05.
The Talent Siphon

Levels and Ladders

My uncle worked for one single firm, leaving school at 15, for more than 50 years. They took him on as a 15-year-old apprentice and educated him over half a century, his loyalty rewarded with a pension and countless friends that would keep him busy in retirement. That romantic image is a postcard from the past that we look back on fondly knowing that it is beyond us and will not return.

In reality, in a hyper-connected, distributed world, no-one works for a single employer forever anymore. At least not in small companies.

'Are you telling me I shouldn't want experienced people to employ and trust for as long as possible?'

Challenging a 'self-evident' truth (or just 'common wisdom') should be considered strange. There are some axioms that make no sense to question, but in a highly volatile marketplace where it's as easy to go out of business as it is to start one, very little should remain gospel. It's probable that you're invested too heavily in both what's worked for you so far (you made it a decade in business), and what worked for previous generations (see: my uncle).If labor efficiency is the wind that gets us places, the cost and effectiveness of that labor is the size of the sail. Even a gale isn't going to do much for us if our sail is the size of a napkin.

Do you want experience? Some. But I need you to realize that 10 years as an Account Manager at 10 different companies is one year of experience multiplied 10 times. It's not the same as constant growth. And if you hire a different Account Manager with a decade of experience doing good things for another (single) firm, you're buying them — the complete sum of their experience, good and bad — at a higher cost. It better be highly relevant to what you do and the way you do it.

Should you hire people for as long as possible? Are they a good cultural fit and highly productive? Are they continuing to add value by solving new mysteries and rising through the Levels in your firm? Great. More likely, they get things done very well and quickly but want no part in your culture. Or the opposite: everyone loves them — how would we ever do without them? — but they have no end product. In either case they are below the standard you need.

Instead of hoping your best people stay (and do not ask for consistent raises), it's important to get ahead of the narrative and define what you offer your people when they arrive with hope and energy. Ironically, the more you embrace the reality that some day they will work elsewhere (but that you're going to give them the finest preparation for the world), the longer they will want to stay with you, to repay the effort you've invested in their career (not just this job and what they're going to do for you).

The more closely you define and help develop and individual's career, the more likely you are going to have a long-term employee.

— Simple Numbers. Straight Talk, Big Profits!

By investing in people at the level they're at, you develop a team with high standards. I call this the Talent Siphon. Using four levels to label each employees role and status:

• Designer, Level One (most junior)
• Designer, Level Two
• Designer, Level Three
• Designer, Level Four (most senior)

Most small firms do not need three Level Four designers, they need a range of skill levels that siphons, or pulls, each level into the next:

• Level Ones grow to become Level Twos
• Level Twos grow to become Level Threes
• Level Threes grow to become Level Fours

By taking this approach you can set both the skills required for each level, and the accompanying salary range, based on your needs! Not the industry's needs, on yours.

What Happens When Level Fours Max Out Your Salary Range?

You have an adult conversation and remind them of what you can afford, and the numerous non-monetary advantages of working for a small firm like yours. Frustration that you need to restart the cycle to find a replacement is an indication that you should not be the one responsible for doing so. There is no bigger line item in your expenses than "people," so you (your company) needs to be good at:

1. Finding people.
2. Hiring people at the right price.
3. Developing people constantly.
4. Accepting that your best people will eventually leave.

If this makes your heart sink — why should I not just give people more money to keep them, they're amazing at what they do?! — you're probably not the person who should be making these decisions (or you need to face the reality of the modern market). Owner-operators are typically the deciders when it comes to hiring and firing but perhaps there's someone you can lean on to help with those decisions. The Endowment Effect (a cognitive bias where people assign a significantly higher value to things they have) is a very real and unhelpful bias when dealing with people. We're much kinder and more lenient to employees we like, even when we do not fully understand the work they do, than alternative outside our group. By stating your Levels and accompanying salary ranges you break the unwanted connection between people and money. People are not quantifiable. Nothing is more offensive (or open-ended) than stating 'Greg is not worth $100,000.' Meeting a standard — 'performance' — enables a judgment — 'value' — that becomes the rubric you need to keep top of mind where people and money are related.

People are going to find more money elsewhere, for many reasons:

• Bigger businesses with equally big ambitions need Staff Designers.
• Your competitors will over-pay (based on market standards) for your people. They will think deterministically about a probabilistic problem ('we have to hire Sam, they're the one person for this role!'), risking financial peril, all because they cannot find and teach Level One prospects that later become both as good as Sam is today and better because they work towards your specific vision.

When competitors cannot develop talent or believe it's beneath them ('why should I have to bother?'), your winning advantage in the labor marketplace becomes finding overlooked or under-experienced candidates that want a chance more than a windfall.