Friday, July 22

Are You Wasting Time on Poor Performers?

This was an interesting article from the CFO. Basically the argument is that people who spend more time and capital on poorly performing units do not return shareholder value. They should instead be concentrating on the higher performing units to increase value.

There is much in this argument and the argument extends to people as well. If you want to have a high performance team, then you have to bring everybody up to speed, but then some will never do it. I once had a chat with a colleague from another bank who was describing what they did to their people. They divided their people into 4 quartiles based upon performance. The first quartile, they encouraged, the second quartile they spend most time by coaching etc. etc. , the third quartile they pushed and the fourth quartile they exited. One has to be brutal about this, the more time you spend on the fourth quartile, the more waste of time, money, energy and resources there is. They will never give you the increase in productivity, revenue, sales, performance that the investment in the top two quartiles will.

But we persist in an annoying and childish behaviour in trying to invest time in the bottom quartile. They might be in the wrong job, they might be dead wood, they might be whatever but at end of the day, you are carrying around deadweight. So do them and yourself a favour and exit them or the business.

The same behaviour is also observed in people who invest in stocks. Why do people keep on keeping dogs in their portfolio well after it has been proven that those dogs are really dogs? Take your loss and get out.

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