When Apple announced they were opening retail locations in 2001, many experts didn’t give them a chance.
To start, there was the market share problem. While Apple made products that were well regarded and well built, they remained an also-ran in the industry, hovering around 3% of total PCs sold. Apple’s first forays into retail, partnering with CompUSA and Sears, were “massive failures”, according to marketing director Steve Chazin.
Apple was looking to change the game with branded retail outlets where they could control the entire customer experience. However, none of their competitors had ever achieved great success with that strategy; Gateway, now defunct but then famous for its piebald packaging, was the biggest success with $8 million in annual sales per store. David A. Goldstein, president of researcher Channel Marketing Corp., was quoted in BusinessWeek as saying, “I give them two years before they’re turning out the lights on a very painful and expensive mistake.”
The experts were very wrong. Apple went on to open 481 stores across the globe that bring in a million people a day. Apple Stores drive so much traffic to malls that the company is often able to negotiate discounted rent. In 2014, the average revenue per store was $50.4 million, which translates to more money per square foot than any other retailer, significantly ahead of longtime leader Tiffany & Co.
The experts were not wrong about the retail climate – Gateway stores and CompUSA disappeared within a few years of the first Apple Store opening. But Apple changed the game, offering something fundamentally different than its competitors – not just a place to purchase wares, but an extraordinary experience that drove people to the locations again and again.
A good portion of the credit for that retail success goes to Ron Johnson, Apple’s Senior Vice President of Retail Operations. Johnson was hired by Jobs from Target to lead the team responsible for creating the look and feel of the Apple Store. Chazin explained, “Johnson realized that if a store merely delivered products to people, it was not creating value for the customer – it was just completing a transaction which could be easily handled by any website.”
Johnson’s big idea was the “Genius Bar” – an area of each Apple Store that he modeled after the concierge desk at luxury hotels. At the Genius Bar, customers could get information or help they needed about Apple’s products without any sales pressure. The Genius Bar idea was a revolutionary way to help customers feel well informed and taken care of, in a comfortable environment. Johnson explained his “job is to make the store rich with experience for people. It’s not the boring, laborious, I’ve-got-to-move-merchandise and take care of customer problems. I’m suddenly enriching people’s lives. And that’s how we select, that’s how we motivate, that’s how we train our people.”
Johnson is an excellent example of Jobs’ great success with building his team, and finding truly talented people who could deliver what the company needed. Jobs had been honing his hiring practices since the beginning with Apple, and had boiled down his success to one thing: A-players. “I noticed that the dynamic range between what an average person could accomplish and what the best person could accomplish was 50 or 100 to 1,” Jobs said. “Given that, you’re well advised to go after the cream of the cream. A small team of A+-players can run circles around a giant team of B- and C-players.”
Jobs was blunt on the effect these A-players had on his life: “I’ve built a lot of my success off finding these truly gifted people, and not settling for B- and C-players.”
Better yet, Jobs determined that a focus on A-players self-perpetuated excellence throughout the company. “I realized that A-players like to work with A-players, they just didn’t like working with C-players,” he said. “It becomes self-policing. They only want to hire more A-players.” B- and C-players, on the other hand, want to hire people less capable than they are so that they feel better about themselves. This leads to a so-called “bozo explosion.”
This philosophy has had immense influence on the hiring practices of Silicon Valley and beyond. Publications like Forbes and Harvard Business Review are filled with articles about, “The Importance of Hiring A-Players”, “The Behaviors that Define A-Players”, “Why Every Company Needs a ‘No Bozos’ Policy”, etc. Recruiting blogs around the web tout Jobs’ prescience. There’s even a book, How to Hire A-Players. One reviewer on its Amazon page notes, “it made me reflect deeply on whether I was always an A-player.”
Of course everyone wants A-players. A-players are game changers. Wherever they go they make good things happen. They work harder, think smarter, and have better skills than their “bozo” peers. They can go wherever they want, and do whatever they want. This is the conventional wisdom about stars: they just simply outperform everyone else, no matter the circumstances.
But what if that was wrong? What if the whole notion of an “A-Player” was not only misplaced, but dangerously off-base? What if the Ron Johnson story wasn’t the shining example of the A-player advantage, but merely another in a long line of cautionary tales about the way we think about talent?
