Topgrading is a hiring methodology from Brad Smart which is designed to provide you with a ninety per cent success rate when hiring and promoting people on your team.
The Topgrading process should provide you with A player candidates, those who are in the top ten per cent of all candidates at the pay level you provide. There are several tools within the Topgrading methodology and this week we explain the methodology and each of the tools.
Topgrading, hire with 90% success
Episode 100 – The Growth Whisperers
The Growth Whisperers is a weekly podcast hosted by Brad Giles and Kevin Lawrence two advisors to mid-market businesses, one Australian, one Canadian, who each work with CEOs and Leadership Teams across the world with a mission to build enduring, great companies. Each weekly episode covers interesting situations and questions from the world of strategic planning, leadership development, talent and hiring in high growth entrepreneurial companies where real results matter.
Topgrading, hire with 90% success
Brad Giles 00:13
Hello, and welcome to the growth whispers where everything that we talk about is building enduring great companies, and everything that you need to do to do that. Everything around that. I’m Brad Giles. And today, as always, I’m joined by my co host, Kevin Lawrence. Hello, Kevin on this auspicious occasion. How are you today?
Kevin Lawrence 00:34
Yes, happy 100th episode, Brad, it’s exciting that, you know, an idea that we had at the beginning stages that pandemic, and we’ve done it 100 times in a row consistently. Never had a week without an episode 100 weeks in a row? That’s pretty darn impressive.
Brad Giles 00:53
It is. It is. It’s 100 weeks, where every week we’ve spoken about, yeah, a lot of interesting things. And what a journey we’ve covered off so many subjects. And like, let’s be fair, it’s a mini MBA, I don’t want to talk us up too much. Like a mini MBA, if
Kevin Lawrence 01:15
you listen to all of these episodes, with, with all the stuff that we’ve spoken about, there is so many it might be more practical than an MBA, because it’s all from hands on small and medium enterprises, you know, in the trenches. Yeah, yeah, there’s so much value. Certainly, that even I’ve obtained from these conversations, just learning. You’re talking to me? Yeah. You know, we get a lot of great value back and forth, sharing and learning from each other. It’s, it’s awesome.
Brad Giles 01:49
Yeah. And that’s where it kind of came from the idea originally, because we would go to these conference conferences in the US, and there’d be these amazing conversations. And really, we started thinking, Well, what about if we were able to have these in the public domain, these stories that we keep hearing about these growing businesses, it’d be fantastic.
Kevin Lawrence 02:11
Well, and it has been, so let’s dig into our words of the day, and I’m going to start with mine. Um, and, and mine. It’s relentless execution, you know, just focusing and getting the work done. And we’re getting to 100 episodes. I mean, we’re finding times that early in the morning, late at night, sometimes you’ll have to, to in a setting to get it done. And, you know, it’s the relentless execution is those that show up and get the work done, you generally get rewarded and get a lot of progress. And it’s, you know, it’s not rocket science, but it’s that relentless execution that that really does create the results. Whether it’s in work or life or podcast company doesn’t matter. I love it. Yeah, what’s your
Brad Giles 03:03
mind is, it’s really a book from Chip and Dan Heath authors you may be aware of they know that I’m reading at the moment. It’s the power of moments. And it says that there are these moments in our lives that we all remember a wedding, or a car accident, or an event with our kids or something like that, that we all remember. But why can’t we make them curated in our lives or in our businesses, rather than just accidental lead so and so using the power of moments in businesses to create engagement. Now, I don’t know how that I’m looking forward to how you stitch these two together, as always,
Kevin Lawrence 03:43
rillette lists the execution power of moments. Maybe I finally got you after 100 episodes. I think it might I don’t know how to put those together with me. Hopefully, power of moments, relentless execution, relentless execution of amazing moments. I could go with amazing moments, but Well, it’s, well how about we move on? Let’s get into the topic today. Let’s move on quickly. No need to look into it anymore. So today, we’re talking about the power of top writing. And now if I had $1, for every time I said the word TOP grading, it’d be incredible because it’s, you know, it is an incredibly, fairly simple but the very, it requires a lot of relentless execution. It’s challenging to get the value out of it for most people, but it’s a very disciplined process for evaluating human beings. And almost all of our clients use it because it’s the best tool we have found to notably strengthen a team and executive team leadership team management team. And it’s the best tool that we have found to get a higher hit rate north of a 7580 90 95% hit rate on hiring and promotions to make sure that we get players in the seats. And if you listen to our last Episode Episode 99 about, you know, brilliant jerks. It’s basically how do we avoid brilliant jerks? Or avoid, you know, unintelligent jerks? Who would be the lower performing version?
