The Hard Thing About Hard Things by Ben Horowitz provides a raw and insightful account of the challenges faced by a CEO in the tech industry. Unlike many business books that offer formulas for success, Horowitz provides a realistic portrayal of the difficulties and complexities involved in building and leading a company. Drawing from his personal experiences, he shares practical advice and hard-earned wisdom that can benefit anyone involved in the entrepreneurial journey.
Give Ground Grudgingly
In “The Hard Thing About Hard Things,” Ben Horowitz introduces the concept of “Give Ground Grudgingly,” emphasizing maintaining growth while minimizing degradation. This principle advises leaders to make necessary sacrifices but resist unnecessary losses. It’s about finding the balance between expanding the business and preserving its core values and capabilities. Essentially, Horowitz is advocating for cautious and strategic growth, ensuring that as the company evolves, it retains its essential strengths and integrity, thus degrading as slowly as possible.
American Football Analogy
There is a great analog to this concept in American football. An offensive lineman’s job is to protect the quarterback from onrushing defensive linemen. If the offensive linemen attempt to do this by holding their ground, the defensive lineman will easily run around them and crush the quarterback. As a result, offensive linemen are taught to lose the battle slowly or to give ground grudgingly. They are taught to back up and allow the defensive lineman to advance, but just a little at a time.
When you scale an organization, you will also need to give ground grudgingly. Specialization, organizational structure, and process all complicate things, and implementing them will feel like you are moving away from common knowledge and quality communication. It is very much like the offensive lineman taking steps backward. You will lose ground, but you will prevent your company from descending into chaos.
Final Thoughts
In The Hard Thing About Hard Things, Ben Horowitz does not sugarcoat the entrepreneurial experience. Instead, he provides a genuine look into the grit required to lead a company through its toughest times. His insights are invaluable for current and aspiring leaders who seek to understand the true nature of building and sustaining a successful business. This book is a must-read for anyone looking to gain a deeper understanding of the complexities of entrepreneurship.
Download My Notes
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What we eventually accomplish in life may depend more on our passion and perseverance than on our innate talent - Angela Duckworth, Grit (2016)
In Grit: The Power of Passion and Perseverance, Angela Duckworth unpacks the attributes/traits of those individuals who possess grit which is defined as holding the same top-level goal for a very long time and having the passion and perseverance to see your ultimate goal through.
She challenges the unconscious biases we all have towards talent, especially in the way that we all rush to anoint people as extraordinarily talented whenever they accomplish a feat worth writing about. As much as talent counts, effort counts twice as you can see in the following picture of skill and achievement:
What we all achieve depends on talent (how fast we improve skill) and our effort. But as you can see in the above picture, effort factors in the calculations of achievement twice. This is because effort builds skill and at the very same time, effort makes skill productive!
Similar to the findings of Daniel F. Chambliss by the end of the book it is clear the most dazzling human achievements are, in fact, the aggregate of countless individual elements, each of which is, in a sense, ordinary. High level of performance is, in fact, an accretion of mundane acts.
Steve Young: An Example of a Paragon of GRIT
“You cannot quit. You have the ability, so you need to go back and work this out.” - Steve Young’s Dad, (circa 1980s)
Steve Young is the epitome of a GRIT Paragon. When he was a freshman at BYU, he was the 8th string quarterback and was barely even getting any practice time. Like most freshmen when things don’t go according to plan, Steve called his father (whose nickname was actually Grit).
Steve’s dad basically said the following: “You can quit but you can’t come home because I’m not going to live with a quitter. You’ve known that since you were a kid. You’re not coming back here.”
With the words of his father ringing in his ears, Steve Young stepped up his game and put the work in. By all accounts, he threw over 10,000 spiral passes at a practice net the summer between his freshman and sophomore year. By his sophomore year, he had risen to QB2 and by his junior year he was BYU’s starting QB. In his final year with the Cougars, Steve Young won the Davey O’Brien award for the most outstanding college quarterback in the country.
Then … It happened all again when he got to the San Francisco 49ers. He spent 4 years on the bench as the backup to four-time Superbowl champion, Joe Montana. And because of his experience at BYU, Steve stayed, learned, and flourished under Montana’s apprenticeship. He eventually got his chance and the rest is history.
Steve Young: A Gridiron Paragon of Grit. From every touchdown to each hard-fought comeback, his relentless determination on the field defines the true essence of grit. A quarterback icon who faced challenges head-on, Young embodies the spirit of unwavering passion and perseverance.
When Steve Young retired, he was the highest-rated quarterback in NFL history.
Final Thoughts
Superlative performance is really a confluence of dozens of small skills or activities, each one learned or stumbled upon, which have been carefully drilled into habit and then are fitted together in a synthesized whole.
People with grit are paragons of perseverance and effort. As much as talent counts, effort counts twice as much with them. They develop their skills by hours and hours and hours of deliberate practice beating on their craft. They master the capacity to do something repeatedly, to struggle, and to have patience over the long-term. But most importantly, they develop the stamina to go over something again and again and again no matter how difficult it is.
