While working in private equity, I started to notice a phenomenon: within a portfolio of investments, the ones that received the most attention, energy, effort, and mindshare, were always the worst performing companies. The worst performing companies were more likely to miss budget, disappoint customers, and make errors of strategic judgment (or some combination). The management teams at these companies required significantly more direct involvement, and on some occasions, had to be replaced. It was a lot. Sometimes these intensive efforts would continue for years. And unfortunately, all of the extra effort, time, and energy seemed to rarely turn a significantly underperforming investment into a great one. Most of the time, it was about fighting to protect the initial investment.
And of course, ironically, the best performing companies required little to no attention. “Set it and forget it”. These businesses had strong management teams, consistently outperformed expectations, and ultimately created fantastic financial outcomes for all stakeholders.
Interestingly, I now see a very similar and parallel theme within my operating role as it relates to a) people management and b) strategic projects/opportunities.
Let’s consider People Management first. Who takes more mindshare in a given week? The person who struggles, lets clients down, disappoints colleagues, misses deadlines, provides low-quality work, and ultimately drains energy from the team? Or the person who constantly impresses you, delights your clients, is loved by their colleagues, produces exceptional work, and enhances the rest of the team around them? Sadly, if you’re like me, you’ve probably spent a lot more mindshare on the former. And like my experience in investing, despite how much energy, focus, and effort you might put into turning around that person, the time-to-payoff ratio isn’t particularly great. Does it mean you shouldn’t try? Of course not. However, it’s important to remember that your strongest performing team members not only deserve, but require considerable investment, focus, and energy. In fact, putting your focus on those who perform best, is more likely to have a meaningful positive impact on your team and organization as a whole. Don’t forget to invest in the best.
The same goes for strategic projects and opportunities you may be working on. Let’s say you’ve got three critical projects that must be completed in a given year in order to accomplish your organization’s annual strategic goal(s). If of those three, one is going poorly and meaningfully behind plan, while one is going well, which are you more likely to spend your time, energy, and mindshare on (and that of your teams)? Probably the one that requires remediation and course correcting; however, if you spend the majority of your time trying to get one project back on track, you may ignore the potential to spend your time turning a ‘good’ project into an absolutely fantastic project, which may ultimately be of greater benefit.
There is a finite amount of time, energy, and mindshare we have. It may not come naturally, but I have seen the benefits of dedicating focus towards the strongest performing team members and the best opportunities. It doesn’t mean you should ignore those that are struggling, but it means you should be conscious not to let them entirely absorb your most valuable resource: your time.
To quantify this a bit using an investment example: if you make two $100K investments and one is underperforming while the other is doing quite well, your time is better served focusing on turning the better performing investment from a 3x outcome to a 5x outcome, instead of fighting to retain your initial investment in the underperforming asset.