Brad Giles 05:18
And what do we do about in the last episode? Absolutely, yeah. And so, top grading is, I guess it was about 15 or 16 years ago, I first came across the idea of TOC grading the concept. And why it’s so important, certainly, to me as a concept is that you’ve got to get the right people there is there, you know, all employees are not equal in the eyes of your company. Now, let’s not get into discrimination or anything. But in terms of your values, in terms of your value chain, your value proposition and who you are as a leader, and what you value. All people can’t be right for that they can’t all be right in that scenario. And therefore, you know, the best people in the market, there is a bit of a war for the top people,
Kevin Lawrence 06:17
there is no, it’s like, if you think about all the different forms of transportation there are. And even if you zoom in on cars, and you look at all the different types of cars there are, and then zoom in on all the different colors of the types of cars, there’s so many variables, but yet everyone seems to find a car they like or in some cases, love. Um, and it’s the same with people in jobs, everyone is a highly desirable employee somewhere, it just may not be your company. And whether it’s about the type of job and our ability to perform, or the culture and how they fit. We’re just trying to put the right people into the right seats. That’s all that it is. And it’s hard. It’s really hard, especially if you aren’t highly skilled with very precise tools to be able to make those decisions.
Brad Giles 07:09
Yeah, a few episodes ago, we spoke about the barriers to growth, what are the main barriers to grow, then one of those was having leaders who can predict and delegate at the right levels. And, you know, those people are hard to come by, you can’t find those people with every job applicant that comes your way. So you need to have an effective filtering mechanism to get to let people in, and to be able to grow your firm as you do grow. So this is, this is a great tool to be able to make sure that you’ve got a team of a players. And that syncs a massive difference to your firm.
Kevin Lawrence 07:56
It does. And so so if you want maybe you just touch on a bit of the history on it. Oh, would
Brad Giles 08:02
love to. So So top grading. The first thing that people say when they say the book is it’s a really thick book, it’s probably two or three inches thick. It’s a really thick book, compared to the average business book. And that tends to turn people off. But yes, why is it? Why is it our go to and why does it matter? So originally, we’ve got to go back to General Electric, and a guy called Jack Welch, who was the CEO, they’re arguably one of the most successful CEOs of all time. And so Jack Welch had a really simple strategy, which was we’re going to be number one, or number two, in every market that we operate, or we’ll sell that business unit or shut it down. And what he realized is that the only way you can be number one or two, number two, the only way you can really outperform is if you’ve got great people in and leading those businesses. And when he realized that he needed to find someone who could build a system throughout the whole of General Electric that they could apply to be confident that they would get, let’s say, someone who’s in the top 10% of available candidates at the pay that they were offering. And that guy that he turned to was a guy called bread smart. And bread smart successfully did that General Electric creating amazing results. And then he wrote a book called Top grading about that experience. So that’s kind of the background to top grading and where it comes from. It’s got a very successful pedigree. And that’s kind of what appealed certainly me to initially or what made me interested in it, and then to see it consistently work as well.
