Stop being unfair to the people doing the work

Cut a cake for two small children and watch what happens.

The four-year-old can’t tell you what a fraction is. She can tell you, to the crumb, that her brother’s slice is bigger.

I pinched that from Barry Ferns, and I love it, because nobody taught her. She arrived knowing. By six it gets more interesting. Children don’t just notice the difference any more, they get properly angry about it. What winds them up is whether the difference was earned. Give her the bigger slice because she helped bake the thing and her brother will grumble and live with it. Give them identical slices when one of them did all the work and you’ve started a war.

Adults never grow out of it.

Christina Starmans, Mark Sheskin and Paul Bloom went through the lab studies, the cross-cultural studies and the work with very young children, and their 2017 paper in Nature Human Behaviour comes down to one line. When fairness and equality pull in different directions, people prefer fair inequality to unfair equality.

Now hold that thought and look at your payroll.

Who can already see who does the work?

Walk round your office and you could point at them. The two or three people you’d feel in your gut the moment they resigned.

You know who they are. Their manager knows. So does everyone else, right down to the quiet one in finance who has watched it for three years and never says a word.

Someone gives up a Saturday to keep a client. On Monday she watches a colleague on the same salary pack up at five. She doesn’t begrudge him his evening. She’d just like someone to explain why they’re on the same deal.

Somebody signed off that deal.

You did.

Now, I know what you’re thinking. “We pay the role, not the person.” It sounds fair.

But who does it protect?

Not the person doing the work. It protects you, from a conversation you’d rather not have.

Same pay. Not the same work.

Here’s a question I put to CEOs. How much more does an A-Player get done than a B-Player?

They nearly always say somewhere between five and ten times.

Then I ask whether they pay that person more.

Almost always, no.

Some of them pay them less.

Think about what that tells your best people. And if five to ten times sounds like a CEO exaggerating over a glass of wine, it isn’t far off what the research found.

Ernest O’Boyle and Herman Aguinis looked at 633,263 people across 198 samples (researchers, entertainers, politicians, athletes) for a 2012 paper in Personnel Psychology. They wanted to know whether performance really sits on the tidy bell curve your appraisal form assumes.

It doesn’t.

In their first study the top 5% produced 26% of the output. The top 1% alone produced 10%. And the comfortable middle, everyone between the 16th and 84th percentile, who on a bell curve would produce about 68% of the output? They produced 46%.

So the middle does a lot less than your pay bands think, and the top does a lot more. You still pay them the same. That’s why you pay high performers more.

What does paying only the stars teach everyone else?

So you decide to sort it. You pick out your five stars, pay them properly, and leave everyone else on the old deal.

It feels like justice for about a month.

Then everyone else sees who got the rise, and they work out how to get picked instead of how to do the work.

Publishing everyone’s salary won’t save you either. Not while the pay still doesn’t match the work.

You need a standard before you publish anything. What does an A-Player look like in this seat, for this money, in this business? Decide that first. Then the pay follows it.

“But I can’t afford A-Players”

I hear this one all the time. Usually from a CEO running a team of eight that ought to be seven.

Rick Crossland, author of The A Player Advantage, has the best answer to it I’ve seen, and I use his numbers in my masterclass on people decisions.

Take a team of eight. Two A-Players, four Bs, two Cs.

That team costs £531,000.

Now rebuild it. Keep Adam and Ashley. Keep Barbara and Belinda for now. Billy, Bob, Charlie and Cheryl go, and you hire three A-Players from the market.

That team costs £487,000.

Look at Abby. She’s on £73,000. Belinda, the B sitting next to her, is on £66,000. When you go to market for an A-Player you’ll probably have to pay more for her than you paid the person she replaces. That’s the point.

Fine. Pay it.

Because the team of seven still costs less than the team of eight. £487,000 against £531,000.

And here’s the question I always put to the room. Has anyone ever told me the team of eight would outperform the team of seven?

Nobody. Not once.

So you spend less and get more done. If you go one step further and make all seven of them A-Players, the slide has the team at £497,000. Still less than the eight.

What talent density does one pace need?

Steve Jobs said it. “A small team of A+ players can run circles around a giant team of B and C-Players.” He said it in an interview for In the Company of Giants.

When your best person is surrounded by people as good as she is, she stops being the resented exception. She’s normal. Nobody’s propping anybody up. The team moves at one pace, and you can pay all of them properly because they’re all doing the work.

This is not a star scheme. A B-Player gets coached up to an A or moves on. A C-Player doesn’t get parked in a critical seat out of loyalty. And the toxic high performer who hits the number and poisons the room goes too. A team running at one pace won’t tolerate that either.

So how many A-Players do you actually need?

Start at the top. Every person on your executive team is an A-Player. Every person who manages people is an A-Player. That’s my standard, and I don’t compromise on either. A B-Player manager will not hire an A-Player, and an A-Player will not come and work for them.

Below that, you don’t need a firm full of unicorns. You don’t even need half the company.