Johnson left Apple on top of the business world. After earning $400 million on his successes at Apple over his twelve years at the company, Johnson was looking to stretch himself, and accepted an offer to be CEO of J.C. Penney in 2011. He reflected at the time, “I don’t just want to run a business, I want to do what I did at Apple—I want the chance to transform something. So I picked J.C. Penney. I didn’t come here to improve Penney, I’m here to transform Penney.”
Johnson immediately fired all the top brass and brought in his own people from Apple. He set about to rebrand the retailer from a bargain hunter’s paradise of undifferentiated merchandise to a hip establishment built off a base of stylish young customers. He rejected testing his ideas – including eliminating the stores’ well known discounts, coupons, and frequent sales – before rolling them out to all of the retailer’s 1,100 stores. Johnson summarily stated, “We didn’t test at Apple.”
Johnson was at J.C. Penney for 17 months. Financial press called it “one of the most aggressively unsuccessful tenures in retail history.” Johnson had “immediately rejected everything existing customers believed about the chain and stuffed it in their faces”, resulting in a 32% decline in sales as alienated customers abandoned the retailer in droves. Ron Johnson, vaunted A-player, was ignobly fired after less than two years on the job.
Was Ron Johnson an A-player? Or was Jobs just good at picking talent for him and Apple?
When Jobs re-emerged at Apple, he took his inspiration about hiring A-players from Pixar, where he was also serving as CEO. Yet Jobs never interfered with the hiring process at Pixar – he left that to founding president Ed Catmull and chief creative officer John Lasseter. Catmull was, according to Academy Award-winning director and Pixar employee Brad Bird, “the designer of the human machine that is Pixar.”
It was among Jobs’ greatest decisions that, despite owning the company, he allowed Catmull and Lasseter to run Pixar according to their own vision, not his. Jobs was a vital money man for the company, but unlike at Apple where he was a notorious micromanager, he knew to leave the important decisions to those who understood the context of the company better than he did – including hiring.
Jobs brought his “A-player” message to Apple long before he sold Pixar to Disney, yet he was wise enough to recognize that how you define “A-players” depends completely on the context of the organization. That’s why he stayed out of Pixar’s hiring business: he understood that people inside the company knew what would work for them better than he did.
Yet time and time again Jobs’ “A-player” message gets spun into an altogether different message – don’t focus on what the context requires, or how the person might fit into that reality. Focus on skills and results. Find go-getters. Ivy Leaguers who have crushed it.
But as Ron Johnson showed us, an A-player for one organization is not always an A-player for another.
The myth of A-players pervades business. It blinds us to the reality of how different people can excel in some contexts and completely fail in others. It’s a story that has been played out thousands of times. Just like when Ron Johnson almost ran J.C. Penney into the ground.
The same happened during the merger of car manufacturers Chrysler and Daimler in 1998. Juergen Schrempp, the dynamic and ambitious German CEO of Daimler-Benz, envisioned a three-pillared system that would give the company access to North America and then Asia. But the Americans at Chrysler didn’t see wisdom in expanding into Asia when there were still many issues to be worked out on home turf. They were interested in streamlining and profits, not intercontinental growth. The board, confused by Schrempp’s aggressive plans, torpedoed his attempt to buy Nissan. Growth goals were never realized, sales suffered, and Daimler sold off Chrysler in 2007, two years before Chrysler declared bankruptcy in the midst of the financial crisis.
Previous articles have explored how former “king of the skies” Jeff Smisek went from star CEO at Continental Airlines to disgraced CEO at United. Like Ron Johnson and Juergen Schrempp, Smisek found himself in a new context that was superficially similar to one where he excelled. And like those other CEOs, he failed.
Even Steve Jobs’ “golden touch” couldn’t create success during his first tenure at Apple or at NeXT Computer, the company he founded after leaving Apple. NeXT never gained traction in the market, and was eventually absorbed into Apple. But Jobs was the A-player in the context of Apple circa 2000.
There are still other cases like Marissa Mayer, a superstar at the hugely successful Google, but in danger of failure at the helm of the long-struggling Yahoo. Or Richard Thoman, star CFO at IBM, but ousted from the top job at Xerox after 13 months. These examples are everywhere, littering the business pages of newspapers and websites across the globe every day.