In closing, greatness is actually doable because greatness is many, many individual feats, and each of them is doable. When it comes to how we fare in the marathon of life, effort counts tremendously, and consistency of effort over the long run is everything. Great things are accomplished by those people whose thinking is active in one direction, who employ everything as material, who always zealously observe their own inner life and that of others, who perceive everywhere models and incentives, who never tire of combining together the means available to them.
Little Habits and Characteristics That Can Make You More Gritty
Seek to continuously improve
Focus on the daily discipline of trying to do things better than you did yesterday
Remember that the 10-Year Rule Applies to developing skills: thousands and thousands and thousands of hours spent in deliberate practice over years and years and years
Love what you do
Remember that sustained effort over the long-run counts more than talent
Interpret setbacks and failure as a cue to try harder rather than as confirmation that you lack the ability to succeed
“Riding Shotgun: The Role of the COO” by Nathan Bennett and Stephan A. Miles is an insightful exploration of the multifaceted responsibilities and significance of the Chief Operating Officer (COO) position within organizations. The book delves into the challenges and opportunities faced by COOs, shedding light on their pivotal role in driving operational excellence, strategic execution, and organizational change.
Drawing from extensive research and real-world examples, the authors provide valuable insights into the qualities, skills, and strategies that make COOs effective leaders and trusted partners to CEOs.
In their analysis, Bennett and Miles identify seven distinct types of COO jobs, each with its own unique focus and purpose. These include the Executor, responsible for daily leadership in operationally intensive businesses; the Change Agent, leading strategic initiatives in response to dynamic environments; the Mentor, guiding and supporting young or inexperienced CEOs; the Co-Leader (Two-In-a-Box), working collaboratively alongside the CEO to balance strengths; the Trusted Partner (Other Half), fostering a strong and cohesive leadership team; the Heir Apparent, preparing future CEOs by imparting business knowledge; and the MVP, retaining executive talent without a specific business imperative.
Recognizing the parallels between sports and business, I aim to leverage various sporting partnerships to delve deeper into the diverse roles of the COO. By drawing connections between the dynamics of sports teams, I hope to help you gain deeper insight into the multifaceted nature of this critical executive role.
Ed Reed, The Trusted Partner
Ray Lewis and Ed Reed Formed a Strong Co-Leader Partnership During Their 11-Year Run with the Baltimore Ravens
During their Super Bowl XLVII-winning campaign in 2013, the Baltimore Ravens showcased their defensive prowess, despite being ranked 12th in total defense. What set them apart was the remarkable partnership between Ray Lewis and Ed Reed. Their collaboration as Co-Leaders began in 2002 and spanned an impressive 11 years, solidifying their status as one of the most formidable linebacker/safety tandems in NFL history. Together, they anchored a consistently outstanding defense that stood among the league’s best.
Ray Lewis and Ed Reed epitomize the essence of a Trusted Partner relationship. Their deep bond and understanding on the field allowed them to anticipate each other’s moves, offering unwavering support and collaboration. With Lewis’s commanding presence and Reed’s exceptional playmaking skills, they formed an unbreakable foundation for the Ravens’ defense. Their synchronized efforts and remarkable synergy elevated their team to new heights.
This Trusted Partner dynamic in football can be likened to the role of a Chief Operating Officer (COO) in the business world. Just as Lewis and Reed established a reliable and cohesive unit, a COO serves as a Trusted Partner to the CEO, fostering a strong partnership at the top. This collaboration ensures a harmonious and effective leadership team, capable of driving the organization towards success. The impact of a Trusted Partner, both in football and business, cannot be understated, and Lewis and Reed’s legacy as an exceptional tandem serves as a testament to the power of such a partnership.
Patrick Mahomes, The Heir Apparent
Alex Smith and Patrick Mahomes Formed a Strong Heir-Apparent CEO-COO Relationship During the 2017 Season with the Kansas City Chiefs
During his tenure from 2013 to 2017, Alex Smith served as the starting quarterback for the Chiefs, leading the team to the playoffs on four occasions and securing their first playoff victory in over two decades. However, in 2017, the Chiefs made a strategic decision to trade up and select Patrick Mahomes as Smith’s long-term successor. Coach Andy Reid demonstrated transparency with Smith, providing the reassurance he needed to embrace the role of mentoring Mahomes. Just a year later, Smith was traded, paving the way for Mahomes to step in as the new starting quarterback. This scenario exemplifies the Heir-Apparent CEO-COO structure, which can be instrumental in ensuring successful succession planning.
In this context, the COO plays the role of the Heir Apparent. Similar to the quarterback transition, the COO is identified and groomed as the successor to the CEO. By implementing a well-executed Heir-Apparent CEO-COO structure, organizations can facilitate a seamless transition of leadership. The COO, under the mentorship and guidance of the CEO, gains valuable experience, insights, and knowledge necessary to assume the top role when the time comes. This strategic approach allows for continuity in leadership and ensures that the organization can thrive even during leadership changes.