Kevin Lawrence 09:50
For sure, and for me, I had heard about it but then when I was doing the research for the book called Scaling up, I did notice kind of getting close to seven, eight, you years ago, maybe longer. Of the 50 CEOs I interviewed around the world ate, specifically called out top grading as the game-changer for their business. More even than the scaling up tools that we’re talking about it was the core. Because it basically, they ended up with a team that was three times as strong as they started with, and everything became a heck of a lot easier. So I spent a lot of time learning and master technology. In our firm, we have a number of different people who helped to implement it in companies. And we’ve had many companies who go from me most companies, when you look at a player’s in their companies, most companies are in at about the 25 to 30%. And, you know, we’ve had many that crossed into 50 and 60, even a handful that got over 90% A players now. One was a firm of under 101 was a firm of, I think 300 And something Yeah, and you know, and it’s substantial to get to that level. But it’s a an incredible just to the point where sometimes I think maybe I shouldn’t even talk about it publicly and just save it for my clients. Seriously, I’ve had that internal conflict. And I’m not I’m a person who loves to share, but I’m like, our clients use it. And and and most people do not have the discipline to do it. Most people end up with their fast and loose hiring processes. And they’ll stick around their 25 30% of the players, or they will have incredible turnover because they can’t get the right people, right. So let’s talk about the idea. The idea is, is to get close to that 90%, a player’s by consistently just picking the top 10% of the available candidates now. It’s the top 10% available candidates at the pay that you’re offering for the role. And if you’re hiring an accounting role, that’s paying $65,000 a year, and there’s someone available at 120. That’s not what we’re talking about, it’s about the top person at the pace that you’re offering in the market. So you’re, you’re basically learning to skim your version of the cream off the top of the talent pool.
Brad Giles 12:14
And that’s so important because that’s when many leadership team members and CEOs get hung up is is they think that top grading is about getting the top 10% of available candidates, they immediately go to, we can’t afford to pay the same amount as whoever they see as being an expensive candidate in their industry. But it’s about the pay that you provide.
Kevin Lawrence 12:40
Right. So for example, we just hired internally in our firm, another admin person to support our advisors. And we went through two rounds, In the first round, we didn’t find someone that we felt was good enough, and we just hired someone last week, which is really exciting. But we use the full methodology. So at that role at the pay that we’re offering, we’re just looking for the best talent we can get. And being pickier about it and more scientific in the evaluation. So it’s, it’s a very basic level. So at the base level, the base tool, something called the talent review, which we’ve developed and enhanced to be even more robust. But when you go through all of your top talents, your most important roles in your company, every quarter, you do a mini evaluation. And you do work thinking about how can we help them thrive more now? If they’re in a how do we help them sustain that level of performance? If they’re a B, how do they become an A? If there’s someone with potential? How do we help them get promoted to their next role? Or how do we develop their successor? And if they’re not meeting the mark, either if they don’t fit the culture? Or they’re not hitting their performance? How do we help them to get there? And if we’ve done everything we can, and it’s the end of the road? How do we create a graceful exit quickly. But this discipline of every 90 days, reviewing your talent making the next batch of choices for the amazing ones, and the ones that need help, is the core discipline, because people talk about their people being their greatest asset. But they don’t ever do a portfolio review. Or if they do, it’s once a year and it’s weak. This is a key activity that the CEO and executive are involved in. And you know, if it’s a company, if we are a company of, you know, 300 people, the CEO and executive are looking at the top 30 or 50, every 90 days it’s part of their greatest value add is making sure the right things are happening with those key people.
Brad Giles 14:46
And it can be confronting first time you do it. When you look at it. You go whoa, we’ve got 30% C players. We’ve got 30% of people who aren’t aligned with our values and they’re not productive in the role. And even worse, they’ve been hanging around for a few years, it can be really confronting, because the next question becomes, so what are you going to do about it? And then when you rinse and repeat that over a quarter, several quarters, several years, you get, you can get to the point where if you’ve taken action on it, if you’ve hired correctly, where you’ve got a high percentage of players in your team, yeah.
