The Coefficient Of Skill: Why Executives Need To Play To Their Strength

Written by Addam Stone, Director

Focusing on your strengths is such a time-honored strategy it is close to being a platitude. However, it is very tempting as an executive to ignore this wisdom for immediate expediency. One of the most dangerous phrases an executive, or entrepreneur, can utter is “I can do that quicker.” Yes, you probably can, but is it the right thing for you to do?

If you focus on improving your weaknesses versus playing to your strengths, you risk being average. You can always hire out to compensate for your weaknesses. But what happens if you are better at multiple things than your current team or even those you can hire?

Classical Economics Endorses Playing To Your Strengths: Comparative Advantage

Over 200 years ago, economist David Ricardo created the concept of comparative advantage. His basic idea was that (as a country) to maximize your economy you concentrate on your most productive industries and let other countries work on the things where they are most productive—even if your country is more productive doing that work.

A modern business example is a partner at a law firm. The partner is great at law and happens to be an incredibly quick typist. Still typing takes time, so instead the partner records his notes, and an administrator types it up. The admin might type slower than the partner, but the partner’s time is better spent with clients. That is comparative advantage in a nutshell: Everyone concentrates on what they’re best at.

In reality, this concept is a little more complicated. People and businesses do not have one or two skills. You, your business, and your employees are more like a multivariate equation.

The Coefficient Of Skill

In every multivariate equation, there are inputs, coefficients and an output. For business purposes, the inputs are (X) the time it takes to do certain tasks and (M) a coefficient that captures the skill of the person doing the task. The coefficient is key here because for every task and person the coefficient will be different. The output (Y) is value, or easier understood, money. Now to take you back to algebra and pre-calc, here is a multivariate equation representing someone’s general skill set:

Y = M1*X1 + M2*X2 + M3*X3 + M4*X4

For every task, X is time spent. For example, X1 is time spent being detail-oriented, X2 is recognizing patterns, X3 is developing personal relationships and X4 is speaking in public. If the coefficient M is one for a particular skill, every hour spent returns an hour’s worth of value. If the coefficient is less than one, every hour spent destroys value. If M is greater than one, the value of every hour spent is multiplied.

So imagine the equation for a person: Y= (0.5)X1 + (1)X2 + (5)X3 + (3)X4

This person is half as good as the average at details, as good as the average person at recognizing patterns, five times better at building relationships and three times better at public speaking.

Therefore, every hour this worker puts into personal relationships is five times as effective as the average. If this same person spent their time on detail-oriented tasks it would require 20 hours of input to achieve the same 10 hours’ worth of output gained from two hours spent on relationships. If this was your team member, where would you want to use their time?

The Business Connection

In business, you need to know what you’re good at, and what you’re not good at. These skills will translate from a characteristic to a type of job. In the example above, the employee is probably good at sales and bad at accounting.

As an executive, you want to hire people whose coefficients of skill align with the job you need them to do well. For an executive assistant, you want somebody that is really good at administering and handling your calendar, and accurately filling out your forms and reports. They don’t need to be good at public speaking.

If you’re hiring a sales team, personal relationships are a top skill. Your screening process to find the right candidates should focus on the skills that will generate the most value—and avoid a process that focuses on skills that aren’t important to the role. When you have people on your team spending time on things that don’t add the most value to your operations, you’re going to end up with less value from everyone.

Of course, there are times when roles require skills that an employee lacks. A CEO’s job requires a certain amount of public speaking. If the CEO is not good at that, minimize it or use other executives who are better. The CEO must spend their leadership time where they excel and hire where they don’t have the skills.

The Key To Building A High-Value Team

Executives need to delegate work they are not proficient at to those that are. That means hiring people with high coefficients in areas of work where they will be spending most of their time. This focus will produce extraordinary results by having employees that are really good at what they do. If everyone the firm hires had a five coefficient for their role, imagine what could be achieved where every eight hours of work is 40 hours of value.

These concepts are not an exact science. People don’t have a coefficient of skill noted on their resume. But a forward-thinking HR department can ensure they are bringing in the right kind of people by requiring the hiring executive to clearly state the skills that the open role requires. Those skills will likely translate into jobs that a candidate may have on their resume and create a process to test for the specific skills needed. Building a team matching high skills to roles maximizes value by having every task in the company performed by the person most skilled at that task.

This article originally appeared on the Forbes Finance Council

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