The luxury of "inexpensive"

Going for the inexpensive way of doing things may be a costly option. In fact, inexpensive may be a luxury your business cannot afford. What prompts these lines is a discussion I had this morning with the managing director of a start-up I first met a year ago. Back then the company was in crisis both because one of the founders was about to quit and because there were no business priorities. At least that was my assessment and it was not to the liking of the entrepreneurs. A year later, the company is about to file for bankruptcy and I had a chat with its MD to understand what had happened. Much of the ills of the operation came from its incoherent development strategy and from a less than realistic way of allocating available resources. As an example, I will simply mention the fact that the company attempted to develop markets that were several thousand kilometers aways from its HQ, when all it had was a few thousand Euros of equity and less than 3 FTEs as personnel. Of course, there are many causes for the sorry situation in which that business finds itself today, but what struck me in my chat was a statement made by its MD as he gave be a brief summary of the past 12 months and I quote: "we hired a commercial director basically because he was not too expensive, but he turned out to be a biz dev guy rather than a real sales person". Sometimes, especially when it comes to choosing personnel, the real cost of choosing the candidate who appears to be the most inexpensive is simply too big to bear. Inexpensive is a luxury that no business can afford for mission critical positions. That may be the saddest lesson to be taken from this case and there is also a confirmation: talent is the most critical ingredient of business success, no matter what. However, for talent to have an impact the organization must be able to configure itself so as to assign talent to topics matching real competence and sometimes founders just should not be leading the organization. MD is not an easy job and not a job that should serve as a way for someone to enhance their social position of the perception people may have of them. That's just serving the ego.

Inexpensive is luxury...