‘You can’t do a good business with a bad person. Find the right people to work with and you can’t go wrong.’ Richard Branson.
When shown an investment, Sir Tom Hunter does not care so much about the business plan. He cares about the people doing it, because if the business plan does not work out, if the people are good, they can change it to make it work.
Warren Buffet, value investing, first priority when looking at an investment is the quality of the people running the business, second priority is the business model and third priority is if it is a good price. The quality of the people running a business comes first.
When looking for managers, Warren Buffet’s first priority is honesty and integrity, second priority is intelligence and third priority is if they are energised. If they are dishonest you want them to be stupid and lazy because they will be a destructive force in the business.
Warren Buffet will only trust about 2 percent of management teams, which is why he only invests in a business about once every 2 years, because he has to look at so many businesses to find this.
In football there are many teams, very very few teams become the top winning teams and only one can be the best. The top few teams get 90 percent of the money in the whole industry and the volume of fans. So an investor has to search far, wide and for a long period of time over the whole of the relevant industry to find that person and that is who they should invest in.
They need to find the best football players in the country to be the winning team.
Need to find the people that will cause the company to be the winning one. This is just like there are many football teams, but the one with the best players gets to the top of the league. Also even in the winning team, normally it is the best players in that team that make it win.
Ultimately you are investing in people, not in businesses, because it is people that determine the business.
It is the very small amount of people in a business, who will take responsibility, work late, change what they are doing for the needs of the business and put themselves out, that makes a business survive. If that small percentage of people leave, the business quickly dies.
Warren Buffet believes when the people in the business are weakest, investors are obsessed with command and control systems in the business because the staff are weak. If you have the best staff, you do to not want to limit them with command and control structures, because they will be better than you can you do not want to restrict them.
Jack Welch says managers have to have hire people who are more intelligent and brilliant than themselves. If he is with his board and all the others are not more intelligent and brilliant than him, then he has a big problem and is in trouble.
Good investors and managers normally put most of their time into finding the best people to run the business and then leaves them to get on with it.
If the investor spends too much time telling them what to do, it is normally because they are obsessed with power and then are not with letting them get on with getting results.
A business cannot afford to hire a less good person for charitable reasons, it will turn the business from a winner to a loser. It is important to do charity, if you would like to do it by hiring such people, do a separate organisation, because it will make a loss and it needs to be separated so you know what is going on. The strong must help the deserving poor.
Be slow to hire quick to fire. This is not as cruel as it sounds, it is very hard to find the best people and the winners, so it takes a long time. The worst thing is to hire somebody now because you really need them, or the hiring person is too lazy to search around, you will not get the best person. You hope the staff member will stay many years, so the fact it may take weeks, or many months to find them, is nothing relative to that. However once the candidate starts work, their actual performance and results will make it very evident if they are winners or loosers. Yes training can help and people should be helped all that is possible.
However once it gets to the point, that they are still not being the best, on average people are very very slow to change, if they do at all. So you need to be quick to fire. Companies make very low profit on turnover business is incredibly competitive you cannot afford to carry that weight.
Incentivising staff to find the best people.
Staff may hire people who are worse than themselves, so they are not a threat getting promoted to the job they want to be promoted to, or even their own job.
However a successful manager is only successful if you hires people more honest, intelligent and energised than themselves.
If staff are less good than the manager, the manager will be running around all the time sorting out their mistakes and deserves to fail.
Tactics to resolve this are.
Have different parts or divisions to the business, separate to what the manager is involved with. Make it clear that any successful people will be moved to that other part of the business, so they will not be a threat to that manager. Also the manager who initially found, trained and promoted that worker, will be credited financially and with honour for having found them.
Make the managers that find, train and promote people who qualify to run other branches, heroes of the business.
Reward managers financially and with honour, when they find great people. It could even be rewarding a junior regular worker for finding a friend of theirs to do a job. It could be a junior manager finding a more junior person who already works in the company for doing a more senior job.
The Bell curve
Normally 20% of the staff are the ones that keep a business going. If they leave the business is dead.
It is often the people who stay on working on and thinking about the business outside their shift hours.
People that love doing the business and care.
20% of the staff are secretly malevolent and do more harm than good and a manager has to get them out.
The middle 60% of people are okay and do a decent job but are not the ones the business depends on.
Often there is just one person who will genuinely take responsibilty and think, without that person the business will die. Very fortunate if more than one of those in a business.
Hiring people for whom what that business does, is their life’s vocation
There needs to be an entrepreneur in the business, who can see what makes money and ensure the business does that thing.
However for the product or service produced, the entrepreneur needs to hire people that produces that service or product.
The entrepreneur needs to hire people for whom producing that product or service is their actual vocation in life, not just what they do to make money.
So if it is a cleaning business, then cleaning is their life’s vocation.
Manufacturing cars for a car manufacturer.
It could be architecture, or whatever that business does.
Programming for a computer programmer.
Needs to be what is their life’s vocation and interest.
They are actually thinking about, writing notes, working out that thing, all the time, even in their spare time. This is because it is what they life’s purpose and interest is.
For example if it is cleaning, they love to clean their home, look at cleaning products, talk about, study and do cleaning in their spare time.
Emotions are energy, they are the fuel thst powers people. A person has to have passion for something to succeed at it.
If a person is inspired and passionate about something they can do it two says what would normally take weeks or months.
A person needs passion and enthusiasm to succeed, if they are just doing it for the money they will do as little as possible for what is needed to get it.
It is possible for a person to have morality and so their passion is to do the thing for God and for others, which is the highest thing.
Things to look for in people
Some people just have some of these traits, but they can build a business focused on them to be a success. They then need to have a business model suited to their traits. Then they delegate the bits they are less good at.
-Morals (this is essential for all people)
-Ambition (practically everyone stops growing their business once they have enough money to be comfortable. So need a person who wants to be top dog)
-Imagination, this is needed to create, find out and work out new ideas of what to do.
Marcus Lemonis says ‘If you are going to have a successful business, need to have people on the team that actually love and care about it as much as you do.’