Anish Batlaw at General Atlantic researched more than 200 companies and found talent density was the most predictive indicator of performance. By talent density he means the share of critical roles held by A-Players, the roles most central to the value creation plan. When over half of those were held by top talent, companies consistently outperformed.

And everyone else? Moira Clark is Professor of Strategic Marketing at Henley Business School, and I quote her in my book Mind Your F**king Business. A bank moved the manager of its best branch to its worst. Nothing changed until a third of his old team moved with him. In my experience that’s about 30% A-Players in the rank and file.

Malcolm Gladwell goes further. In Revenge of the Tipping Point he calls it the magic third, and says the whole group can shift once somewhere between a quarter and a third think differently.

So that’s half your critical seats, and a quarter to a third of everyone else.

Most firms aren’t close when they first come to us. Somewhere between 10% and 35% of the team are A-Players. The worst I’ve seen on day one was 10%. The best was 35%. Our clients have pushed it to 60%, and some to 70%.

What holds them back is who they let through the door. Everyone who joins has to be an A-Player. Hire anyone else and you never get to 30%.

And founder-CEOs delegate that too early. The first fifty people, you hire yourself. Brian Chesky still hires his senior leaders’ direct reports at Airbnb. He has said he learned the hard way that he did not spend enough time on hiring. Don’t be embarrassed about it. It’s the main lever you’ve got.

Plenty of firms hand it to a junior recruiter whose job is to fill the seat. When I recruit with a founder, we can have a real conversation about what the job is and what great looks like. You can’t have that with someone whose target is filling seats. Your job is to get someone who can actually do the work.

I was talking to a CEO recently who was hiring a new team of SDRs. His global head of talent told him he was being too picky. His standards were making it too hard for the talent acquisition team to hit their numbers.

Cry me a river.

That is not a company destined for greatness.

Two questions for every manager.

Have you got a number two who could do your job in six months? Almost always, no. And does that number two have a number two? You want two people in the team who are really good, so a promotion doesn’t leave a hole.

The other question is the bar. Managers hire someone good enough to sit in the team. That’s too low. Everyone you hire has to be better than half the people already there. If they aren’t, you’ve decided to drop the average.

Talent density is just that number, and above all the number in your critical seats. It only moves when you make the call seat by seat, which is what talent assessment is for. And if you’re still running the nine-box grid, bin it. It was built to look after the middle.

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So here’s something to try this week.

Take a sheet of paper.

1. Write down the people you’d feel in your gut if they resigned.
2. Underneath, write down the people whose leaving wouldn’t move the number.
3. Put the salaries next to both lists.

If both lists are paid on the same logic, your best people worked that out long before you picked up the pen.

What do founder-CEOs ask about talent density?

Why does the same salary feel unfair when the job title matches?

A job title doesn’t say who did the work. Two people can share a title and a salary and still not share the quarter. When one does it and the other watches, the people next to them call that unfair. Starmans, Sheskin and Bloom found people prefer a fair difference to an equal share.

O’Boyle and Aguinis, in Personnel Psychology in 2012, found the top 5% produced 26% of the output in the distribution from their first study. A pay band that treats that person like the middle is the deal people are angry about.

Should we publish salaries to make pay fair?

Not before you’ve got a standard. If the bands still pay the passenger and the person who saved the account on the same logic, publishing the numbers shows the gap. It doesn’t close it. Decide what an A-Player looks like in each critical seat, pay against that, and then be open about the pay.

Where do I start if talent density is weak in three seats?

Start with those three seats, not a programme for the whole company. Tell your leadership team who you’d rehire and who you wouldn’t. Then coach, move or replace, one seat at a time. Fix the managers first. The people they hire won’t be any better than they are.

Keep the bar on the next hire as well. Anyone who joins has to be better than half the people already in the team, or the average falls and you don’t get to 30%. Where the leadership team can see the problem and won’t name it, that conversation is what executive team coaching is for.

What should you do next?

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Your A-Players already know who does the work. If you pay everyone the same, they’ve also worked out what you think the work is worth.

Fix that and the room changes. Your best people stay. The middle can see what great looks like and what it’s paid. Every hire has to raise the bar.

That’s the point. Pay for the work, seat by seat.

Four ways to take this further

1. Book a call. If equal pay for unequal work is costing you your best people, Dominic can help you work out whether it’s the standard, the pay logic, a manager who won’t make the call, or a leadership team that can see it and won’t say it. No obligation, no pitch.
2. Grab the book. Mind Your F**king Business gives founder-CEOs a practical way to stop being the bottleneck and build a company that can scale without them in every room.
3. Read the talent density guide. Start there to find out how many A-Players you’ve got in your critical seats, and how to raise that number.
4. Subscribe to the newsletter. One idea a week on hiring, pay and building a team of A-Players.

Your move. Put your two lists and the salaries in front of your leadership team this week, and ask which A-Player you’d lose first.