Venus Williams, The Mentor
Venus Williams and Serena Williams Formed a Strong Mentorship CEO-COO Relationship During Their past 25 years on the court
Venus Williams stands as one of the most compelling examples of mentorship in the world of tennis. Serena Williams herself acknowledges that her journey would not have been possible without Venus, but I believe the impact goes even further. The influence of Venus extends to players like Coco Gauff, Naomi Osaka, Sloane Stephens, and Madison Keys, who have all been inspired by her trailblazing presence.
Venus brought a new era to tennis with her remarkable speed, distinctive style, and unapologetic confidence. However, her role as a Big Sister went beyond her on-court achievements. She served as a mentor, shielding Serena from the resistance of the tennis establishment and the pervasive racism that often accompanied their rise to stardom.
This mentoring dynamic can be likened to the role of a Chief Operating Officer (COO) in the business world. In both cases, the mentor figure provides guidance, support, and protection, empowering their mentee to navigate obstacles and reach their full potential. Venus’s mentorship not only elevated Serena’s career but also paved the way for future generations of tennis players, exemplifying the transformative impact of a dedicated mentor, both on an individual and broader scale.
Scottie Pippen, The Co-Leader
Michael Jordan and Scottie Pippen Formed a Strong Two-In-A-Box Partnership During Their 10-Year Run at the Top of the NBA
Michael Jordan and Scottie Pippen established an extraordinary and cohesive Co-Leader partnership during their dominant ten-year reign atop the NBA that ended in historic double three-peats. Throughout their intertwined careers, Jordan and Pippen exemplified the essence of a Two-In-a-Box partnership. Their collaboration on and off the court showcased remarkable synergy, mutual understanding, and shared goals. Pippen’s exceptional abilities, combined with Jordan’s unparalleled talent, propelled the Chicago Bulls to unprecedented success, and Pippen flawlessly assumed the role of Michael Jordan’s Co-Leader.
Their dynamic duo not only achieved individual greatness but also fostered a collective strength that elevated the entire team. Together, they formed one of the most electrifying and potent duos ever witnessed in the NBA. In drawing parallels to the COO’s role, Jordan and Pippen’s Co-Leader partnership exemplifies the power of a collaborative approach. By working together, leveraging their respective strengths, and nurturing a harmonious relationship, they propelled the Bulls to the pinnacle of the NBA. The impact of such a Co-Leader dynamic extends beyond basketball, highlighting the significance of a strong and complementary partnership in driving organizational success.
Luis Figo, The Change Agent
Luis Figo Served as Real Madrid’s Change Agent During the First Era of the Galácticos
In 2002, Luis Figo emerged as the winner of the prestigious Ballon d’Or, recognizing him as the top football player in Europe. This accolade came shortly after his controversial transfer from Barcelona to their arch-rivals, Real Madrid.
Figo’s move to Real Madrid marked him as the chosen Change Agent by Florentino Pérez, who aimed to usher in an era of high-profile, world-class superstars. The 62 million euro transfer fee was just the beginning of a series of extravagant signings from 2000 to 2006, during which Madrid spent well over 290 million euros.
Over his five-year tenure with Real Madrid, Figo made a significant impact, with over 200 appearances and notable triumphs, including two league titles and the 2002 Champions League. His arrival injected new vitality into Los Blancos, albeit at the expense of his former club in Catalonia. Organizations often require a COO to serve as a Change Agent, focusing on implementing specific organizational changes. In this role, the COO spearheads initiatives such as turnarounds, major organizational transformations, or planned rapid expansions, while the CEO maintains the day-to-day operations. When executed effectively and in balance, this approach can lead to remarkable progress and success.
Conclusion and Final Thoughts
Real-world examples, such as Venus Williams’ mentorship and the dynamic partnership of Michael Jordan and Scottie Pippen, underscored the pivotal role COOs play. Their ability to nurture talent, forge collaborative partnerships, and spearhead transformative change has been demonstrated time and again.
The COO acts as a catalyst for success, blending leadership, strategic acumen, and operational expertise. Their role as mentors propels organizations forward, paving the way for the development of future leaders. As trusted partners, they foster a harmonious and effective leadership team, while their role as change agents propels organizations toward new heights. By recognizing and embracing the multifaceted nature of the COO’s role, organizations can unlock their full potential and confidently navigate complex challenges. The power of the COO lies in their ability to lead, mentor, collaborate, and drive transformative change. Through harnessing this power, organizations lay the foundation for thriving and sustainable growth.
“There are two systems of thought: The Intuitive System 1, which does the fast thinking, and the effortful and slower System 2 which does the slow thinking, monitors System 1, and maintains control as best it can within its limited resources.”
--- Daniel Kahneman, Thinking Fast and Slow (2011)
Introduction
The fact remains whether we like to admit it or not, our minds are susceptible to systematic errors in thinking and judgment. And when we are under pressure or lacking total information, our minds are strongly biased toward causal explanations. To wrap our minds around all the ways we make mistakes in our thinking and judgment, Daniel Kahneman simplified the mind into two systems:
The Intuitive System 1 thinks VERY FAST
The effortful and controlled System 2 thinks VERY SLOWLY
The point Kahneman drives home in his book is by learning to recognize these patterns of thinking in yourself, you can minimize the mistakes when the stakes are highest.
