Achieve stress-free business growth:

Cut out the cancer and build an A grade leadership team

By Warren Otter, Principal of Otter & Associates

For a business to be truly successful, it needs a great team. However, one of the biggest challenges of private business owners is not having a strong and effective leadership team.

If you don’t have a strong and effective leadership team you are left with;

• all the problems,
• having to develop all the solutions and
• left with trying to implement those solutions; which the team
  • a/ may not agree with your solution, so not get behind it, or
  • b/ be unable to execute

One of the key benefits I found when I built my A grade team was being able to focus less on the day-to-day and week-to-week running of my business. Instead, I was able to add far more strategic value by planning the future of the business. As a result, my business grew organically from $4.5m revenue to $8m before it flattened out. At this point, with our strong management structure I was able to take on a series of strategic bolt-on acquisitions, which took the business to $25m revenue with 90 staff (profitably), with no more stress or hours spent in the business then when it was at $4.5m revenue.

How can you achieve these results in your business? Read on to learn how to build an A grade team which will allow you to grow significantly with less stress and input.

A, B and C grade players

In his book Jack, ex-CEO of General Electric Jack Welch stated that at GE they constantly sorted their leadership team into A, B and C grade players.

A grade players are filled with passion and are committed to making things happen. They are open to ideas and understand the need to continue to develop themselves as well as develop those around them for the business to be successful.

Jack writes that they have what he calls ‘the four Es of GE leadership: high energy, the ability to energise others around a common (agreed) goal, the edge to make tough decisions and finally the ability to execute and deliver on their promises.’

Adding to the four Es, I believe that A graders are highly aligned with a company’s values, love to solve problems and take them off their boss’s desk, take responsibility seriously and don’t give excuses. A graders also have a natural thirst for lifelong learning and development as well as strong ethics and high emotional intelligence.

B grade players are aligned with the values and goals of the business and bring energy and passion on a consistent basis.  They contribute consistently  and their focus is to assist with what is required of them, they may lack the ability to solve problems or to get the required results at a high level. They run at an acceptable level with limited concerns or problems.

Every business needs a good number of strong B graders in areas where the business needs to get ‘stuff’ done on a day-to-day and week-to-week basis. You would, however, want to see that a strong number of these B graders are able to be groomed and developed to become A graders; even though not all of them will become leaders.

Finally, C grade players are the trouble makers. They are the ones who have attendance problems, and/or are not aligned with the values and goals of the business.

Some may not have the skills, competencies or intelligence as required by the business and are not trainable to the required standard. Those staff who do possess the skills to achieve acceptable or even relatively strong outcomes, but are not aligned with the company’s goals and do everything their own way, often to the detriment of those around them, are in my view  C graders.

Ultimately, C graders suck the energy and life out of a business.

Too often, however, businesses accept C graders for too long. In part, they are unsure of how to move them on, particularly due to concerns about employment laws, which are seen to protect the weak.

At GE, Jack used this grading system to sort out their leadership team and structure, with the A grade players being the top 20 per cent, B grade players being the vital 70 per cent and the C grade players being the bottom 10 per cent.  This is a forced distribution model and does not actually mean that the bottom 10% are poor leaders or C Graders.

To remain competitive and maintain GE’s strong growth, under his leadership the company had a practice of constantly identifying  the bottom 10% of leaders, and moving them out of the business, if it was justified.

Whilst I am utilising the broad concept of Jack’s A B C grading, I do not follow the forced distribution model of 20-70-10. That is not what I suggest you do in your business; you should evaluate and grade all your staff according to their individual merits, and not have a forced situation in which 20% are A , 70% are B and 10% are C graders.

Leadership grading in your business

While GE’s leadership grading methodology is easily applicable to large businesses, how can a medium-size private business use this concept to strengthen their team and improve business outcomes?

I like to use the fundamental A-B-C ranking process in two parts:

1. For the leadership group, including second-level managers; and
2. For the balance of the entire staff.

I have adapted some of Jack Welch’s comments, along with those of Dr Bradford Smart in his book Top Grading, and blended them with my own practical experience of developing strong and aligned A grade teams.

The goal: minimum of 80% A graders

In medium-size private businesses, a great team consists of as many A graders as you can muster. A strong A grade team does not rely on the owner to make all the decisions and solve all the problems, which reduces key person risk and gives the business tangible value. Therefore, the higher the percentage of A graders in your team, the better the chance for growth and the easier it will be to achieve and maintain improved results.