Study after study shows that transferring what you know from one context to another is difficult and unreliable. Ron Johnson, Jeff Smisek, Juergen Schrempp, Marissa Mayer, and Richard Thoman aren’t outliers, they’re just some of the more familiar examples of a phenomenon that is all too common. None of them “lost their touch” or were exposed as frauds – they only changed settings. It bears repeating: skills are more specific and more difficult to transfer than many of us would like to believe. You can’t divorce performance outcomes from context, because the context is the thing you’re actually good at.
So what is context? And why is it such a critical determinant of performance? Google defines context as “the circumstances that form the setting for an event, statement, or idea, and in terms of which it can be fully understood and assessed.” As that definition implies, you cannot fully understand and assess an outcome without understanding the circumstances that formed the setting.
It’s true for political outcomes and the political leaders that produce them. It would be foolish to assume that Abraham Lincoln or Winston Churchill would have been effective leaders in different nations and times. And the same is true for business outcomes and the business leaders that produce those. The context is what makes a person good or bad.
In business, context is the sum total of the conditions and circumstances – both internal and external – in which the business operates. One of the most important aspects of the context, and one that has an outsized impact on whether any particular person will fail or succeed within an organization, is the organization’s culture.
Culture is a word that’s thrown around with many different implied meanings, but at it’s core, the culture of a business is what people believe are acceptable behaviors – i.e., which behaviors will be rewarded and which punished. It stems from the organization’s purpose – its very reason to exist – and from deep-seated fundamental beliefs and biases of the organization’s leaders.
Some cultures are oriented towards maximizing profitability, and reward efficiency and predictability. Others are oriented towards achieving high growth, and reward agility and competitiveness. Still others are oriented towards solving hard problems, and reward innovation and insight. Whether or not it is explicit, every organization has a culture. It is built and reinforced through thousands of daily signals – in promotions and firings, bonus checks and salary adjustments, pats on the shoulder and email admonitions, in the boardroom and at the water cooler.
And here’s the thing. For some people, those culture signals just make sense. The culture fits seamlessly with their own beliefs, biases, and compulsions. It brings out their best selves, they are firing on all cylinders, the path forward is clear, and work is both highly productive and consistently enjoyable. These people are likely to be A-players in that culture.
But for other people, those same culture signals don’t make sense at all. The culture clashes with how they view the world. Their instincts push them to respond to cues in one way but the culture demands something different. They become stuck in downward spirals of confusion and anxiety. They are far from being at their best, and frequently make poor decisions. These people are bozos in that culture.
Apple’s culture prized creating beautiful and elegant new solutions to problems the customer didn’t even know they had. This culture permeated everything, from how products were designed to how meetings were held. J.C. Penney, on the other hand, had a culture where predictability was king and anything that might alter the ecosystem of the existing customer base was considered destabilizing. Small wonder that Johnson was A-player at Apple and flamed out spectacularly at Penney.
Daimler-Benz had a culture of going after high growth opportunities through bold top-down moves. Chrysler’s culture was more circumspect, democratic, and focused on ensuring profitability. It shouldn’t come as a surprise that Schrempp was unable to bridge that culture gap successfully.
Culture differences are often a big part of why A-players become bozos, and mediocre performers become stars. But culture isn’t the only aspect of context that matters. Another key part is the design of the role that people find themselves in. When someone’s responsibilities match what they find meaningful and purposeful (their passion) and what they are naturally good at and improve at fastest (their talent), they will inevitably produce excellence. But much too often, an A-player in a role that highly leverages their passion and talent will be asked to take on a role that doesn’t.
Steve Jobs had an uncanny talent for knowing what consumers wanted before consumers themselves knew, and he had a passion for translating that into building a “bicycle for the mind” for the average person. But NeXT was a B2B company where that talent and passion was largely wasted.
Context encompasses a great many other things in addition to culture and role design. The pace and predictability of change in the market, the brand DNA, the availability of funding and resources, the ownership and management structure of the company, the stage in the life cycle of the business, the amount of regulatory scrutiny, the activeness of unions, the state of the overall economy, the list goes on. Yet the myth steadily holds that A-players are stars independent of the context.