System One … The Hare … All Gas No Brakes!
To put it quite simply: System 1 thinking is impulsive and intuitive and is designed to jump to conclusions from very little evidence. What’s worse, System 1 isn’t designed to know the size of the jumps it is making in its thinking. With System 1, WHAT YOU SEE IS ALL THERE IS (WYSIATI), and because of this, only the evidence at hand counts. In the absence of an explicit context, System 1 will generate its own context, and it really excels at constructing the best possible story … Are you scared yet? If not you should be!
System 1 is highly adept in one form of thinking … Automatic and Effortless. It identifies causal connections between events, sometimes even when the connection itself is spurious.
System Two … The Tortoise … All Brakes No Gas!
Like most things in life, there is a yin-and-yang or balance to things. Your brain’s method of thinking is no different. If System 1 is your default, fast, and reflexive method of thinking, System 2 is the opposite of this. To be specific, System 2 controls thoughts and behaviors, and it is the only system that can follow rules, compare objects on several attributes, and make deliberate choices between options.
Okay… Now What?
Here is the thing… Regardless of Systems 1 and 2, our brains are pattern-matching machines subject to a plethora of cognitive biases. Here are a couple of my favorites:
Anchoring Effect
Availability Heuristic
Halo Effect
Hindsight Bias
Representativeness Heuristic
We often ignore relevant statistical facts and we rely almost exclusively on rules of thumb. When you factor in that System 1 is our default fast way of thinking, and the deep, deliberate, and controlled System 2 way of thinking is lazy and hard to consistently deploy, it’s not surprising that we humans make a ton of decision-making errors. Often, we are inconsistent in our evaluations, and we often make errors in summary judgments. Kahneman found in his research that humans when asked to evaluate the same information twice frequently give different answers.
Reading through Daniel Kahneman’s work convinces me of a couple of solutions to human decision-making shortcomings that a lot of us humans are not going to like to hear… Humans need help to make good decisions, and there are informed and unobtrusive ways to provide this help:
Whenever we can replace human judgment with a formula, we should at least consider it.
Since machines are more likely than human judges to detect weakly valid cues, we should consider complementing or augmenting human-only judgments with human + machine judgments
Maximize predictive accuracy by using machine logic, especially in low-validity environments
Conclusion and Final Thoughts
In Thinking Fast and Slow, Daniel Kahneman set out to improve the ability in all of us to identify and understand errors of judgment, and choice in others, and ultimately in ourselves! He wanted to provide his readers with a richer and more precise language to discuss decision-making and thinking within the brain. Because our System 1 method of thinking is our default and intuitive way of thinking, it’s easy for us to ignore relevant statistical facts that don’t fit the patterns we want. By nature, our slower and more methodical way of thinking (System 2) takes more time than we want and is lazy by nature. Humans need help to make good decisions because there is overwhelming evidence that we Humans can’t think rationally 100% of the time.
What Will I Do Differently As a Result of This Book?
Learn to recognize situations in which mistakes are likely and try harder to avoid making significant decision-making mistakes when the stakes are high
Understand that even when I think that I am being rational there is a good chance my default System 1 way of thinking has quickly pattern-matched and downplayed disconfirming information.
Understand how deep the halo effect goes in clouding/painting my judgment of a person with a favorable first impression versus not.
The major source of error in forecasting is our prevalent tendency to underweight or ignore distributional information. We forecast based on information in front of us (WYSIATI).
Consequently, I will therefore make every effort to frame the forecasting problem so as to facilitate utilizing all the distributional information that is available
Here is the thing … We are pattern seekers, believers in a coherent world in which regularities appear not by accident but as a result of mechanical causality or of someone’s intention.
This fact means that we humans often misclassify random events as systematic and we are far too willing to reject the belief that much of what we see in life is random.
This means for me, as I continue to plan I MUST EMBRACE THE RANDOMNESS OF LIFE!
Lastly, beware when I am in a good mood and I have had limited sleep … My System 2 will be weaker than usual and I should pay extra attention to my default System 1.
Downloadable Content
Thinking Fast, and Slow is a must-read for anyone interested in gaining insights into the Human mind and the manner in which decisions are made. The following book notes have been created to help you with your understanding of Daniel Kahneman’s concepts within Thinking Fast, and Slow.
"A business that wants to be able to innovate, wants to have a chance to succeed and prosper in a time of rapid change, must build entrepreneurial management into its own system!"
--- Peter F. Drucker, Innovation and Entrepreneurship (1985)
Introduction
The book on Innovation and Entrepreneurship by Peter F. Drucker was written in 1985 and is still very relevant in 2023. At the heart of his argument lies two very simple beliefs:
Management is the new technology (rather than any specific new science or invention) that is making the American economy into an entrepreneurial economy.
Innovation and Entrepreneurship are capable of being presented as a discipline, capable of being learned, and capable of being practiced.
