“Hire People Smarter Than You” is Bad Advice for Small Business Owners

Whether it’s Steve Jobs saying “It doesn’t make sense to hire smart people and tell them what to do” or Richard Branson telling us to “Surround [ourselves] with great people and delegate well”, people love the idea that business success is as simple as making good hiring decisions.

For almost all business owners, however, this alone is not a strategy for success.

Once a business gets to a certain size it is undoubtedly true that the CEO’s job is to “get the right people on the bus” and hiring the best people becomes the sole source of competitive advantage, and it is precisely for that reason that a small business cannot hope to succeed purely by “hiring the best people”, because the people with the most experience and skill are either starting their own businesses or working for the big companies that can afford them.

In this article I want to discuss how you can build a high performance culture of accountability and initiative even if you can’t afford the most skilled and experienced people.

Management by Abdication

In his legendary book the E-Myth Revisited, Michael Gerber called the “hire people smarter than you” approach to staffing “management through abdication rather than delegation”.

For almost everyone reading this article, you can’t expect someone you hire to have a better idea of what to do and how to do it than you do, and even if that happens by some phenomenal stroke of luck (the law of large numbers dictates that it must happen sometimes), then eventually that person becomes the bottleneck.

Even if you do succeed in finding someone who will not only run your business better than you, but who also doesn’t want to leave and start their own business or go and work for a bigger company that can afford to pay them more, the chances that you’ll be able to replicate that hiring success become increasingly remote the more you do it.

You’re simply transferring key personnel risk from yourself onto someone else. There is no longevity in this plan.

A strategy for success that hinges on “investing in people” and “hiring the best talent” is as expensive as it is naive.

The simple fact is that the bulk of the work done in any business doesn’t require the most skilled or experienced or “best” people (for some definition of “best”).

What REALLY makes no sense is hiring the “best” people and then paying them lots of money to do work that could be done by someone less experienced (and therefore less expensive).

A Culture of Cost Effective Delegation

In his book “High Output Management”, co-founder and former CEO of Intel Andy Grove states:

“Decisions should be made at the lowest competent level by someone with both detailed technical understanding and past experiences”

The most interesting part of this quote from a delegation perspective is “lowest competent level”. This is the key to removing approval and bottlenecks from your business and ensuring that, while you may continue to do the highest value work in your business, you aren’t overpaying when you delegate less critical functions.

Even if you already have a sizeable staff, you will quite often find these people are doing tasks that are well below their pay grade simply because the task of subdividing their roles is too complicated.

When delegating work in a small business environment the key to employee happiness to give clear instructions, but that’s not always easy or possible.

It can be very easy to write down something you know how to do, and even easier to record a video of how to do something, but that is only sufficient for a minority of the total tasks you or your team might like to delegate.

When someone actually goes to follow those instructions you may find that there are nuances around how to make decisions or “hand off and hand back” points where a process needs to move between two different people.

Depending on the size of the task, it can be very easy to feel as though the complexity of these decisions and the inter-operation between multiple people (some of whom are increasingly likely not to be collocated) means it’s all too hard and you might as well just do it yourself.

It is an unwillingness to engage in the task of unravelling this complexity that results in so many businesses failing to grow beyond the number of people than can easily fit in given office space or beyond the scope of work that can easily fit inside the business owner’s head.

The solution is to create a culture of accountability and initiative, where instructions can be honed and refined over time without people becoming stressed or anxious about making the wrong decision.

This requires commitment from key personnel as well as acceptance that some things will go wrong as you go through this process.

When looking to hire people into this kind of culture it is less critical that they be “the best” at whatever role you’re hiring them for, and more critical that they be effective communicators.

In fact, the ability to digest a set of instructions autonomously, ask good questions and update documentation with the response to those questions is a skill that you should be universally hiring for and cultivating at all levels of technical and non-technical staff.

I find the manual on How to Ask Questions the Smart Way by Eric Steven Raymond and Rick Moen to be an excellent primer on clearly written communication. It’s skewed towards technical projects but as more of us move to knowledge work that document is gaining more relevance by the day (one of these days I’ll create a “non-technical” version of it and post it to this blog!)

