Can you grow a small business with the wrong team?

I am frequently confronted with a difficult issue that all business owners will get confronted with at one point or another: the quality of the team. Even though I typically coach business owners and CEOs directly on how to grow their business, at the end of the day, the work that needs to get done requires effort by a lot of people. And the larger the organization is, the more complicated this one area is to get right. This is, by the way, one of the many reasons I no longer work with large companies. The level of disfunction is usually unbearable.

Let’s say there’s a company doing $2M in revenue. It probably has 10 or more employees in various functions. For a company this size, everyone needs to be doing their job – and then some. Inefficiencies in any one role are quickly felt by the whole team. You also typically don’t have a lot of redundancies in each function. There’s probably one person in accounting, one person in legal, one person in HR, and probably a single office manager. The only roles you usually have multiple people in, for a company this size, are the roles where something is produced (e.g., developers cranking out commercial product). Even the entire Sales function may be held down by a single person. So, in a situation like this, any one person not doing a good job is going to negatively impact the whole company. Obviously, some roles will be more mission-critical than others. For instance, if you are selling commercial software and you have a slow developer, that will have a direct impact on your company’s success.

As revenue starts coming in, management can hire more people and slowly upgrade and fill out the team. Eventually, the 80/20 rule kicks in. Let’s face it: 20% of your staff do about 80% of the work. As companies to grow bigger and bigger, stronger team members join in, and eventually, the ineffective employees are hidden inside the overall performance of the group. But there are a couple of problems with that.

First, those ineffective people may still be in positions of power. When dealing with small startups, the founding set of employees may be related, or have significant ownership in the company. It becomes very hard to unseat them. As a result, what owners and CEOs wind up doing is building a more competent team around the ineffective team members. This is the start of disfunction.

The other problem is that, over time, the company will be full of ineffective people in different departments of the company. This eventually prevents the company from truly achieving its full potential. You see this in sports quite a bit. If you look at the most successful teams in the world, they have these consistent elements:

·??????? Extreme hard work and discipline

·??????? Zero tolerance for underperformance

I’ve been watching Soccer my whole life. It’s one of my little guilty pleasures. For the last decade or so, my favorite team has been Manchester City. I learned about them from my son’s coach at the time. He was a former Real Madrid academy player and was excellent at teaching technique and learning the fundamentals the right way. He had told me: “if you want to see what the best teams in the world are doing, watch Manchester City”. At the time, they hadn’t even gotten to the top, but they had the right formula – and lots of cash, but I’ll save that topic for another time.

What I noticed watching them over the years is that the manager was relentless about discipline and hard work. You could see that many games they just won out of sheer work rate and determination. But I also quickly noticed that the manager had absolutely zero tolerance for poor performance. You literally had to earn your spot on the starting lineup every week. And, no matter how much of a super star you were, if you didn’t perform, you just didn’t play. I was even shocked in the early years that some incredible players were removed from the team completely. So, it wasn’t just about performance but also overall right fit with the strategy and direction of that team.

I usually tell people when I introduce myself that I am a corporate geek. I’ve been fascinated with the business world since I was a little kid. Not sure why. That’s just the cards I was dealt, I guess. So, I look for scenarios that work or don’t work from many areas of life and then see how they apply to the wonderful world of business.

So, let’s get back to the subject at hand: the quality of the team. The cold, hard truth is this:

“Your business will never achieve its full potential unless you have ‘the right people’ onboard.”

Finding these right people is very time-consuming and expensive. But keeping the “wrong people” in the company is even more time-consuming and expensive.

I briefly mentioned the difficulty of having a “wrong person” onboard who is a cofounder and a significant shareholder. I’ve lived that exact situation. Without naming any names of people or companies, I recall once a company that was started by a couple of guys who eventually took the company public and became billionaires. Unfortunately, the one partner never did anything other than take up space. In those situations, it is really hard to do anything about it. Add that to the reasons I don’t work with large companies.

The more common situation, especially with small businesses, is that the ineffective person in the company may be a close friend, or even a direct relative, of the owner of the business. Making decisions to remove a friend or relative from the team can be a very difficult decision to make. In such scenarios, the owner really needs to consider what the ultimate vision of the business is and can that vision be realized with weak players?

Can you imagine Manchester City trying to win the English Premier League using an ineffective midfielder? How about an ineffective left back? Ok, that has happened but I’ll keep my opinions to myself on this one!

Now, to revisit my comment about the ineffectiveness of large companies, can you imagine how much of that takes place in a company with 2,000 employees? How many line managers are allowing friends to be in positions where they are only 75% effective? And if every department has 75% ineffectiveness, how does this ineffectiveness compound across the whole company? Hhhmm. Let’s do some very quick math:

·??????? 75% ineffective marketing generating new opportunities

·??????? 75% ineffective sales closing new opportunities

·??????? 75% ineffective customer success retaining customers

Since these variables are compounding, we have roughly a 40% degree of effectiveness for the business. And, again, the larger the business, and the more moving parts, the larger this ineffectiveness compounds. And, as a result, most large companies are a complete s&%t show, when it comes to effectiveness. Sorry, I don’t mean to insult anyone going out there and trying to make a difference, but that’s just the situation.

In small business, you at least have an ability to improve upon things. You have the ability to increase the effectiveness of every role in the business. And removing someone from the team isn’t always the only option. Many years ago, one of my team members was running a department that frankly outgrew him. He was an amazing individual contributor, very hard working, and very dedicated to the business. Why on earth would I want to get rid of someone like that? Instead, what I wanted to do was put him in a position where he could really thrive. He was great at working with difficult customers and building genuine and lasting relationships. He was not great at managing 30 people. So, I created a new role for him to do what he was good at full time. And I brought it someone who was great at managing people. When I first introduced the idea to him, honestly, he had an emotional response. I did my best to explain to him why I had to make a change for everyone’s sake: his, his employees, our customers, and the company’s wellbeing.

A few years later, I was at a social event and met up with him. I had moved on to another business by then. I remember him telling me how meaningful and important that change I made was for his career and how much he appreciated it. He went from being stressed about not doing a good job, to loving his work, and making a real difference. He works for that company in a similar role to this day, more than a decade later.

Look, I know it’s hard having these conversations. But if you are a business owner, or a leader of a team or a workgroup, you really cannot avoid them. Ultimately, it is the right thing to do for everyone involved. My only other advice on this topic is to have these conversations in the most gentle and human way. After all, we are dealing with people!

No one said leading a team was easy.

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