Terrence Brown Creates Value

Management

The Law of Crappy People

I cannot take full credit for originating this idea, but neither can Marc Andreessen (founder of Netscape), from whom I borrowed heavily. In an article from 2000 in Fast Company magazine, Andreessen was asked about some of his management ideas. Of all the ones he spoke about, this idea really struck a cord with me. This is the reason I have adapted and expanded it here.

We know that the competition for talent has also increased over the past few years. In addition, talent is now more evenly distributed around the world. No one country or group of countries has a monopoly on smart people. Furthermore, talent (like financial capital) is more fluid today, meaning that it moves from company to company, opportunity to opportunity and even country to country. As a result, human capital can make the difference between corporate success and bankruptcy; it is therefore incumbent on top management teams to create a system to attract and to retain the very best people it can. However, this is much easier said then done.

This is especially true because of the Law of Crappy People. The law consists of two underlying tenets.

1. In addition to their lack of skills, bad managers usually hire very, very bad employees. Why? Because bad managers see everyone and everything as a threat. Since their biggest threat is competent people, bad managers hire and surround themselves with even less competent people. This is especially bad of the organization because of what you can call the bad manager multiplier effect. As already stated bad managers have a very negative effect on their subordinates and given that each bad manager will have five to ten direct reports, his or her negativism is multiplied many fold.

2. Competent managers can usually screen out bad employees. However, here lies the hidden problem. Competent managers often have difficulty time distinguishing good employees from great employees. Now don’t get me wrong, I have nothing against the average or good employee. Unfortunately in this business environment, good is not good enough. For businesses to beat the competition, firms need to recruit the best.

And to make it worse it may be impossible to attract a good team to work with a bad manager. So what do you do?

Well, there are a number of ways. First, as stated above the firm must always be recruiting. The firm must have its eyes and ear open and be ready to hire when it comes across great talent. Second, the firm must recognize that it may be better to hire a brilliant person who does not have experience in the particular task and train him or her than hire a mediocre person with experience. Finally, the firm must hire the best recruitment/human resource staff it possibly can (which of course will supplement the recruiting efforts of the entire organization). It must instruct that staff is that good is not good enough. The recruitment staff then must develop a system to differentiate between good and great and then only hire those near the top of the heap.

Smaller and younger firms have the advantage here, because they probably have fewer average or below average people. For them hiring just a few key people may be enough to start turning things around. How many below average, average or good people does your firm have? How many smart people will you have to hire to increase your workforce’s average IQ score?

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