Top grading is a concept that has been used by some of the larger well-run companies (for example, GE and Allied Signal) for many years, but it is probably unknown by most smaller company CEO’s and owners. However, it may be more important to the small company, especially at the initiation or expansion of the company, than it is for any of the major corporations.
Top Grading: How Leading Companies Win by Hiring, Coaching, and Keeping the Right People, written by Bradford D. Smart, describes the process in detail. Smart has been a guru of employment selection for over 35 years. In this book, he details an extensive process for selecting employees. This includes developing very specific performance objectives for each position, a detailed job description, and detailed interview processes. Reference checks and background checks are critical. In addition, he recommends giving a homework assignment to the finalists. The goal of this assignment is to determine if the individual is a self-starter, and whether they are willing to roll up their sleeves and work for the job.
Top Grading specifies building the organization by hiring only the top people. It will cost more to hire these top employees, but it will be worth it in the long run. Most employees can be classified as A, B, and C. A Top Grading company only hires A employees; Smart recommends that all companies start by hiring these people at the top positions. These employees bring more to the organization than just skill. They bring energy and passion. An A employee can be a trusted advisor, and will be a responsible, creative, confident, and competent performer who can be the difference between thriving and just surviving. In fact, it is even more important to have A employees during stressful times in your business.
Hiring these people at the top brings many benefits, especially since these managers generally will only hire other A employees and will gradually replace your B and C with more A’s. A strong CEO with other A managers can develop some B’s and C’s to become A’s.
Hiring A employees may take more time, but it is worth the delay. Many owners believe that they cannot get good people to work for them, so they think they must lower their standards to find employees. The opposite is true: if you raise your standards, make it difficult to be hired, and be demanding of your employees, you will have people clamoring to jump on board. People will generally live up to the standards and beliefs you project to them. What you expect is what you get: the majority of your staff will live up to (or down to) your expectations. If you believe they are capable and transmit this belief to them, they will believe it as well and meet or exceed your standards.
The Container Store strongly adheres to Top Grading. The Container Store has been one of the top 100 companies to work for, as rated by Fortune magazine, for many years. Their principal philosophy is that one great person equals three good people. They pay about twice as much as other retailers and they heavily train their people. This fits with Jack Welch’s concept which is “Less people, paid more, with a lower total wage cost”.
This is also espoused by Jim Collins in his book, Good to Great. To achieve greatness, the good to great companies “…first get the right people on the bus, the wrong people off the bus, and the right people in the right seat—and then they figure out where to drive it.” Collins’ first principle in getting great people is “When in doubt, don’t hire—keep looking”.
One of the immutable laws of management is “Packard’s Law” from David Packard, “No company can grow consistently faster than its ability to get enough of the right people to implement that growth, and still become a great company. If your growth rate in revenues consistently outpaces your growth rate in people, you simply will not—indeed cannot—build a great company”.
There is an old adage that people are your most important asset. This is not completely true, because the right people are your most important asset. Hiring the best employees is the most important task you have in developing a strong company.
Bill Boyer is the President of CEO Focus of the Tidewater, a coaching organization for small company CEO’s/owners. He can be reached at bboyer@ceofocus.com or 757-233-2577.
Topgrading - To learn more about this author, visit Bill Boyer's Website.
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Bill Boyer
(Visit Bill's Website)
Bill Boyer has over 35 years experience
working with businesses, from small to
major international corporations with
extensive experience in operations,
distribution and finance.
Bill has held CEO, COO, CFO, and other VP
positions with Burlington Industries, The
Disston Company and Hickson PLC and other
corporations. He has also been an
individual coach/consultant with many
smaller corporations.
Bill holds a BS in Industrial Management
from the University of Richmond, and is a
graduate of executive programs at the
University of Virginia.
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