To achieve this, the goal is for at least 80 per cent (preferably 100 per cent) of your managers and middle managers to be A graders within six months. The senior management team, in particular, must all be strong A graders to add real value and to reduce stress for the owner to a minimum.

Step 1: Grade your leaders

The first step is to sit down and objectively grade all of your leaders. These are the top line managers and the managers/supervisors who report to them.

When ranking your senior and middle management group, don’t be generous or lenient – you need strong A graders in your management group. Incorrectly ranking a B or C grader as an A grader or potential A grader because they are likeable or have years of experience or specific knowledge will be detrimental to your success and business value.  There are specific measuring tools which will assist you grade your leaders, it would be wise to seek the appropriate professional assistance when grading your leaders.

Step 2: Grade your staff

Once you have completed this process for senior and middle management, the next step is to introduce the concept to your senior managers and ask them to grade all their staff on the A-B-C scale.

Compare your assessment openly with each of your senior managers; allowing them the opportunity to have a different opinion to you.

Step 3: Cut your C graders

Once you have graded all staff, the list of C graders needs to be clearly identified and an exit strategy developed to cut them out.

Using a metaphor, C graders are the same as an operable cancer. If you have been diagnosed with an operable cancer, what do you do? You would get the best advice as quickly as possible and have the cancer removed without delay. Your focus would not be on the cost of the removal; your focus would be on executing the operation. You cannot afford to develop excuses or reasons why you cannot remove the cancer; you just need to set the plan of action and cut it out.

Similarly, C graders are like a cancer in your business – highly destructive and worse than cancer because they have the ability to infect those around them. Like a living being, an organisation cannot survive if it has untreated cancer that is allowed to grow and spread. Therefore, you shouldn’t muck around – get a specialist to help cut them out straight away.

The specialist needs to be able to deal with the matter quickly and completely, do not engage a practitioner who diagnoses and reviews and then repeats without a quick and clear outcome.

Once the cancer is cut out, the rest of the body and mind feels stronger and can focus on the future. The same applies in a business – once the C graders are eradicated, the rest of the staff are relieved and can start to function without the burden of the cancer eating away at them and holding everyone back.

Keep in mind that if any of your top-level managers are B graders and you honestly do not believe that they can quickly become A graders then they are, by my definition, C graders and need to go as soon as possible.

Step 4: Nurture your A graders

It’s important to understand the critical elements of not only building an A grade team, but how to create and maintain an environment in which A graders flourish and continue to develop.

A graders thrive in a growth environment in which their input is valued and they are allowed to directly contribute to the ongoing improvement and outcomes of the business. They do not stay in stale or stifling environments or in businesses that suck the oxygen from them. They need to have an environment that trusts them, allows them to add value and invests in their learning.

Finally, A graders want to work with other A graders and need to have respect for their manager which was earned.

The challenge here is to develop and create an environment that fosters, encourages, attracts and retains A graders.

This starts with putting a stop to the cycle of acceptance of underperformance and mediocrity. A key part of developing and creating your A grade team is to improve the recruitment and review process for staff and management in particular. This will involve clearly articulating your business’s values, culture and objectives, and may entail engaging specialist recruitment personnel to assist with best selection of staff.

Are you ready to grow your business to the next level?

Once you have identified the need to develop a strong A grade team, then you are also ready to engage with the massive growth opportunity facing all private business owners: strategic acquisitions.

Strategic bolt-on business acquisitions to me is an underutilised and often misunderstood strategy for the private business sector. It is a key area for quick and greater reliable growth especially when organic growth has stalled.  There are enormous opportunities in the acquisition space currently and this is where private businesses who have (or willing to develop) a strong A grade team and are keen to have significant growth, can participate.

To learn more about building A grade teams and the different strategies strong teams can implement to achieve more robust business growth, attend one of Warren’s seminars for qualifying business owners. Learn more via his website

About the Author: Warren Otter 

Warren Otter assists medium-size business owners with their growth and lifestyle ambitions. He is the author of Crank It UP: The proven way to drive your business to greater wealth and has been a business owner in the manufacturing environment for over 20 years.

At that stage Warren had just completed his third bolt on business acquisition and both the award and growth was largely due to the A grade team he developed.

With an A grade team beside him, Warren was less stressed and was able to spend more time out of his business looking towards the future.