Much of what we do in private equity centres around bringing high calibre individuals together and trying to develop them into an elite team. Most of the time this involves evaluating, selecting and enhancing management teams for investee companies (e.g. determining if an existing team is “backable” for investment, hiring a CEO if a founder wants to step back from the day-to-day operations, appointing a CFO with M&A and exit experience, etc.). However, I have spent a large part of the last year focused on building our team at Pemba ahead of our next fund.
“Talent wins games, but teamwork and intelligence wins championships” – Michael Jordan
There is not a business of any kind that’s achieved success on any scale without a team – and that’s because no one can do it all themselves. Building a great team is essential for any business to perform at its highest level. The importance of building a winning team and having the right infrastructure in place is not only fundamental, it’s critical.
But here’s the problem. Most businesses make a number of mistakes when they’re building their team. When I’m working with SME companies, I see five common mistakes that business owners make. It’s fair to say that we have even fallen foul of some of these mistakes within Pemba in the past. The good news though is they’re all fixable.
Let’s take a look at these mistakes and how to fix them.
Five mistakes to avoid when building an elite team
- Recruiting in desperation. When you recruit in desperation, you’re forced to take the best candidate at that time – even if they’re not a good fit for your business. I’m not saying that you should have surplus team members sitting around. Of course not. What I am saying is that you need to have a ‘pipeline’ for people coming through. Within our business, we have developed a ‘database’ of individuals that we think have the right backgrounds and experience for key parts of our business. We have ranked each individual on this database against specific criteria that is important for the role. Accordingly, if we get a vacancy in the team, we have an instant ‘pipeline’ of pre-screened candidates that we can reach out to in order to fill the role.
- Remunerating poorly. While it’s not the sole motivator for attracting and retaining a great team, money is still very important – people have to earn a living. As Daniel Pink states in his book Drive: “the team’s basic compensation must be adequate and fair – particularly compared with people doing similar work for similar organisations.” If someone’s baseline rewards aren’t adequate or equitable, their focus will be on the unfairness of the situation and the anxiety of their circumstance. People need to be adequately remunerated or they will look for other opportunities. It helps to do a little research, so you know what the market is currently paying. At Pemba, we commission and regularly review market benchmarking studies of compensation for different levels of experience for similar sized private equity funds.
- Not investing in your team. Investing in your people is the best investment you can make. Daniel Pink lists the three factors that creates motivation: mastery, autonomy and purpose. Accomplished leaders create an environment in which people can develop their skills, their knowledge and their character to assist them in their pursuit of mastery. This leads to a learning environment and a culture of curiosity, innovation and continuous improvement
- Not having a vision / strategic goal. If you have read my previous articles, then you will know I’m a big advocate of goal setting and ensuring each business we invest in has a clear and well-articulated strategic vision of where it is heading. Even within our business at Pemba, we have a clear strategic vision of where we want to take the business over the short, medium and longer term
- Declining to lead. There are many great teams that are self-reliant and self-regulating. However, in the absence of leadership, chaos can descend over the team, limiting their ability to perform well and achieve their potential. As the saying goes: “every ship needs a captain“. A high performing and elite team will never survive without a strong and dependable leader. So, if you want your business to reach its maximum potential, then you must be willing to develop your leadership skills.
Five steps to building a great team
- Select on character and recruit systematically. Winning takes talent but to win consistently takes character. Character is essential to individuals and their cumulative character is the backbone of a winning team. At Pemba, we use a systematic approach to recruiting to try to ensure that suitable candidates not only have the IQ but also the EQ. We have incorporated various tools in our selection process to back intuition and ‘gut feel’, such as a series of case studies, meetings with the whole team, a final session in a social setting, sophisticated referencing, etc. It’s exceptionally important for us that new hires have technical excellence, emotional intelligence and cultural fit
- On-board effectively. Effective on-boarding is more than the paperwork. It is the process of helping new hires adjust to their new jobs quickly and smoothly by managing the early stages of their employment. On-boarding effectively is a great way to get a quicker return on your hiring investment, as employees are able to contribute to the organisation in less time. The first days and weeks on the job need to be special for new employees. At Pemba, we spend considerable time with new hires to on-board them effectively. We take the time to ensure they understand what we do, the problems we seek to solve for business owners, our differentiators, internal processes, research tools, etc. We also seek to ingrain the company’s mission, values, vision and goals
- Design your team. Devise an organisational chart of your current team and one for your ‘ideal’ team structure. If necessary, have interim steps. Each of these organisational charts should include clear lines of responsibility and accountability
- Develop your people. Focus on long-term development. Put in place long-term development programs, as well as ensuring you have regular reviews and refreshers. These training and development programs should tie into the pipeline of team members necessary to create understudies for each role within the business. The creation of a Learning Environment, which acts as a stepladder of personal and professional development can help your team extend and expand their abilities in their pursuit of mastery.
- Communicate successfully. Ensure an effective communication system is in place. It is essential there is a systematic approach within the business, ensuring team communications are held daily, weekly and quarterly and that the messaging is consistent from the senior members of the team.
Have you had enough of your company suffering from you spending too much time working in your business and not enough time working on your business? Do you want to start doing business the smart way? If so, then please email email@example.com to find out how we can help you to build an elite team so you can step back from the day-to-day and focus more of your time on the higher value strategic initiatives.