If you have a strong culture of accountability and initiative, you will find it less critical to hire “the best” people (ie. most skilled and experienced) and will instead have an environment where people can grow together and develop a robust, systemised business rather than a collection of rock stars upon whom your ongoing success depends.

Clear Instructions Versus Micro-Management

When creating a systemised business, you need to make a decision about what boundaries you put around the technical competencies of each employee and then give them complete autonomy to make decisions within those boundaries.

A classic example of the difference between instruction and micro-management is the business owner looking over a graphic designer’s shoulder giving them specific instructions about how to change colours and reposition elements. That’s micro-management.

If, however, you asked them to provide some work and then gave them feedback on how it did or didn’t meet your business objectives, along with clear instructions about how to deliver the work (as a layered PSD or as a flat PNG file? Via Dropbox or Google Drive?) that would be an example of giving clear instructions without micro-managing.

This is true of any work someone might do whether it is technical or non-technical work. Some work may have tighter boundaries than others, some work may have more room for discretion and in some cases the instructions themselves will be a work in progress.

In all cases, the person doing the work should have a clear idea of where those boundaries are and feel complete confidence to act with autonomy within those boundaries, without fear or reprisals should they make the wrong decision.

Tell, Don’t Ask

It can be frustrating as a business owner or manager if your every request is subject to analysis and push back from your staff, so at times you just want people to carry out the tasks without asking any questions.

At the same time it is important that people apply common sense so that they have a good chance of getting a task right without further input.

To this end I always ask my staff to take action and tell me what they did, rather than ask what the correct action to take is.

Especially when hiring people who work in remote environments or different time zones, the most time-consuming (and therefore costly) thing a staff member can do when they come across incomplete or ambiguous instructions is stop and wait until they can talk with you in realtime or until you can reply to their request, without taking any further action.

Rather, it’s much better for people to proceed according to their “best guess” as to what might be the appropriate action based on the information they do have, and record that decision for later review.

If someone takes action and there is a huge problem as a result, then that’s my fault for not creating the right boundaries for that task. The staff should never feel hesitant about taking action, but where they are taking initiative in the case of some unforeseen circumstance or ambiguous instruction, should always make a note of what decision they made and why.

That provides a clear feedback mechanism we can use to improve our documentation and processes over time.

People and Process are Equally Important

You don’t have to look very far to find advice that your people are your most important asset; that a business IS its people.

If that’s the case then your business has a very short life span. In most cases for small businesses, the business is, in fact, the owner!

What you should be aiming for instead is a business where culture takes the lead. Company culture is nothing more than a system; a process for interaction between people as they work. Company culture, contrary to popular opinion, is not about birthday cakes and team building workshops. The most important aspect of your culture is how people interact when they ARE working, but the focus of many companies when building or improving their culture is on how people interact when they’re NOT working.

Exactly the wrong approach.

A culture of accountability and initiative, where people feel comfortable to make decisions within clear boundaries and have clear lines of communication is the secret to sustainable growth and robust longevity.

This culture not only allows you to attract and retain staff, but also widens your hiring pool because you are less dependent on finding “the best” and can instead focus on hiring people who are good communicators, who are willing to learn and who can be located virtually anywhere in the world (with some constraints for roles such as sales and customer service based on language and time zone barriers).

BONUS ROUND: The Role of Consultants

The missing piece of the puzzle so far is the role of consultants.

When a small business needs expert advice, they can almost always get what they need by hiring expert consultants. Consultants can provide strategic and tactical advice, skills and experience that would normally be out of the league of a small to medium sized business if they were trying to hire someone with that level of skill and experience as a permanent employee (either full time or part time).

For Apple (or an equally large company such as Virgin), Steve Jobs’ advice might be spot on, but for the rest of us you could rephrase this advice as:

“It makes no sense to hire a smart consultant and then tell them what to do. We hire smart consultants so they can tell us what to do.”

With the right set of experts giving you advice, you can build a high performance culture without worrying about having to hire the most skilled or experienced employees.

You’ll save money and create a robust, scalable business with a clear exit strategy and reduced key personnel risk.

comments powered by Disqus