In our analysis of over 90 failed strategic initiatives and missed plans at growth companies, more than 80% of CEOs blamed bad hiring. Chalk it up to a lack of capabilities or character, or both. Alarmingly, laziness is endemic in the workforce—a recent study showed 75% of respondents admitting they don’t work to the best of their ability even once a week.1 It seems like bad people may be responsible for trillions of dollars in lost productivity.
When people do dumb things or lose focus, it’s natural to conclude they’re stupid or lazy. But more often than not, it’s wrong. What looks like an intractable “bad people” problem is in fact a pervasive “bad design” problem. Despite appearances, our analysis showed the root cause of under-performance was usually not bad hiring but one or more of the following problems with business design (by which we mean responsibilities, processes, goals, measures, and plans):
1. Confusing Design
52% of organizations we analyzed had significant gaps in executive-level understanding of business design, which led to over 40% of plan misses. Leaders are often convinced they over-communicate but don’t rigorously confirm their teams have clarity, and operational confusion quickly sets in.
2. Impractical Design
68% of failures in assigned responsibilities were foreseeable given the qualities of the person in the role, but rather than design for that person, the leader defaulted to a standard organizational model. The most senior roles were more likely to contain mismatched responsibilities (“a CFO should own X”), particularly the CEO role itself.
3. Static Design
Consistently hitting goals in a rapidly changing environment requires adaptive design. Failing to regularly use accurate data to track results and course correct was a significant factor in 65% of unsuccessful strategic initiatives. The cost of not actively experimenting with design is even higher in missed opportunities.
4. Blind Design
Leader blind spots and biases result in distortions to design, and limits to the leader’s rate of personal development can bottleneck the entire organization’s productivity. Less than 10% of C-level hires succeeded when a founder was trying to hire for “above the box” experience they themselves lacked (and ultimately couldn’t metabolize).
Attributing business failure to “bad people” doesn’t solve the problem. Shuffling new people into an ill-fitting design rarely works: nearly half of all senior manager hires fail within 18 months, and less than 20% have significant impact.2 Most leaders design the business according to a strategy and then slot people in to run it, but we’ve had the most success when working with leaders to attend to design as an evolving business experiment:
Explicit - Leader clarifies expectations and ensures understanding of how things should work
Practical - Leader optimizes across people strengths, operational needs, and strategic opportunities
Evolving - Leader regularly uses accurate data to course correct plans and responsibilities
Unbiased - Leader intentionally guardrails blind spots and biases
Blaming “bad people” doesn’t just ignore critical design flaws, it’s a perniciously self-fulfilling prophecy. Leaders lower their expectations, standards, and plans. People shut down under clear signals from leaders that they are “not the right fit for the role.” Both sides enter a chronic state of learned helplessness, and business suffers dramatically. The path to better performance is to stop asking if your people are stupid or lazy and start asking if the business design is getting the best out of them.
Surrounded By Idiots
Trillicent should have been taking off. They had great product-market fit, an industry visionary CEO with a brilliant strategy, and ample funding to execute on it.
But the business was sputtering. Trillicent had just closed a funding round at a disappointing $80 million valuation, and CEO Eduardo Moyer was miserable, frustrated by lackluster performance. He knew he was an incredible communicator and brilliant salesperson. But when he spoke at All Hands meetings, all he got was blank stares, and only 12% of the people we surveyed could describe what he’d been saying.
It was his job to set the vision and goals, he reasoned, and their job to figure out how to get it done. If they couldn’t do their jobs, he needed people who could. But too many people needed replacing. “I’m surrounded by idiots,” he muttered in an unguarded moment, and considered quitting after just 1.5 years on the job.
Somehow, this promising business was on the brink.
Moyer’s “bad people” judgment was not only wrongheaded, it was tipping the business into a downward spiral. Trillicent’s employees were not stupid. They were confused and scared, already inundated with change through the recent founder succession. A big picture guy, Moyer struggled to tie his vision to present day realities, so they couldn’t connect what he was saying to their daily lives. Sensing their CEO’s increasing displeasure, they began to panic, and productivity nose-dived.
Moyer’s instinct was to become increasingly hands-on to compensate for shortcomings in his team, but that was the opposite of what the organization needed. Trillicent needed a new organizational design that leveraged Moyer’s strengths and challenged his assumption that a CEO needed to own every leadership responsibility.
As part of a deeper reorg, we elevated the COO to the role of “translator” of the CEO’s vision to internal audiences and focused Moyer on an outward-facing, pedal-to-the-metal growth strategy to build the sales funnel. We predicted that change driven by strong customer demand would make more sense to the team, improving their agility and productivity.
The sales growth spurt that followed, plus the refreshed and cohesive company culture, contributed to the 3X valuation for a successful exit within 1.5 years of our engagement. Grinning broadly, Moyer reflected, “I was the idiot.”
Author: Greg Hudson