People First Strategy that Increases Retention and Unlocks Higher Performance | Rohit Bassi

Welcome to The Flourishing Edge, the podcast where we share weekly tips on making flourishing your competitive edge. I'm Ashish Kothari, your host, and each week we'll dive deep with flourishing experts, changemakers, and executives to share best practices that can help you unlock higher performance through science-based interventions. Let's step together into the edge of what's possible and live, work, and lead with more joy, health, love, and meaning. We measure IQ. We have learned to value EQ. But the companies that win, they optimize for something else entirely. In this episode, I sit down with Rohit Basi, former McKinsey leader, private equity operator, and author of The People Priority, to unpack a powerful idea. Just like successful individuals have IQ and EQ, successful companies have PQ, or people quotient, and most leaders are leaving it to chance. Rohit shares how after analyzing hundreds of P&Ls, the companies that consistently outperformed weren't just better strategists. They were stronger across the three dimensions that make up PQ: leadership capability, organization design, and talent operations. We go deeper in this podcast episode on the 3 leadership traits that actually drive performance, why most hiring processes break down and how to fix them with a true NA investor mindset, and why retention isn't just an HR issue, it's a leadership one. What Rey had shared in our discussion will challenge how you think about performance and the people, the real engine of growth. If you wanna build a company that truly outperforms, this one's for you. Hey Rohit, thank you for joining us all the way from Australia. It's lovely to have you on our Flourishing Edge podcast, my friend.

Love to be here. So, so good to see you. I, I'm in the future, so you know the future exists because I'm several hours ahead of you. But thanks for having me. Really happy to be here.

Amazing. Yeah, I mean, I would love to speak to myself, you know, my future self, right? But at least for now, we'll take it as speaking to your future, right?

It's true.

You're in the future. I love it. I have a funny story about that, actually. You know, we did a round-the-world trip where we started— it was around the world fairs, and we started from Chicago back then. I just made partner, and we literally traveled from Chicago to Barcelona, Rome, Munich, you know, and then on to India. Then we were in Koh Samui, Bangkok, went to Siem Reap, went to Hong Kong, went to Tokyo. We took off from Tokyo. And we landed in Hawaii and I went to check in to the hotel and they're like, sir, we don't have a reservation for you. And I was like, what do you mean? I booked the whole trip and I have the reservation. Here's the reservation. And it was for the next day, right? I'd literally left in Japan a day ahead and arrived in Hawaii on the prior day. Truly one of those Jules Verne Around the World in 80 Days. We kind of did it in 60 days, but you know, we had things.

We had shows.

That's amazing.

I wish I could. I've only done that backpacking and so very low budget, no hotel reservations, last minute, wherever I can find to bed to sleep, that sort of stuff. So nevertheless, I think time travel is a real thing, I guess.

It is a real thing. Look, I've always believed in recovery, even in the recovery, rest, enjoying life, right? Celebrating wins and moments that matter. People are on a continuous treadmill their whole life and job to job to job, promotion to promotion to promotion. And I think the only time they stop oftentimes is when they retire. And I think it's such a shame. I think we've got to celebrate our wins. And I think it's something that I always advocate to people is, hey, take the time to enjoy. Enjoy life, celebrate life, connect with those that matter, build memories because they're going to go away. You know, time flies, right?

It does. And to that point, I know the conversation is going to go in other directions as well, but to that very point, just this morning I was listening to a podcast and somebody sort of mentioned this point, which is they're very stressed about the to-do list in front of them as they were, they were getting to work and they were in New York City. Stuck in traffic and they're like, and then they realized that everything on their to-do list is what they had wished for. And that moment, that stress converted to gratitude. And in that moment, that person had a very nice, they're very successful. You know, whether you are in a small business, large business, solopreneur, or a corporate job, doesn't matter. But you've all got to-do lists. But in that moment, it was very powerful statement when she said that her mindset shifted. And so to your point, you know, like when you, when you take that break, when you take that, you know, enjoying those moments in the middle, because what we don't realize is how much of what we've got is what we've asked for. We just forgot that we had asked for it.

