It is one of the oldest stories. A star performer feels unrecognized and underappreciated and withdraws his efforts and participation. His organization struggles and loses again and again to the star performers of rivals. Finally, our star returns to business and crushes the competition, fulfilling the organizational vision. It is the story as old as Homer’s story of Achilles: Organizational performance has had a lot to do with the performance of the stars.
In fact, in my experience, the top 20% of professionals in any firm are likely responsible for 80% of the growth opportunities, 90% of the implemented ideas and positive changes and 100% of the culture of excellence. The top team members may come from the advisory department, the operations department, executive management or investments, but they are invariably good at every aspect of their job, and they become the catalyst for getting others to perform better.
If you want your firm to be great, the key to excellence is to channel the energy of your top players, create a culture that mirrors their behavior and find a way to recruit and develop more exceptional team members. On the other hand, if you want to create stagnation, you can alternatively manage with the median performer in mind and let the average (often mediocre) performance become the cultural norm and expectation.
The pursuit of “average” performers and performance, however, still works for some firms, ironically because the firm’s founders themselves are usually stars. This strategy provides founders with control, prestige and command over compensation, which lets them foster peaceful cultures. It is easier for them to try to make everyone comfortable than to face the aggravation that often comes with the ambition of future stars. However, such firms will eventually have to turn power over to the next generation, and such “recreational teams” are not built to grow the new generation of star players. Those stars who do emerge won’t want to stay when more competitive organizations are calling out to them.
Many firms seek to appease everybody and pursue misguided initiatives.
For instance, they might be afraid to track people’s individual results, thinking it will damage teamwork. This is very naïve. I coached my daughter in soccer when she was 6. The league wanted to encourage camaraderie, so it didn’t track scores. Guess who did. The 6-year-old girls.
The firms shooting for average are also afraid to set goals for employees: They think that setting easily reachable targets for staff won’t have much business impact and that setting more ambitious goals will likely end in failure. So the firms do neither.
The thing is, top players still want to win, even if they aren’t compensated or encouraged. It certainly helps to offer them ownership. But here, too, firms make misguided decisions—by also offering ownership to those with longer tenure, even if they are otherwise falling short.
Finally, firms often delay promotions or leadership training for their best people. They worry that promoting Elizabeth, a top performer, would upset James, who was hired before her. They worry that sending Emily to leadership training would make Steve feel bad because he hasn’t passed his CFP exam yet.
Karl Marx famously wrote: “To each according to their needs, from each according to their abilities.” It sounds like many advisory firms are consciously or not following a similar philosophy. What Marx didn’t account for was that those with significant “abilities” often just go to another team. The firms they leave behind are stuck with those who have fewer abilities but more needs (that are now harder to meet). That’s why back in the communist days we were not allowed to travel to the West—no one came back. Even Lenin openly acknowledged that communism would only work if it were global so that no other teams could compete (which is also why I prefer shadow boxing).
The Top Players Generate Most Of The Results
Before LeBron James joined the Miami Heat, the team was fifth in the Eastern Conference and lost in the first round of the playoffs in 2009. After he joined in 2010, the Heat went to the finals every year for the next four and won the title twice. The year after he left, they didn’t even qualify for the playoffs. Not until they recruited another star, Jimmy Butler, who took them back to the finals (where they happened to face LeBron James).
Business dynamics lend themselves to sports analogies because both endeavors are so results oriented and data hungry. In fact, the NBA has become a real data-driven enterprise, voraciously collecting performance statistics. In the last season, players like Steph Curry, Giannis Antetokounmpo and James are estimated to have contributed between 15 and 20 wins more in an 82-game season than what their teams would have otherwise done without them. In other words, they make the difference between getting into the top seed and missing the playoffs.