By Dennis Siggins
Behind every successful business owner is his/her team; vendors, customers, and investors, to name a few. But the most important team every new business owner will build is the team of people he works with every day – employees. In 40 years of launching successful start-ups in several industries, I have developed a strategic process for each of the five steps to building a great team. But before we dive into the team-building process, let’s take a side road and visit “Moneyball”.
Team building by the “Moneyball” approach
Based on the story of the 2002 Oakland A’s baseball season, the movie (book) “Moneyball” focusses on team building with a lower overall payroll. The Moneyball story begins when Oakland does not have the money that the larger market teams (like the New York Yankees) have to spend on player salaries, so General Manager Billy Bean and his team of statisticians determine that most Major League Baseball teams are overpaying for talent. Billy Beane theorizes that batting average, home runs, and pizzazz are overvalued assets, while on-base percentage and pitches taken are greatly undervalued assets. Oakland is forced, by economics, to unload many players, including two key offensive weapons, All Stars Johnny Damon and Jason Giambi, who are picked up by Boston Red Sox and NY Yankees at combined salaries of $21 Million. Oakland replaces Johnny Damon with aging centerfielder David Justice (The NY Yankees are paying half of Justice’s salary.) and Scott Hatteberg, who they scored for near league minimum $237,000.
Throughout the 2002 season, Justice and Hatteberg put up on-base percentage numbers similar to those of Giambi and Damon (but at a fraction of the price), and the rest of the team fills in the gaps. The experiment works and Oakland wins more games than any other team that year, including an MLB season-best 20 game win streak, and they do this with a combined salary that is one third of the Yankees.
Because the experiment worked for Oakland in 2002, The Boston Red Sox developed the same philosophy and, in 2004, won the World Series (breaking the Red Sox’ 86-year curse), and three more subsequent World Series’ in the new millennium, using Billy Bean’s Stat-based strategy. Now, in major league sports, every team has a stat department, so secrets are hard to keep. Since that 2002 season, all teams now consider on-base percentage and pitches taken to be key statistics, so the word is out!
The lesson we learn from Moneyball is simple; find the piece to the team building process, the undervalued assets, that everyone else is not seeing. Fortunately for many of us, our competitors in business are not as astute as major league sports teams, so when we develop a creative way of team building, we can keep it in our back pocket and continue to use the method almost indefinitely!
The Five-Step Approach
I have developed a five-step approach to team building that has served me very well over the years; hire, train, incentivize, delegate, and hold accountable.
The small business owner will ultimately hire based upon two qualities; skill set and personality. Skills can be taught, and skills can be learned, but personality is highly unlikely to change. Therefore, when hiring, I focus more on personality and less on current skill set.
In mid-2021, my company has nearly 20 employees operating out of the corporate office and a dozen or so in our two sister locations. Only three of the team members in the corporate location had any prior hands-on experience in our field. The rest of the team was built from available aggregate in the workplace.
We have, for example, found that chain restaurant managers have a personality type that fits our team model, and we can teach the rest. If you are the manager at a Bertucci’s Italian restaurant, and your last name is not Bertucci, you have probably worked your way from the bottom up, waited tables, run a small team in the kitchen, battled through a busy Christmas season at the mall, dealt with a grumpy customer or two, worked the register, and you are unlikely to be the type of person who calls in sick very often. You are the personality I am looking for! Remember, skills can be taught, but personality cannot.
One of our corporate partners, Bruce, had never run a web site, let alone built one, prior to my hiring him six years ago, but I knew his personality type. Over the past six years, he has built, and currently manages, many web sites for us. He is also redesigning our entire back end of the business, and as we continue to grow, he is excited about being a part of this team.
When we undertake the task of building a personality-based team, the key aspects, the undervalued assets, that we look for in of our employees are things like positive attitude, grit, dedication to the job, and showing up on time every day. All of my employees get one paid sick day per month (12 per year), so if they don’t ever take a sick day, they can just bank that money! Many of my team members have been with my company for years and have never taken a sick day! For me, the owner, that’s a lot of productivity, and for the employee, that’s a lot of bonus money!
Many small companies run into problems when they hire based primarily on over-valued assets, like specific skill set, extensive experience, and “big-name” references. Often, candidates that have these over-valued assets also come with arrogance, an over-inflated opinion of themselves, and a laundry list of “big-name” contacts in the field that do me absolutely no good. These people often don’t play well in the sandbox with others. The company that hires by this method is far more likely to overpay their staff and more likely to have higher employee turn-over.
Once the successful candidate becomes an employee, and long before he becomes a co-worker, he is in training. Now if I hire the high skill set with wrong personality, then training could be very difficult. But if the right personality for the job is hired, then the training process has a much higher likelihood of success.
Many years ago, my friend Steve, a local golf pro, taught me how to play golf. (I was in my early thirties and had never played the game prior.) We would practice once per week for 45 minutes and Steve and I would play nine holes each Wednesday; that’s it! Toward the end of my first summer of golf I hooked up with three local golf junkies; these are the guys who have the cool shoes, cloths, the glove, the hats, sunglasses, the club membership, and all the golf lingo. These guys watch the Golf Channel and have been playing golf three to four days per week for fifteen years. A few days after the round of golf that I played with them, I talked with my friend Steve, and I asked him how he thought I had fared against these guys. Steve said that these boys were not even in my league, that I was fifteen strokes better than each one of them… and he was right. But I asked Steve how this could be, me with my four months of low-level training and these boys with thousands of holes of golf played over years and years… Steve knows these guys and explained that they have perfected awful swings, poor form, and bad habits and that they also have huge egos getting in the ways of learning proper skills… True story!