Kevin Lawrence 15:26
And you’re brutally building discipline into the organization, because that’s not a surprise that that person is a low performer. Yeah. And their manager has been putting up with low performance. So a manager’s job is either help people to grow and be effective in their role, look for a different role that can be effective in or move them out. But it’s so in many ways, it’s a management discipline to pay attention to an act on a thing. So that’s the base level. The next level is scorecards, yes. A very detailed, almost mathematical job description. And it’s not all this bla bla bla word stuff that’s typical. How do you measure someone against words, it’s hard, it comes up with clear outcomes or goals that that role needs to achieve, obviously, looking at them through the lens of core values, and then looking at them on 50 different competencies. And, and some jobs, some of those competencies are more important than others, but deciding what’s the minimum level of skill they need on these different competencies to be successful in the role. And that this, this, this takes a few hours for each role to figure this out, right. But you’re so clear on what they need to produce, how they need to fit the culture, and then the competencies they need to have. So then when you’re assessing people, you’re assessing against this really detailed scorecard versus, you know, seven paragraphs of words. And it’s like, if we’re gonna go and build the Golden Gate Bridge, you could take the sketch that a kid did with their crayon, and then send the crew to build it, they’re gonna fail. Yeah, or we get an engineer and architect to do the drawing an engineer to do the drawings, the architecture, drawings, that engineer to make sure everything is sound, and then give it to the crew to build. All we’re doing is getting engineered drawings for a job instead of a child’s crayon scratch. And then letting the hiring people go assess versus the engineer’s drawings, which are just much, much more clear and specific. And once
Brad Giles 17:39
you’ve hired against a job scorecard, you are so clear that it does appear mathematical. And then you go back and you look at other firms, job descriptions, or other firms, hiring adverts, and it does look like a child’s crayon sketch it really, really because it is yeah, you just go what are all the words that are mumbo jumbo sort of mashed together, what do they miss, you copy and paste something of something else that you thought sounded cute. And it’s there’s no real tangible, measuring stick.
Kevin Lawrence 18:18
So I’ll give you an example. We hired ahead of sales for an automotive group that we do a bunch of work with. Now, it’s probably eight years ago, the guy we hired, I loved him as a human being he was awesome. And again, this is, you know, early days and working with this client. The challenge, automotive is an hourly based sale. It’s very, very fast, very, very tactical, but by the sales are made about a 60 minute, sometimes 24-hour sales process. The guy that we hired, was that, you know, had run sales, and then was the the the lean improvement leader for a company that sold something that was 10 times the price and had an 18-month sales cycle. Yeah, like all sales leaders are not created equally. And someone that is has the skills to do an 18 month high ticket sales cycle business to business, versus a business to consumer transaction that takes 60 to 90 maybe, you know, 24 hours, he would fail before he was hired. He failed before he entered the building because he just didn’t do it. Although he wasn’t driven drove sales and process improvement. It was not the same type of environment. He was not set up to win. And it’s like taking a professional golfer and then throwing them into the national National Basketball Association to play basketball for the NBA. It’s like it’s a bad choice. But unless you have really really clear descriptions of what the role is As people make these decisions all the time, they forget that there’s, you know, they forget about, well, you know, golfers on average aren’t seven feet tall and being seven feet tall is kind of important in the NBA, for example, and they get candidate lust. Now, I don’t say, you know, in a sexual way, they get candidate lost, meaning, all they do is candidate is simply going to solve all of my problems. And they come from Apple, and they have the this, they have all right credentials, the right brands and the right personality.
Brad Giles 20:35
And that’s human nature to get that candidate last. And so we’ve got to have some kind of empirical measuring tool stick system that can avoid that. And, you know, this is many for many entrepreneurs. They’ve started based on an industry or a trade, and they’ve grown and grown. And HR is kind of an add on. And maybe when they had a job before, it was an add on that someone else perhaps did or helped with or there was an existing system. And so they just kind of build it and tack things on as they go along, not knowing that massive cost that bad hiring makes.