Drucker posits that innovation and entrepreneurship are “risky” mainly because so few of the so-called entrepreneurs know what they are doing. In order to reduce the risk of innovation and entrepreneurship and increase your likelihood of success, you need to establish purposeful innovation across the following 7 sources of innovative opportunity:
The unexpected – the unexpected success, the unexpected failure, the unexpected outside event.
The incongruity – between reality as it actually is and reality as it is assumed to be or as it “ought to be”
Innovation based on process need
Changes in industry structure or market structure – that catch everyone unawares
Demographics (population changes)
Changes in perception, mood, and meaning
New knowledge, both scientific and nonscientific
Therefore, innovation should be systematic and consist of a purposeful and organized search for changes. It should also consist of a systematic analysis of the opportunities such changes might offer for economic or social innovation.
TheSystem: Establish Entrepreneurial Management
Peter F. Drucker is the father of modern business management and in this book, he puts forth a pathway for entrepreneurs to follow. Successful entrepreneurship and innovation are based on luck or genius. It’s based on the systematic and purposeful search for opportunities within the seven sources discussed in this book.
The System of Success is establishing Entrepreneurial Management!
Entrepreneurial management of most new ventures has 4 main requirements:
It requires, first, a focus on the market
It requires, second, financial foresight, and especially planning for cash flow and capital needs ahead
It requires, third, building a top management team long before the new venture actually needs one and long before it can actually afford one
Finally, it requires the founding entrepreneur a decision with respect to his or her own role, area of work, and relationships
If you can establish this framework in your organization or new venture, you will get purposeful innovation at low risk. Drucker makes sure to state unequivocally that innovation and entrepreneurship should not take unnecessary risks. Successful innovators and entrepreneurs are not “risk-takers.” They try to define the risks they have to take and minimize them as much as possible, and entrepreneurial management helps them do that.
What I Will Do Differently?
Invest more time employing “Creative Imitation” and “Entrepreneurial Judo.” As Chapter 17 discusses, the Japanese made the deliberate decision 100 years ago to concentrate their resources on social innovations, and to imitate, import, and adapt technical innovations with fantastic success. Using entrepreneurial judo, one first secures a beachhead in the market leader’s backyard. Once the beachhead is secured with adequate market and revenue streams, you then move in on the rest of the beach.
Pay more attention to the changes in Global Demographics. In Chapter 7, Drucker discusses how Demographics are doing some funky but predictable things right now. The developed countries are seeing a rise in the
aging population as birth rates fall and people live longer, while Third World Counties are seeing a tidal wave of young adults. Aging populations historically have caused labor shortages in places like Japan and put outsized pressure on government pension plans like in Italy. Consequently, there are huge innovation and entrepreneurial opportunities.
It’s cliche but Keep It Simple Stupid. In Chapter 11, Drucker discusses his principles for innovation. In order for an innovation to be effective, it must be simple and focused. It should do only one thing and that one thing well. Throughout the history of mankind, all effective innovations are breathtakingly simple!
Downloadable Content
The book on Innovation and Entrepreneurship was written by Peter F. Drucker in 1985. The year is 2023 and his principles are still relevant. As stated above, a business that wants to be able to innovate, wants to have a chance to succeed and prosper in a time of rapid change, must build entrepreneurial management into its own system. The following raw notes were created by me to help streamline a deeper understanding of Peter F. Drucker’s concepts in Innovation and Entrepreneurship. Hope you enjoy it!
"Let everyone else call your idea crazy ... just keep going. Don't stop. Don't even think about stopping until you get there, and don't give much thought to where "there" is. Whatever comes, just don't stop."
--- Phil Knight, Shoe Dog (2016)
Introduction
In 1965, Phil Knight discovered a philosophy by which he centered everything he was doing: To have cash balances sitting around doing nothing made no sense to me. Sure, it would have been the cautious, conservative, prudent thing. But the roadside was littered with cautious, conservative, prudent entrepreneurs. I wanted to keep my foot pressed hard on the gas pedal.
By 1975, he was still having the same problem as they were undergoing an explosion in assets and inventory which continued to put enormous strains on their cash reserves. Sales were through the roof but they were still cash-poor. Fast forward to today, and Nike is a cash-rich business whose days of cash constraints are long gone!
The lesson I take away from reading this memoir is that cash in a growth company is a problem. Every penny you make will be reinvested back in the business and you will struggle to make every single payment. You will borrow every nickel you can and plow it right back into chasing growth. But always remember that fortune favors the brave. Beating the competition is relatively easy. Beating yourself is a never-ending commitment.
"The Smart Machine Age will usher in an era where the smartest humans are not those that have the deepest knowledge"
--- Edward Hess & Katherine Ludwig, Humility is the New Smart (2017)
Summary
With the dawn of the Smart Machine Age, humans need a new playbook to thrive. That playbook is laid out in detail by Edward Hess and Katherine Ludwig in Humility is the New Smart. In order to reach “New Smart” you need to:
(1) Quiet your ego
(2) Manage yourself (emotions & thinking)
(3) Reflectively listen
(4) Emotionally connect & relate to others (otherness).
“The ability to make good decisions regarding people represents one of the last reliable sources of competitive advantage, since very few organizations are very good at it.”
