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How Bad Hiring Decisions Can Mess Up a Good Business Strategy

Posted by Lou Adler on Tuesday, August 27, 2013 Under: Technical Analysis

This is not a story about Steve Ballmer, Steve Jobs, Tim Cook or Carl Icahn, although they all help to make the point that business strategy is often overlooked when making critical hiring decisions. Hiring people who aren’t naturally driven by the same business needs, no matter how brilliant or capable, can often take a company off course. So can activist investors.

To begin the tale, some background:

There are Only Four Jobs in the World. Are You in the Right One?

In an earlier post I suggested that there were only four jobs in the world and four types of people. Putting a good person in the wrong job is a recipe for under-performance and dissatisfaction. Here’s the quick summary of the four work types:

Thinkers: these are the people who come up with new ideas, new products and new ways of thinking about processes, people, and tasks.

Builders: these are the people who convert ideas into reality. Typically they’re entrepreneurs, inventors, turn-around experts and built-from-scratch project managers.

Improvers: these are the people who take existing processes, procedures and ways of doing business and make them better. These people are also referred to as organizational managers.

Producers: these are the people who apply their skills or execute repeatable processes to deliver high quality work. Without them, nothing gets done well.

While all jobs have a mix of all four work types, one or two usually dominate. People are the same way. Getting the mix right is part of the hiring puzzle. While Jobs, Ballmer, Cook and Icahn are all Thinkers, it’s what they’re thinking about that matters. I’m not so sure what their next most dominate trait is, but this also matters when hiring people like them, or taking their advice.

Use the Corporate Lifecycle to Determine the Best Work Type Mix

In a more recent post, I contended that a company’s position on the corporate life cycle offered a means to match open jobs with the four work types. This idea is shown in the graphic. In the early stages of a company’s growth, Thinkers and Builders need to dominate the leadership positions. As companies grow and mature, Improvers and Producers need to become more important. Unfortunately, if they become too important, or take over, they can kill innovation and growth. This eventually leads to stagnation, under-performance and decline.

Use the Four Business Strategies to Rethink Hiring Needs

I must have read Michael Porter’s Competitive Strategy when I came up with the idea that business strategy could also be used to help make critical hiring decisions. At the time (mid ‘90s), I was helping small entrepreneurial companies build their management teams for a ride on the corporate life cycle. Porter’s work was a little too complicated for me, so I simplified it, and added a fourth strategy - Financial Maximization - that didn't seem fully considered in his work. As a starting point for developing the hiring plans, I asked the CEOs which of these four business strategies formed the foundation of their business:

Customer Focus & Market Growth: this strategy focuses on maximizing revenue growth and market share. It requires heavy investment in sales, marketing, distribution channels and advertising resources. Maximizing customer satisfaction is a key part of this. This is the underlying strategy for most high volume businesses. On the surface, this is the dominant strategy for LinkedIn, Google and Facebook, but there are shifts underway. Builders and Improvers thrive under this strategy.

Product Innovation: this strategy involves developing cutting edge technology sold at premium pricing. Market share is secondary to maximizing profit margins. This was Apple’s strategy when Steve Jobs was the CEO. It might have been Microsoft’s when Bill Gates was CEO. If this was the strategy under Ballmer, it was a failure. A product innovation strategy requires brilliant engineers, designers and product developers (all Producers/Thinkers), and a CEO like Steve Jobs. Along with the product-oriented Thinkers, entrepreneurial Builders need to dominate under this strategy.

Operational Excellence: in this strategy, growth comes from low cost operations combined with high efficiency every step of the way. This is Costco’s strategy. To pull it off, companies need to invest in state-of-the art systems, logistics, production systems and Improver/Producer type people. Apple seems to have shifted towards this strategy when Tim Cook took over as CEO, since “operational excellence” is part of his nickname.

Financial Maximization: maximizing shareholder value through state-of-the-art financial reengineering is the essence of this “show me the money!” strategy. Success here requires strong financial, investor and business development people who can mix and match assets with opportunity. Wall Street and the big investment banks epitomize this strategy. One doesn’t need to overthink Carl Icahn’s $1 billion investment in Apple as an attempt to shift its focus to wealth creation from producing and delivering great products. I personally hope he doesn't succeed.

As companies grow and mature, getting the right strategy and the right people in critical positions is essential for maintaining long-term growth. If the CEO’s core and primary focus is not fully aligned with the underlying business strategy, companies can quickly lose their way. Apple seems to be currently undergoing this type of transformation, facing increasing pressures from customers and investors alike. Where it winds up is hard to imagine. Microsoft has already gone through this type of transformation, and on a financial basis, it’s clear it’s been unsuccessful. Google and Facebook are entering similar unknown territory. Regardless of the company, the right hiring decisions will ensure its continued success, and the wrong ones will put it on a path to mediocrity.

There are only four jobs in the world and four business strategies. When these two ideas are considered from the perspective of where a company is on the corporate life cycle, it’s not hard to make the right hiring decision. Most companies don’t. We all suffer as a result.

___________________________________________

Lou Adler (@LouA) is the CEO of The Adler Group, a full-service talent acquisition consulting firm. He’s the creator of Performance-based Hiring and the author of the Amazon Top 10 business best-seller, Hire With Your Head (Wiley, 2007). His new book, The Essential Guide for Hiring & Getting Hired, (Workbench, 2013) has recently been published. For more hiring advice join Lou's LinkedIn group and follow his Wisdom About Work series on Facebook.

In : Technical Analysis 


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