The second dimension of hiring right, is making sure that we hired the right people that are the people who apply to our organization, we're choosing the ones who are going to be most successful. How important is that really? How much value does they contribute to the organization? We've got the right people on board. She suddenly, there's often quite hard to figure out mean there are a few jobs, may be some sales jobs where we can really take the individual person and see how much value they're adding, but in most roles there are so many different people who contribute to the success of the organization. There are so many separate influences in terms of shifts, what store you're in, all of those sorts things can be very hard to figure out how much we should attribute to any one person and therefore, how much difference having the right person versus the wrong person really makes. Though I talked briefly about a study that I've been working on with a colleague, Federica De Stefano at HEC in Paris, where we've really been trying to understand this a little bit. In the context of retail, we've been trying to understand, particularly the store manager. How much difference does that manager makes? One way to think about it is if you think about a lot of different stores, and I don't know if you remember from your statistics classes favorite took one maybe in psychology, this idea of the normal distribution. Then we would expect the ability of these managers to be roughly normally distributed. There are a lot of managers in that thick middle bit where they're performing roughly the same, then you've got tails on two sides. There's a few managers on that left tail not where you want to be really very unprofitable, and there are few managers on that right-tailed, the ones that you really want, the ones who are much more profitable than the others. If you want to think about how much difference does a store manager make, what you really think about is how wide is this distribution? For example, in this picture, I've illustrated the median manager fits normally distributed also the mean, and that manager is better than 50 percent of other managers and worse than 50 percent of other managers. They lie in the middle of the pack. I've got a second line there that illustrates being one stead standard deviation that SDS standard deviation, one standard deviation above the mean. The manager who's there is better than about 84 percent of other managers. There's substantially better than the average but still but not the best manager by any stretch of imagination. What we want to think about is as we go out one standard deviation, how much difference does that actually make to store profits? We looked at this in a store that had this interesting policy where they tended to rotate managers frequently. Why is that interesting? First of all, only to us, and secondly to us it's interesting because what it means is you cannot see the same manager in different stores and you can see the same store with different managers. Whereas is usually you can see a store doing well, is it the store is at the manager, who knows? In this case, we can start to see, who are the managers who consistently make the stores that they go to better, and who are the managers who sadly consistently make the stores that they go to worse? We can use that to try and estimate how much profit do we attribute to managers themselves? When we did this, what we found is that going from being the average manager to being one standard deviation above average, who's worth about six percent of store profits. She may not sound that much but it does suggest that when you go from a weak manager who's going to be maybe as far as two standard deviations below the mean to one who's a couple of standard deviations above the mean, your best manager. Difference between your best and your worst manager is about 25 percent of profits. Just that one bearable, just that which manager you have could be as much as 25 percent of store profits and these differences are way higher than what you're actually paying people. In this case, I think on average managers wages were about three percent of store profits. We find this one question, do you have a good manager or a bad manager that can be worth multiples of what you're paying them in the first place. In this case at least, and there's no reason to believe the story is that any different from any other, having a good manager is worth a huge amount. The manager remember, is only one person in the store you also want to think about all of the others. When we think about performance, getting the right people into the organization is incredibly important to profits. What I want to think about in these module is what do we know about making that happen?
