Meritocracy. It’s Brutal.

Aaron P. Graft

October 10, 2012

Some thoughts on succeeding in business.

I was listening to a radio broadcast of the Cowboys/Seahawks football game a couple of weeks ago. One of the announcers mentioned that there were only two players left on the Seahawks who had been members of the Super Bowl team of 2006. A 53-man roster, and seven seasons later, only two players remained. Why such high turnover?

Now football is a brutal sport. The average NFL career is 3.2 years. Part of that is the physical harshness of the game, but a major part is what I call the “brutal meritocracy” of professional sports. Lose a step, lose your job. Go from being better at something that 99.5% of the entire population to 99.4% and lose 100% of your paycheck. That’s meritocracy in action.

Where else do we see this brutal meritocracy? Clearly in nature – only the strong survive. A wounded animal will likely be killed by a predator or die of starvation.

What about the free market? Eastman Kodak was a Dow Jones company just 8 years ago, and now it is bankrupt. There are many reasons for its failure, but the bottom line is that it wasn’t good enough at producing a product to keep its market relevance. In a true meritocracy, less great ideas go nowhere. Below average employees don’t add enough value to keep their jobs. The second best product disappears. Remember Betamax tapes? Saturn cars? Blockbuster Video? Motorola beepers?

Meritocracy means that those who are not cutting it are, well, cut. Applied to business, it means that when an employee demonstrates that he is no longer capable of consistently delivering, he will lose his position. It is not a judgment of his value as a person, but his value to the organization, which is an entirely different and frankly, less important, calculation.

Unlike the NFL, my son’s flag football team is not a meritocracy. Every kid plays every position. Every kid gets equal playing time. No matter what the won/loss record, every kid on every team gets a trophy. No one gets cut; no one gets left behind. While this is entirely appropriate for kindergarteners, it’s not the way the world works. The market economy is not kindergarten. There are winners and losers. If your product isn’t good enough, the market will leave you behind.

What I see in a lot of companies is the entrenched practice of pretending its kindergarten. Somewhere along the way, everyone started getting a trophy – in this case, the trophy is keeping their job. As long as these companies were profitable, it was easier to pick up the slack for an underperformer than to have the honest conversation about lack of performance. Let that go on long enough and meritocracy becomes mediocrity, and mediocre businesses don’t last very long.

When Triumph was working on the deal to acquire Equity Bank, things were very difficult. The economy was tough. The regulatory scrutiny of our deal was intense. I was trying to keep all of the balls in the air and continue to meet our operating expenses while having no idea if our deal would receive regulatory approval and, if it did, whether we’d be able to raise the capital to close the deal. I shared this with one of my mentors, Carlos Sepulveda, and he said to me: “This is real life. It’s so real, that you just might not make it. What an exciting opportunity!” He could have said, “This will work out just the way we want,” but he didn’t. Carlos was challenging me to do business with reality – we had called a play that we might not be able to run. If we failed, life would go on, but it would still be painful. If we succeeded, then it would bring greater joy because we had a genuine risk of failure.

In a true meritocracy, the greatest ideas will have the greatest chance of success. The employee who produces the most value gets the greatest reward. The best product wins the market.

Merriam-Webster defines it this way:
mer•i•toc•ra•cy \ˌmer-ə-ˈtä-krə-sē\ noun
1. a system in which the talented are chosen and moved ahead on the basis of their achievement
2. leadership selected on the basis of intellectual criteria
Merriam-Webster, Merriam-Webster’s Collegiate Dictionary., Eleventh ed. (Springfield, MA: Merriam-Webster, Inc., 2003).

My goal as the CEO of Triumph is to create a culture of meritocracy. I think that is the only way to build a successful company. I think that is the only way that top performers will stay engaged. It is leadership’s job to make the hard calls. We have a finite amount of resources –particularly time — to allocate to create the best possible return for our stakeholders. If we don’t do that, then I am accountable. It is appropriate to point out here that the NFL analogy breaks down in certain areas. At Triumph, we define value far differently than a professional sports team. Winning week to week is not something we talk about. Locker room leadership, i.e., contribution to our culture, is more important than scoring a touchdown. Working faster or more hours is less important than working well with others.

Hopefully, it is clear that the point of this blog post is not to sound harsh. I hope it is equally clear that we value our team members. It is because they are the most important assets of this organization that we are a meritocracy, which is the fairest form of reward for excellence.

What I want to do here is point out reality. We live in a market driven world. If Triumph doesn’t deliver value for its customers, someone else will. We have to keep our edge and continually improve. The bottom line – if you’re a person who wants to excel, then this is a great team to play for. Welcome to the game!