Kevin Lawrence 21:18
Absolutely. And the thing is, is that especially at a leadership level, you don’t get there unless you’re persuasive, and a good storyteller. They’re hard people to hire because they can spin a story. And I remember, I came in late stage to a hiring process for one of my clients hiring a head of operations. And I interviewed this gentleman, who had been through five interviews of a couple hours each already. I had an hour, an hour and a half. And so I interviewed him, and they were going to hire him. And I tell you what, this guy was charming. He had a slick presentation. He’d be a wonderful guy to go have a beer with right. As I dug in and started using the top grading interview, which we’ll talk about next, this interview process. He was an arrogant, lying jerk. He was a bad man. been involved in some bad like, like, he started disclosing stuff at some point where it 75 minutes into the interview. And I just, I just started chatting about other stuff, lightening it up, because he balked. Because what he disclosed in 75 minutes was he knew he wasn’t getting the job. And again, the CEO and exec went from good to hire him that day to well, we need to change our mind. Yeah, because he was blessing his way through the interviews and charming his way through the interviews, but when you dug deep on how he did his work, yeah, bad dude. So let’s, let’s go into the next part, which is then the assessment process. So there’s, so once you’ve got the scorecard and the engineers drawing of the job, and you know, the type, you know, there’s probably 25 different sales roles out there and salesman, they’re very different depending all of them. So you got your specific one. You know, there’s, there’s, there’s a screening interview, half hour, 45 minutes to get to really sense of the candidates worth the time and it’s enough of a fit. There’s something called the, the, the tandem executive interview, call it but it’s, you know, three, four or five hours, depending on the position to interviewers going back and starting from high school, and breaking down in detail their entire career up until today, and with a lot of depth. It’s why we get so much detail and understanding. Because when you ask the same, it’s only a few simple questions. But you ask it every job from high school and get deep examples, the patterns emerge like crazy. Yeah, no best example, sorry, the best indication of how a person will be in your role is how they were in other roles. And those absolutely no edge. Absolute Luly. And the leopard doesn’t change its spots very much at all. It’s, you can take a look at someone at 15 years into their career, and you can probably predict the rest of their career. It’s you know, that people might not like that I say that, but it’s, it’s true more often than not, perhaps it is. And then after you do that, even, you know, you’re going to notice a lot of stuff, but even you might have liked the candidate you might emotionally connected but they still might not be good for the job. You got to take a couple of days and cool down and write a report in a structure that is recommended. And then you go and talk to the references and the key is you go and talk to three, four or five of their past managers, not the list you give you that Their aunt, their uncle, their brother and her mother, that’s the reference list. They might have different names, but they’re going to tell you they’re amazing. You go and you talk to past managers and ask very specific questions, and I tell you what I’ve done. I get called fairly often for some reference checks. It’s laughable the questions people ask me, like laugh a bull. Like, it’s not adding any value to the process. But we have a very specific process view. So it’s, it’s, it’s, so you go from the base of the talent reviews costs, improve your talent, when there’s a new role engineer, job descript engineer job description. And then you go through this process of deeply assessing people and then making a decision with boatloads of data, not feelings. Not got it, you can have your gut instinct on top of it. But it’s got to come back and say something that doesn’t feel right. Which competency you’re concerned about, which core value you concerned about? How do you know that’s true? Well, we don’t Okay, that’s a feeling great. How do we go and verify that feeling? Because feelings can be helpful? Maybe we verify that through the reference check, or we have a further interview, but it’s a very disciplined methodology, and it produces outstanding results.
Brad Giles 26:14
So one of the common criticisms of top grading would be that it’s too complex or too complicated for my business, not breads, business, but that might be what someone might say, people
Kevin Lawrence 26:26
who don’t understand it, riding a bike is complicated, too, until you figure it out.
Brad Giles 26:30
Yeah. But what would be if someone said that to you, what would be your reaction? If they said, I’ve heard about that, but it’s too complicated? We need something that’s really simple.