Most companies would agree that the single most important driver of organizational performance and individual managerial success is human capital or talent. Yet most companies still leave their talent acquisition process to chance using outdated interview techniques that lead to poor long-term results.
In June of last year, I read Topgrading by Bradford D. Smart as I geared up to hire a Director of HR. And like “every important business book” out there, Topgrading has been recommended by every who’s who in the business world. I honestly must say that the book is chalked full of strategies that promise to improve your talent acquisition process. I could spend 30+ days trying to unpack all the different tidbits I obtained by finishing this read, but I won’t. Instead, I want to share how my approach to talent acquisition has changed as a result of reading this book.
The Current Reality
The cold reality is that the average company suffers a 75% failure rate hiring people. 75% of managers hired externally without Topgrading methods are mistakes, underperformers, or miss-hires. The following chart shows the reality of talent dispersion:
The Goal
The directly stated goal of Topgrading is to fill at least 75% of positions in an organization with high performers (A Players) by hiring and promoting people who turn out to be high performers at least 75% of the time.
Topgrading companies, in contrast to their competitors, get disproportionately better talent for the total compensation dollars they spend. As ruthless as it may sound, Topgrading is all about increasing the percentage of high performers, A Players, and not being satisfied with B Players who never are worthy of a Very Good or Excellent rating.
The How and What
When you finish reading Topgrading, you are introduced to the Topgrading Interview process where you spend close to a full day accessing your potential hire. You take a chronological approach starting with school years and progressing through many questions about every job starting with the first job and moving forward to the present. The proven magic of Topgrading interviewing is to learn how the candidate has evolved across the education years and full career history.
During this tenacious interview process, you will spend hours accessing 50 separate competencies across five domains:
Intellectual
Personal
Interpersonal
Management
Leadership
The following chart details the 50 competencies and ranks each competency across three dimensions of people’s ability to change their behaviors related to each competency.
50 Specific Competencies For Managers
Most companies have 5 to 10 competencies for most jobs, but the Topgrading method believes that for management jobs these 50 competencies are all important. This means that if a new hire is only Fair or Poor on even one of the above competencies, that new hire is apt to be considered a miss-hire. How tenacious is that?
Resourcefulness is the Most Important Competency
Early in the book (Smart, 2005, p. 36), Bradford D. Smart unequivocally states that resourcefulness is the most important competency to hire for. Resourcefulness (Initiative) is defined as:
“Passionately finding ways over, around, or through barriers to success. Working to achieve results despite lack of resources. A willingness to go beyond the call of duty and a bias for action. A results-oriented “doer.”
Resourcefulness is a composite of several competencies. It’s proactivity, energy, passion, analytical skills, and persistence wrapped into one. In common terms, resourcefulness is the brains and drive to figure out how to get over, around, or through barriers to success. A Players all exude resourcefulness in spades. C Players never seem to develop it.
Resourcefulness is a crucial leadership skill for today’s generation of leaders. A resourceful person is one that is able to quickly adapt to new or different situations, is able to find solutions, think creatively, and sometimes manage with what they have available to them. Given today’s challenges leading during the COVID-19 pandemic, everyone is having to learn how to make do with what they have and develop a skill in doing more with less (Hardwick-Smith, 2020).
A Players Do The Following Really Well…
What I Will Do Differently
As a knowledge-work leader, the key to my success, in the simplest terms, is to hire the best employees, create an empowering environment, provide the necessary tools and guidance, and then get out of the way. I must continuously align individuals’ responsibilities to be consistent with their strengths, weaknesses, and interests.
“At the end of the day, you bet on people, no strategies”
—Larry Bossidy
As a result of finishing this book, I will do some things differently in my talent acquisition approach. Specifically:
I will look harder to find talent at all salary ranges. The focus will be on hiring A Players at the right salary level. Regardless of what we pay people, we should be sure to get top talent for the salary we can afford.
I will screen harder on the front end to select the right people. Time is a precious resource but more time needs to be spent in the phone screening process to eliminate B and C Players upfront.
I will act more quickly to confront nonperformance and redeploy chronic B and C Players.
I will use 360 email surveys and skip-level meetings to gain deeper insights into every manager’s strengths and weaker points, including myself!
In closing, the name of the game is to create talented teams that drive towards better results over the long term. As Peter Drucker so eloquently put it, “Culture eats strategy for breakfast & lunch.” Topgrading will help me prevent the 75% failure rate in hiring and promotions that are so commonplace in most companies. But almost more importantly, it will help me solve the three biggest hiring problems:
Rampant dishonesty by weak candidates who easily get away with fudging their resumes and faking their interviews,
Insufficient information, because most companies use superficial hiring methods that enable candidates to control and hide what they share about themselves,
Lack of verifiability, as most reference checks are practically useless.
Having finished the 750+ page tome to Capital by Thomas Piketty well over a year ago, I have just gotten around to writing up what I learned. In attempting to summarize this book, I realize that there is no way I can cover everything I learned. Quite simply, Piketty has blown my mind with the depths of his research. This book is the deepest source I have ever read on how capital behaves and why wealth and income inequality are two sides of different coins.