One further example will illustrate how many of these dimensions of context can conspire to create wildly different expectations for who will be A-players. In 2004, Nike brought on William Perez, star CEO of SC Johnson, to succeed aging founder Phil Knight. The culture at SC Johnson was built on inclusive respect and family values; Nike’s culture showcased irreverence, exclusivity, and performance. Perez’s talents that led to success at SC Johnson were deft financial management and ability to juggle multiple brands efficiently; at Nike, he would need to predict the next fashionable trend for a single brand juggernaut, something that called for much different talents. The brand DNA was completely different, the pace of change was completely different, and even the looming presence of the legendary Nike founder changed the context. So when Perez was summarily fired after a mere 13 months on the job, after overseeing a near revolt in the workforce, why was anyone surprised?
Here’s the truth: Jobs wasn’t a great CEO. He was a great CEO in the context that Apple was operating in at the turn of the century. Smisek wasn’t a great airline CEO – he was a great CEO for Continental’s context. Perez was a great CEO for SC Johnson, Schrempp for Daimler-Benz. They were people who, like so many others, experienced both contexts they were good at, and contexts they were bad at.
That is why the way many of us interpret Steve Jobs’ advice about A-players is so potentially damaging. People have come to believe that you need to find these universal winners, and that everyone else is intrinsically inferior in some way. And that just isn’t true. As evidenced by Pixar, Jobs himself didn’t even practice it that way – he left the hiring up to people who understood the context of the company.
Given the right context, almost any person can be an A-player. But there are four problems that stand in the way.
The first problem is that leaders and managers don’t recognize that context is really what you are good at. The conventional thinking in business is that skills are transferable, and some people (“stars”) are just intrinsically better than others. This means that star performers are pushed into a standard line of hierarchical promotions or are wooed by other companies without considering how the new context changes the winning formula. The context that allowed an individual producer to be an A-player is very different than the one she finds herself in as a manager. And we’ve already seen how the same job in different companies can have drastically different contexts, even within the same industry. This is a large part of the reason that one Booz Allen study, which looked at data from 2003, found 55% of outside CEOs were forced to resign by their boards, compared to just 34% of insiders.
The second problem is that leaders don’t understand what constitutes context and how to engineer it to align with what they are like and want to achieve. Culture is not deliberately designed and is often confused by misunderstandings and mixed messages that are allowed to fester. Roles are designed around the perceived needs of the business first, and not to optimally take advantage of the strengths of people. Many founders of companies don’t recognize how the context will be different for a succeeding CEO. Most people just don’t consider how the sum total of internal and external contextual factors will impact the types of people who will succeed and fail.
The third problem is, even if we understand the importance and nature of context, most people likely do not yet know which contexts bring out the best in them as individuals. From early childhood, our system of education emphasizes standardized learning that develops knowledge and skills, not discovery and development of unique passions and talents. Most people pursue higher studies and jobs based on what they believe will give them the most resume badges, not to experiment with where they can truly excel. As a result, most people are largely ignorant about the contexts that are most likely to allow them to be A-players. So companies can’t rely on their employees to self-select for contexts that would be optimal for both the person and the business.
And the final problem is that hiring, particularly for high profile roles, is governed and advised by people who have insufficient knowledge of the specific contexts, and insufficient time to properly investigate. Boards of Directors that are entrusted with selecting CEOs are ignorant about many aspects of the on-the-ground context. Ram Charan, in a Harvard Business Review article, estimates that “boards’ work on [CEO] succession represents probably 80% of the value they deliver.” Yet in a Mercer Delta study, board members “reported spending less time interacting with and preparing potential CEO successors than on any other activity,” their agendas packed with governance and financial matters. And executive recruiters, though usually honest, are perhaps even more ignorant about contexts and even more overworked, instead falling back on shortcuts and the same-old fishing holes for finding conventional A-players.
Fixing these problems will require a fundamental shift in how businesses approach strategy, organizational design, and hiring. Companies must understand and consciously architect those dimensions of their context they control, starting with culture, and they must do so with the same rigor and diligence that they approach financial planning and governance. They must abandon their shortcut searches for these mythical universal A-players with the standard set of pedigrees and awards, and start learning how and where to find people who will be successful in the specific future context of the business. They must design roles to fit first with the strengths of people, not with the isolated needs of the business, and allow people to experiment productively with different roles and settings to enable them to discover their passions and talents.
The conventional myth about A-players is firmly entrenched. But the prize for debunking it is enormous: organizations where almost everyone is an A-player or has the potential to become one. For businesses that can achieve that, it will be the ultimate competitive advantage.