Kevin Lawrence 26:43
Yeah, it is. It just has great discipline. So usually, when we get involved in helping people to implant it, it takes quite a while to build the discipline into the organization. Because most people don’t have a lot of discipline. People aren’t disciplined by nature, it’s not complicated. It’s just harder than how people normally do it. That’s all. Yeah. Yeah. And that’s, do you really want the results, you know, that’s the thing, that’s, that’s why the CEO and executive need to be bought into it, HR cannot drive it, it won’t work. Yeah, CEO and executive need to be bought in that we’re going to invest, whatever it takes, you know, 100, to a couple 100 grand over a couple of years on the training, the support the expert, external interviewers to work with our team until they become experts, tweaking our systems, auditing our systems, there’s, you’re investing in this for what it does over the next decade, you’re building an A, it’s almost like installing a more robust software system. It’s a it’s a commitment. And what I say to people, if you’re not committed to invest into this and build on it over a period of a couple of years, don’t do it. Because you won’t get the results like anything.
Brad Giles 28:00
Like anything. Yeah. It’s, it’s complicated. Okay, it’s tough. But the results, and what it can do for a business is just outstanding and remarkable. I mean, let’s go back to Jim Collins, right? You got to get the right people, people on the bus doing the right things in the right way. And it’s at the very, that’s the first thing, and that’s what we’re talking about.
Kevin Lawrence 28:27
So I’ll say one thing, but it’s actually not complicated. It’s very simple. It’s just incredibly rigorous and discipline. It is so acute, basic. It’s not complicated. Yeah, I use the wrong word there. But it, there’s a lot to it is what I really meant to say. There’s a lot for No, but that’s the criticism is people. That’s because they don’t understand it. People are already doing a lot of stuff in their hiring process. This is just all of these steps are already happening. They make a job description. It’s just fluffy and weak. They do screening interviews, they just missed the mark. They do proper interviews, and they probably spend more time with a candidate than we would. Yeah. So they are doing all of these steps. They’re just not doing them with incredible rigour and discipline.
Brad Giles 29:22
That’s the key. It’s the rigour and discipline, rigour and discipline that makes the difference and produces the results. And that’s really is the right response to that type of criticism or, or question. Yep, yep. Awesome.
Kevin Lawrence 29:36
Awesome. So that that is top grading, it’s a you will not find a bigger fan of it than myself. And I don’t stop talking about my clients till they do it. It’s not even an option. And if they don’t want to use it, I don’t want to work with them. Because then I have to listen to all the idiotic people decisions. So we know that it’s that it’s it is it’s true, I mean, and then again, executive people decisions. Those are like million bucks minimum screw up when you get it wrong. I’m not. That’s not It’s not anyways. So it’s basically it’s about stacking a deck with the best talent based thing as a talent review. So you’re build a culture and a discipline of constantly enhancing your talent. And then when you go to hire someone, make sure they’re a great fit for that job through a scorecard and a proper evaluation process. And when you do a promotion, the same thing. And ideally, you continue building and moving towards 90%. A player’s and maybe you don’t want that strong of a team. That’s a serious commitment. We put most of our clients in that direction, but some people be happy at 60 You’re already running 30 And you get 60%. A player’s business is twice as strong.
Brad Giles 30:42
Yeah, yeah. Yeah. It is a fantastic system. I’m a massive advocate for it. Love it. Yeah. It’s effectively as I see it the best hiring system and process and tool that you can use for you know, upgrading your talent.
Kevin Lawrence 31:03
Yes, and decreasing your own stress because you’re with better people. So thanks for listening. That has been the top Grading discussion episode 100. Brad, we did it. That’s all good. It’d be great if we were able to be in person and celebrate we will sometime soon I hope. It’s been a growth whispers podcast with Brad and I’m Kevin for the video Vision version go to youtube.com and search the growth whispers and to reach Brad and his awesome newsletter evolution partners.com.au and for Kevin and his firm and their awesome newsletter and ideas. Lawrence and co.com Hope you have an awesome week.
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