Successful entrepreneurs often have a different approach to business than their less successful competitors. Now if my approach to business is drastically different from my competitors, then someone with a significant experience working for my competitor is likely to disagree more than he would agree with me. This means that before I can train an allegedly highly skilled and experienced employee, the first thing I need to do is break down all the preconceived notions that he has and break him of all his bad habits. This takes time and energy, and in the end costs me more than training someone who is far less experienced but who is also willing to learn.
There are two components of the personality-based hiring system that I will highlight; first, I don’t have to break my new hire of his bad habits in the field; second, his personality is far more pleasant to be around. Within four months, my personality-based employee (like the learned golfer) will out-perform the guy with fifteen years of bad habits and big ego. And like Billy Beane, I will pay significantly less money to score a better co-worker. And now we are ready to immerse my new employee into the new system.
There is one reason that nearly everyone goes to work every day; it’s called money. The short list of secondary reasons includes quality of the company, co-workers, friendly work environment… But the bottom line is simple, money talks.
Part of the personality-based team-building process is that co-workers are hired for long-term success. But because we are looking for the undervalued qualities, like friendliness, open mindedness, grit, discipline, and longevity, we are not necessarily looking to hire within our industry. Therefore, we can search other workspaces for our future co-workers. As stated earlier, we have found that the chain restaurant management pool is a very good source of talent. There are two key factors; chain restaurant managers are overworked and poorly paid. Therefore, I will likely find a group of hard-working, gritty, and disciplined people that can be hired below my market value but well above their current pay. My new employees are hired well below the value that they bring to my company, so I’m happy. They are paid above the pay scale that the just left behind, so they are happy. And I have also scored a co-worker with a great attitude who can be incentivized.
Once my new employee has been with us for a few short months, she will get her first raise. She will likely be pleasantly shocked, because her starting pay just a short time ago was higher than her previous jobs’ pay, and now, just 60 days in she is getting a raise. Generally, six months into her time with my company, she will receive her next raise. After six months and two quick raises, I have a very happy, motivated co-worker, and now I will begin to know if she is ready for the next step in the pay scale.
Revenue sharing is the next step in incentivizing co-workers, and this must be earned, and only by the best. It has been called commission, profit sharing, a cut-of-the-action! I find that tailoring an incentive-based pay system for each of my team leaders is one of the simplest and most effective methods of motivating each team. The business owner can base the team leaders incentivized pay on production of his team, total dollars produced/collected by his team, or any other measurable aspect of the business.
When a company is built on a personality-based hiring system, the skills of the individual members will vary, and teams within the company will be formed. The natural leaders will rise to the top, and they can then be rewarded in the form of an incentive-based pay system. It really works!
Another key piece to the motivational puzzle is delegation. Incentivizing and delegation go hand in hand. If a business owner wants his company to grow, he will want to practice the art of delegation. This requires teaching and training without micromanaging.
Micromanagement is the opposite of delegation and the enemy of growth. The micromanager hovers over his co-workers, correcting minor mistakes while creating a hostile environment. Micromanagers don’t trust co-workers, often creating mistrust and higher employee turn-over, which is costly. Some micromanagers do find success despite themselves, but to them success comes harder and will be limited.
Because many business owners are skilled at their trade, it may be hard for them to learn the art of delegation. And delegation is a learned skill. Delegation begins with hiring, by surrounding oneself with a quality and intelligent team of co-workers, and it continues when the business owner challenges each new employee at every level. When the best of these personality-based co-workers rise to the top, the owner continues to challenge them with leadership roles. It is important to recognize that everyone will make mistakes, so we will expect each team member to correct his/her mistakes and move forward. As one learns the art of delegation, it may help to remember the phrase “Nothing we do is irreversible!”
V- Hold Accountable
From the person sweeping the floor after closing time to the CEO, everyone in an organization needs to be held accountable. If every employee is held accountable for at least one thing from the moment that he is hired, then everyone in the organization is responsible for something. Accountability begins with arriving on time every day and being fully prepared to work. As entry level workers assume entry level responsibility, they are on their way to becoming co-workers. If entry level workers show up late and unprepared to start the day, their behavior cannot be tolerated, or it will become their norm, and they will never become co-workers; they will become constant problems.
If the hiring process is done properly, the business owner will find that all employees are responding properly to responsibility. But still, there are just some people who strive for higher positions in life, while others are satisfied at earning a weekly paycheck. (Categorically, there is nothing wrong with anyone in either of these groups; we need co-workers on every level.)
The real success of accountability shows itself in the form of the mid-level managers; team leaders, crew chiefs, department managers… When a business owner selectively promotes from with-in his team, he will choose the best candidates, incentivize them monetarily, while holding each one accountable for his/her teams’ production. The owner should choose measurable criteria, like total revenue generated or number of pieces produced, and create a graded bonus pay scale for the team leader, and hold the leader accountable, financially and otherwise.
As a small business owner, we need to recognize that we are the average the five people closest to us, and we need to surround ourselves with the best talent available. Successful business owners know that sevens and eights hire nines and tens, and they know why. The low level business operator does not know that fours and fives hire twos and threes, and even if he did, he would not know why. As the owner, you want to be that little squirrel under the hood; you want to be the hub that is surrounded by a circle of eights, nines, and tens.
Dennis Siggins is co-founder and CEO of American Gutter Monkeys, and a 40-year veteran of launching start-up small businesses.