In my long career as a company financier, CEO, and business mentor I have found that among the many important things that had to be done right by business leadership was recruiting the best and brightest for all skill positions. I first learned this lesson in my business consulting activities.

Grillos Axiom: There is a nearly 100% probability your company will go out of business if you do not recruit and retain A players. My reasoning involves two forces. First, there is substantial proof that there is an order of magnitude difference between the output of A players and everyone else (commonly referred to the “force factor”). Second, the cost of doing any project goes up by the cube of the number of stake holders, and the better the task performers are (with appropriate organizational design) the fewer stake holders there will be.  So, if you can cut the number of stakeholders from 10 to 3 because they are all A players, then the cost factor drops from 100 to 9. A mix of capabilities will give you a factor between the two extremes. Do not be OK with being on the wrong end of that scale as your competition will not be, implying your life expectancy will be shortened.

The Value of Hiring A Players

There are order-of-magnitude differences among programmers as confirmed by many studies of professional programmers (Curtis 1981, Mills 1983, DeMarco and Lister 1985, Curtis et al. 1986, Card 1987, Boehm and Papaccio 1988, Valett and McGarry 1989, Boehm et al 2000). My claim is that that productivity difference exists for most non routine tasks. A corollary to this is the top 20 percent of the people produce about 50 percent of the output, whether the output is touchdowns, patents, solved cases, or software (Augustine 1979).

The proof that the cost of doing a project goes up with the cube of the number of stakeholders comes from a 1960s study of software development done ty the US Department of Navy.

The interests of the developers and users do not vary much and yet development costs spiral as team size grows. This is demonstrated by the poor performance of large development projects. Three quarters of them never reach fruition. The ones that are finished have massive budget overruns.  Think about the cost of getting things done with large populations of stakeholders with diverse interests, like the US congress which gets very little done at a massive cost to taxpayers.  To avoid the stakeholder count problem well run companies like Google organize output around small stakeholder groups. This not only makes him work better, but makes it easier to recruit top talent which spend more time creating and less time coordinating and selling their ideas.

Given that project size cannot always be tightly controlled, elements of stakeholder involvement may be controlled somewhat to lower the friction and resulting cost.

Elements of Stakeholder involvement

  • Number—keep as small as possible.
  • Alignment of interests—the closer the alignment the less the friction in getting agreement.
  • Motivation—similar motivation reduces conflict.
  • Power to effect outcome—power can create struggle, or it can make decisions happen faster depending on the members of the stakeholder group.
  • Intelligence—dumb people push dumb ideas, so try to keep them out of the mix; and the company for that matter.
  • Social cohesion—this makes stakeholders want to get to shared conclusions.
  • Troublemakers— get rid of them. Independent thought is good. Disrupting to get attention is not.

Since stop performers are 10 times as productive as everybody else one could make the case that they should be paid 10 times as much as everybody else. This is impractical and unnecessary, though to retain A players significant differences in compensation are warranted and required. Salaries, benefits, and perks are the least effective tools for unequal compensation. Performance based bonuses, and equity incentives are far more effective as their cost rises in direct proportion to, but less than, the value of the output.

Leave a Reply