Permanent Equity: Investing in Companies that Care What Happens Next

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This is Urgent

Responding to the idea that the point is constraints, Stephen wrote back, “It brings up an interesting question. How can we create that sense of urgency…when it’s not naturally there?”

To which I replied, “Great question. I don’t think we spend much time thinking about how to make life harder for people, but maybe we should?”

And as owners and operators of businesses, I think that’s mostly true. In my career, I’ve been fortunate to work for organizations that treated people well with much of what I’ve heard from managers being something along the lines of “What do you need?” or “How can I help?” This is also a tactic I’ve tried to employ as I’ve been entrusted to lead teams. 

Yet as I reflected on that, it also became apparent to me that while at those organizations that treated people well, some of the best work the people in those places did was done when deteriorating exogenous economic conditions forced them to really dial-in. So an open question is: Would an organization achieve better performance if everything were more difficult and stressful more often if not all the time?

As I thought about that, I realized there are times when we do make things deliberately harder on others. One obvious example is sports practices. During soccer scrimmages, we often limit the girls to one or two touches. When I played baseball in high school, practice at-bats would start with two strikes. And in basketball the coach might give you only five seconds to shoot out of an inbounds play. The goal of these scenarios is to force a practitioner to operate under pressure so that person not only learns to deal with that pressure, but also so that the game would feel easier when those deliberately applied hardships were removed.

A key difference between sports and business, however, is that sports have clearly delineated times to focus on process (practices and training sessions) versus outcomes (competitive matches and games), whereas in business the line is much more blurred. Sure, most businesses offer some form of “training,” but it’s typically done on the job. Further, while athletes spend significantly more time practicing than playing, employees in the U.S. are lucky to get one hour per week of “practice.” 

But what would practice at work look like anyway? There isn’t enough time in the day and business, unlike sports, has no clear rules of engagement. A worker might practice a process to perfection only to have it be deemed irrelevant the next day.

Another risk of amping up the pressure on employees is burnout. In other words, how much sub-optimal performance is tolerable in order to keep turnover low? Because a lot of turnover is likely to lead to significantly lower performance than what you’d get from a good, long-tenured personal who’s dialed-in, but just not really dialed-in. Further, it may be the case that the ability to really dial-in when necessary is enabled by not having to be really dialed-in all the time.

And maybe that’s the answer. That value creation is not linear and therefore most of our time should be spent creating conditions that enable high performance so we can achieve it in the moments it’s most necessary.

-Tim


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