I figure that the best approach with this write-up is to break it down into manageable chunks. What follows below is a summary of the theoretical characteristics of Capital and how it behaves in the world today as well as in the past. I’ll unpack the features of income, capital, and output and how each of these dynamics interplay with one another.
The next write-up at a later date yet to be determined, will delve into the impacts that Capital has had on inequality. I’ll unpack the structure of inequality and some potential solutions that Piketty mentions. This review is by no means a political or opinion piece. I am simply sharing some of the learnings I received from diving into this book.
With that, let’s dive in…
Is r > g the Central Contradiction of Capitalism?
The first concept that Piketty spends time unpacking is the relationship between returns on capital and the overall growth rate of the economy. Piketty boldly states that growth in the future will slow and capital will be that much more important. As economic growth slows and falls below the average rate of return on capital, past wealth naturally takes on a larger importance. This is simply because it takes only a small flow of new savings to increase the stock of wealth steadily.
Thomas Piketty’s First Fundamental Law of Capitalism
The second concept that Piketty spends time unpacking is what he calls his First Fundamental Law of Capitalism. This law shows how important capital is in relation to the national income of a country. As the nature of wealth over the long run continues to transform (i.e., capital used to be agricultural and has since been replaced by industrial, financial capital, and urban real estate), its importance as measured by the capital/income ratio has remained steady and unchanged.
Thomas Piketty’s Second Fundamental Law of Capitalism
The third concept that Piketty spends time unpacking is what he calls his Second Fundamental Law of Capitalism. This law shows that countries with high savings rates and low growth rates accumulate enormous stocks of capital relative to their incomes over the long run. This can have significant effects on the social structure and distribution of wealth in a country. Piketty emphasizes that the impacts of this law are gradual and take decades to manifest. Boldly, Piketty predicts that by 2100 the entire planet could look like Europe at the turn of the 20th century with a capital/income ratio of 6-7 years.
The Dynamics of the Capital/Income Ratio in Europe and the U.S.
By investigating the dynamics of the capital/income ratio of Britain, France, Germany, and the United States, Piketty uncovers that the nature of capital in these rich countries has changed: capital was once mainly land but has now primarily become housing, industrial, and financial assets. But capital’s importance remains the same.
The Dynamics of the Capital/Income Ratio in Britain
In Britain, private wealth in 2010 accounted for 99% of national wealth and the bulk of the pubic debt in practice was owned by a minority of the population. Britain in summary is a country with accumulated capital based on public debt and the reinforcement of private capital.
The Dynamics of the Capital/Income Ratio in France
In France, private wealth in 2010 accounted for 95% of national wealth and the bulk of wealth in France was driven by accumulations of significant public assets in the industrial and financial sectors followed by major waves of privatization of these same assets. In a sense, France is a country with a model of Capitalism without Capitalists.
The Dynamics of the Capital/Income Ratio in Germany
In Germany, capitalism takes on a more social ownership point of view. Prevalent in the German marketplace is the stakeholder model of business where firms are owned not only by shareholders but also by certain other interested parties like the firms’ workers themselves. This Rhenish Capitalism has resulted in lower stock market valuations for German firms when compared to British & French firms.
The Dynamics of the Capital/Income Ratio in the United States
In the United States, more than 95% of the assets are American-owned but the influence of landlords and historically accumulated wealth was less important in the U.S. than in Europe. However, the structure of capital in the United States took on a different form. Specifically in the South, slave capital largely supplanted and surpassed landed capital. So much so, that the total market value of slaves represented nearly a year and a half of U.S. national income in the late 18th and first half of the 19th century.
Conclusion
A market economy based on private property, if left to itself, contains power forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based. My next write-up on Capital in the Twenty-First Century by Thomas Piketty will dive into the immense inequalities of wealth that have occurred as a result of the natural dynamics of capital.
Traditionally HR has been more about compliance than it has been about developing and managing talent, and changes in HR have been a long time coming.
After World War II, when manufacturing dominated the industrial landscape, planning was at the heart of human resources. Simply put, companies recruited lifers, gave them rotational assignments to support their development, groomed them years in advance to take on bigger and bigger roles, and tied their raises directly to each incremental move up the ladder.
But business today is far less predictable, and these “15-year plans” are no longer sustainable practices in today’s game of talent management. HR must become more agile to properly support the rest of the organization, and take its rightful place as a strategic partner to the C-Suite.
Every CEO in the world would say that employees are their greatest asset. Some would even go as far as to say that their companies are nothing without their employees. Yet traditional HR departments in most companies spend endless amounts of time, effort, and money writing and enforcing policies to deal with problems that a small subset of employees might cause.
On Reinventing HR is a collection of eleven essays originally published in the Harvard Business Review. Each of these eleven articles has been hand-selected to create a collection of impactful readings on transforming and reinventing HR in your businesses.
Outdated HR Model
Many current HR tasks, such as traditional approaches to recruitment, onboarding, and program coordination, will become obsolete, as will expertise in those areas. The problem with Traditional HR typically is that most companies spend endless time and money writing and enforcing policies to deal with problems 3% of their workforce might cause.
