember the 10,000-hour rule? As Malcolm Gladwell illustrated in Outliers, it can take around 10,000 hours of deliberate practice to hit elite performance levels. That rule is now gospel among aspiring musicians and performers, but what if the business world had similar metrics? After all, 10,000 hours equates to about 40 hours of full-time work over five years —almost exactly the time that many top performers are jettisoning their current jobs in search of greener pastures. As a result, employers are losing their best and brightest stars just as they are beginning to shine.
Such a cavalier approach to retaining talent may have been fine in a pre-Internet age, given the effort required to find a new job. But dissatisfied, top-performing employees now have the leg up on their employers, with a vast array of opportunities at their feet, including the availability of seed capital to launch their own projects. A recent survey in Forbes found that the risk of a talent shortage is the No. 2 concern of company executives today, up from No. 29 a few years ago.
So, how do you keep your top talent engaged and in place?
For starters, it helps to give high performers a sense of ownership in the company, whether through a literal financial stake or by giving them creative challenges and investing in their solutions. Providing flexible and pleasant working environments is also key, as illustrated by recent investments by top Silicon Valley firms in perk-laden office spaces. But, most importantly, pay them whatever it takes (just ask Tim Cook at Apple).
As Edward Lawler, a professor of business at the University of Southern California, reminds us, “Jobs don’t have a worth; individuals do.” Retaining top individuals means paying what they are worth and not what their job title might dictate. Firms in emerging markets like the Middle East learned these lessons in talent management long ago and are out-innovating their Western counterparts in many ways today. Is it any wonder that around 20 percent of the largest companies in the world are from developing countries, compared to just 4 percent back in 2004?
The future belongs to those companies willing and able to identify their best players and keep them in uniform. And it also helps if you can keep the assholes out of personnel.