How to get the most out of your people

Are you a leader who has a problem delegating work to others? Or maybe you have no problem delegating, but are frustrated when others don’t do things to your standards? Or maybe you are frustrated that people come to you for every little thing and it keeps you from focusing on running the company?

Spoiler: you may be the problem, but that also means you can fix it.

Oh no, not economics…

let’s talk about two economic concepts – “comparative advantage” and “absolute advantage”.

We will start with absolute advantage because it is the easiest to understand. Absolute advantage is simply “who is the best at something”. For instance, if you have a doctor and a hair stylist, the doctor has an absolute advantage in doctoring and the hair stylist has an absolute advantage in cutting hair. You wouldn’t go to the doctor for a haircut (even if you could), because they won’t do it as well as the hair stylist, and vice versa. Pretty simple.

But what if the doctor was an amateur hair stylist? What if they used to cut hair while going to school and they are pretty damn good at it? Way better overall than the hair stylist you go to today.

It obviously still makes no sense for the doctor to spend time cutting hair for money. This is pretty obvious, but why is it? It is because even though the doctor has an absolute advantage over the hair stylist in cutting hair, the hair stylist has a comparative advantage at cutting hair.

Comparative advantage is a concept of who has the economic advantage in opportunity costs. The things the doctor would have to give up to cut hair are way more, comparatively speaking, than what the hair stylist gives up to cut hair (not to put down hair stylists). Being a doctor earns way more money, and has a much larger social impact. Most people would agree on that. And even though the doctor in this scenario has an absolute advantage in cutting hair over the hair stylist, what they would give up to cut hair is not feasible.

Stick with me, it gets more complicated

Yeah, yeah, you say, this is obvious. Ok, let’s take an example that is not so obvious.

Say you have a CEO of a company that came from sales. She is really good at running a sales department, say an 9 on a scale of 1-10. As a CEO she is also pretty good. Say an 8 at CEO’ing.

She has a director of sales that is better than average at a 6. Not bad, not great. This relationship works just fine most of the time – except when there is a crisis. When a sales crisis happens, the CEO finds herself stepping in and making decisions. She is the best at solving those problems after all, she is a 9 at sales. And here is where all those problems at the start of the post come in.

You cannot decide on who solves a problem based on the absolute advantages of said individuals. You must take into consideration comparative advantages. Although the CEO can certainly run the sales team effectively, she can’t run both sales and be the CEO. Being a CEO requires looking at a lot of factors at a high level and forming a strategy based on those things. Finances, the economy, the competition, product/market fit, and yes, sales. But only at a high level. Running a sales department requires diving to a depth that precludes working on those other things.

Which way to turn

So that brings us to our current crisis. Sales staff turnover is at an all time high. Something needs to be done. The CEO meets with the sales director to discuss it. The CEO knows this is important; if it keeps up it could lead to a decline in overall market share. She has an idea on what needs to be done. And… we are at a crossroads. Does she tell the sales director exactly what to do, or simply outline what constitutes “success” and then let the sales director solve the problem?

If the CEO tells the sales director what to do, the CEO will effectively become the sales director. As a leader, you can’t have it both ways. You can’t make critical decisions for an area and expect someone else to own that area. It is like feeding a lost puppy. Once you have done it once, they will keep coming back to you time after time. In the heat of the moment that might seem like only a possible outcome, whereas the crisis of the moment is tangible and real. There is no denying the bad things that will come if the crisis is not fixed.

It takes real grit to know this and still only provide guidance to the sales director and tell them “here are some factors to take into consideration and here is what I would like for a successful outcome, but you are the one with the best information and are best suited to finding a solution. I will help you the best I can. Please bring me some ideas to solve this.”

Why does this work for long term success of a company? Because of comparative advantage. Even though the CEO is a 9 at sales and the sales director is a 6, the CEO is an 8 as a CEO but the sales director would only be a 2 as a CEO. Comparatively speaking, it only makes economic sense for the CEO to delegate all sales functions to someone that can do it good enough, because no one can do the CEO stuff as well as the current CEO. Absolute advantage makes no difference, only comparing opportunity costs.

This has other long term benefits as well. The sales director that is only a 6 might become a 7 after wrangling with this problem. After solving it on their own you allow them the opportunity to grow and strengthen the company. Making decisions for them keeps them weak. And at some point if you decide you really need a 7 or an 8 in that position and the current person will never get there, then the right thing to do is to replace them with the right person who is either already an 8, or someone that you think can become an 8 with the right coaching from you.

Your job as a leader is to not only focus on the output of your company (i.e., the performance of your company) but also on building the strongest, most resilient company you can. And that means putting leaders in place within the company that can own and be successful in their vertical so you can focus on the big picture.

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