As a result of these outdated HR models, companies are not properly developing their pipeline of future leaders, and the battle for talent means that companies are facing a real scarcity of top talent. Globalization compels companies to have to reach beyond their home markets and compete for the people who can help them drive their companies forward. These changing business dynamics are forcing business leaders to take a hard look at our HR functions and re-skill as necessary.
After reading On Reinventing HR two companies (Netflix and Deloitte) have undertaken some radical changes to their HR processes that I would like to take some time to unpack below.
Recruit and Chill the Netflix Way
Don’t look now but Netflix isn’t just disrupting the way we consume content these days. They are also reinventing the HR function itself. At Netflix, it starts with how they define and structure HR. Traditional HR processes and routines are organized under the finance function, while HR serves only as a talent scout and coach.
Next, Netflix spends all of their efforts hiring people that will put the company’s interests first and who will support their desire for creating a high-performance workplace. They believe in their heart of hearts that if you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing.
To accomplish this, Netflix sticks to the following tenets of talent management:
Lastly for Netflix, the best thing you can do for employees is hire only “A” players to work alongside them because excellent colleagues trump everything else. If you want only “A” players on your team, you have to be willing to let go of people whose skills no longer fit, no matter how valuable their contribution had once been. As a result, at Netflix, adequate performance gets a generous severance package when performance no longer keeps up with the job requirements.
Deloitte Redesigns Performance Evaluations
We have all worked for companies that have quarterly evaluation processes, and if you are like me, you probably dread them slightly. Partly because giving and receiving honest feedback is very hard, and partly because most performance evaluation processes are poorly designed.
Since 2015, Deloitte has been working hard to redesign its performance management system and process of evaluations. Not surprisingly, when Deloitte polled their employees, more than 58% believed that the company’s current performance management approach drove neither employee engagement nor high performance.
To improve this flawed process, Deloitte went deep into the “Science of Ratings.” What Deloitte found is that on average ratings of employees reveal more about the raters than they do the ratee’s performance. So much so, that 62% of the variance in the ratings of employee performance could be attributed to the individual rater’s peculiarities and/or biases. Actual performance only accounted for 21% of the variance.These abysmal stats forced Deloitte to radically redesign its performance evaluation process.
Now, Deloitte asks managers and team leaders four future-focused statements about each of their team members:
1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus [measures overall performance and unique value to the organization on a five-point scale from “strongly agree” to “strongly disagree”].
2. Given what I know of this person’s performance, I would always want him or her on my team [measures ability to work well with others on a five-point scale from “strongly agree” to “strongly disagree”].
3. This person is at risk for low performance [identifies problems that might harm the customer or the team on a yes-or-no basis].
4. This person is ready for promotion today [measures potential on a yes-or-no basis].
In effect, this radical redesign asks each of Deloitte’s team leaders what they would do with each team member rather than what they think of that individual, and is thus their new approach has become a much fairer system for “rating” employee performance.
My Key Takeaways
The goal of On Reinventing HR is to help people become more adept with HR strategies that will move their companies forward and raise the HR department to its rightful place as a strategic partner to the organization. Finishing this book has motivated me to spend all my time and effort carefully hiring people who will put the company’s interests first, and who ultimately understand and support the company’s desires to build a high-performance workplace. Some other key strategies I would like to employ going forward:
Be on the lookout for the employees who are energy creators and develop them because these are the people who get to the heart of issues, reframe ideas, create informal bonds that encourage collaboration, and in general make the organization healthier and more productive
Increase the number of check-ins with my people. The book has a phrase that I love: “Radically frequent check-ins.”
Continue to work hard to separate compensation decisions from day-to-day performance management.
Reconsider how we do our annual merit-based raises. Traditional one-time-a-year merit raises are less effective because too much time goes by.Radical solution:make salary adjustments twice a year.
Curiosity and potential are oftentimes better indicators of future success. Interview and promote those who show:
(1) The right motivation and commitment to excel in the pursuit of unselfish goals
(2) A penchant for seeking out new experiences
(3) The ability to gather and make sense of information
(4) A knack for using emotion and logic to communicate and connect with people
(5) The wherewithal to fight for difficult goals despite the challenges they face.
To close off, if you’re careful to hire people who will put the company’s interests first, who understand and support the desire for a high-performance workplace, 97% of your employees will do the right thing. The problem with HR typically is that most companies spend endless time and money writing and enforcing policies to deal with problems the other 3% might cause.
You should read On Reinventing HR if you are interested in learning some tactical strategies to build your people-focused organization of the present and future. When it comes right down to it, your business is simply a collection of different people. Management and nurturing of people eat business strategies for lunch.
(1) Overhaul performance management practices to jump-start motivation and engagement; (2) Use agile processes to transform how you hire, develop, and manage people; (3) Establish diversity programs that increase innovation and competitiveness as well as inclusion; (4) Use people analytics to bring unprecedented insight to hiring and talent management; (5) Prepare your company for the double waves of artificial intelligence and an older workforce; (6) Close the gap between HR and strategy
