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Are You At Risk of the 18 Month Factor?

Many executives tolerate B and C performance from their key reports for far too long. I have had the privilege of sharing a speaker’s platform several times with investor, serial entrepreneur, author, speaker, consultant and all around good guy Dave Berkus. Dave coined the phrase “The 18-Month Factor” to describe how long it takes from the time you acknowledge having an underperforming manager to the time you have a fully effective person producing critical results. Dave’s theory, with which I agree completely, is as follows: You (the CEO or Senior Executive) first realizes the problem by noticing that “Joe” is not getting it done. You say, “Well, I’ll give him a bit more time.” Interestingly, this patience only seems to apply to people, not other key business decisions, right?

3 months go by, then you say, “Well, I’ll talk to him about it.” Joe agrees to change, so you give him 3 more months, and still nothing has changed, so you give him a warning. Shape up or else. At that point, 50% of the B and C players become “mentally unemployed”. Some of them actually start looking, but some just eat up your payroll while their performance actually gets worse. And, it is expensive in indirect ways too – lost opportunities, etc.

So, at about the 9 month point, you decide you really must do something about Joe. You launch a search. The search takes the usual 3 months, and you find a new person who looks like an “A” player. By the time that individual is on board, and the get-acquainted honeymoon is over, you’re in the 13th or 14th month, and it will surely take 3-4 months before you can expect meaningful change and better results. Presto, 18 months have gone by.

Strategic replacement takes brave, decisive action. My grandfather used to say, “The first loss is the best loss,” because business loss is really valuable information, and if you pay attention quickly, you can cut the next loss. 2010 is a very meaningful year for executive change. As companies jockey for position to see who is going to rise first in the recovery, there will be a scramble for market share. For many companies, that will require stronger people. Don’t find yourself stuck with B and C people in an 18-month cycle.

If you are a business leader, and you’ve survived the past two years, you probably have keen judgment. Make sure it applies to more than financials, inventory, operations, etc. Apply it to your #1 asset as well – your people.