Of course. Of course. Yeah. You know, the hedonic treadmill is real, right? Our brain adapts to what we get and now it's not something that we care about. We start worrying about other stuff. But listen, I wanted to have you on our podcast because you and I spent a bunch of time at McKinsey. You've since then spent a bunch of time in private equity. You just published a book. But I think the thesis that you've been talking about, writing about, I think is very close to heart for me. I think we're so well aligned. And it's in this context of what you're calling people quotient and that winning companies really need to think about their people quotient. So in your own words, my friend, I want you to share with our listeners what is people quotient and a little bit of a story around how you came to that insight that you are hugely prophesying right now into the world.

Thank you. I thank you for the opportunity. So the way I think about it for all the listeners is like individuals have EQ and IQ, I say companies have PQ. And so the difference is that EQ and IQ are innate abilities, whereas PQ is something you can invest in. And so you can consciously think about. So all the organizations So what is PQ? So when I think about PQ, what I, the way I came up with PQ was, and there is a longer story which ties back to the book, but the underlying analysis was I sort of looked over hundreds of P&Ls that I've reshaped over the course of last 20 years. And I looked thematically, the ones that did really well analytically, both financially from employee retention, employee satisfaction. So I looked at a whole gamut of data and said, well, what was what was outstanding about this group of companies and what was sort of missing from the rest that didn't perform as well. And 3 things stood out. It was their leadership team, making sure the leadership had the capabilities of the top-down, but also middle-up and that, that whole pocket. Second was the way they were structured, organizational design, but it wasn't just about design. It was, are the people in the right roles? Are they being incentivized? Are they being enabled to be the best selves of themselves throughout the organization? And not just through incentives, but also through infrastructure and systems and tools. And then third piece of the PQ pillar system is talent operations. So it's very good to have good people at the top, but what I found was the companies that were very good at attracting talent had a system that was consistent. It doesn't have to be the best system in the world. It's a system that works for you, for your company at this point in time, for your industry. That system feeds the humans that you need. To be in this organizational structure that are then to be led by a leadership group at the top. So those three things make up PQ. Interestingly, Ashish, everyone, if you look, look back, every company has an element of PQ because they've got leadership, they've got some design, and they've got a process with which they attract people. So PQ as a concept might be new, but the elements of PQ are already there. It's just a matter of how do you bring them together and and for leadership team to really think about their people in a way that is very holistic rather than today I'm going to think about an employee issue here. I've got year-end coming up. I better think about incentives and the bonuses. Oh my God. You know, we've got to hire somebody. So it's very tactical. It's very reactive. It's as needed. And whereas I think PQ brings it holistically saying, how are you thinking about your people? The single biggest asset. Any company has in the way that's structured. So let me, I'll pause there, but that's, that's the PK concept and I can tell you how I got to it, but at least that's where it sits today.

Yeah, no, I think it resonates very much, right? And as you said, most companies will have, right? They have leadership, they do leadership development. They'll have some people in the roles, right? Who they've hired because they think they could deliver. For sure, they have some version of an org design, right? Looks like an org chart, top-down. They have functions, they have business units, product teams, and then, you know, there is a way for hiring. And training and kind of promoting and all of that, right? They all have it. So all of those things that we work with, but what I really like about that is what you're saying is, yes, you have it, but do you know, right? Just like if you look at your physical fitness, every one of us has certain strengths and we obviously have some cardio capabilities and we are somewhat flexible, right? We have all of those things when you're younger and then, you know, they atrophy over time. But do you know where you are at this stage in your life? And more importantly, for what you are trying to do, right? So for what you— if you're gonna run a marathon, you probably want to build your cardio, maybe do some strength training, but you don't need to build massive muscles versus, you know, if you were gonna do weightlifting. So I think your invitation to think about those three lenses in terms of where you are, what you're trying to achieve, and get an objective view on for each one of the dimensions, where are you, and hence build a plan which strategically helps you get your people assets to a place that support the strategy and what you're trying to do.

100%. You, first of all, the fact they use the fitness analogy, I don't know if it was just to help me out because as you know, I'm a fitness nerd. So that just automatically had a lot of bing bings going, but you're spot on. It's the sport that you're playing and having clarity on the sport you want to play. So some companies are in a sport, they want to play a different sport. You need a different muscle. And that muscle may either be in-house in the form of the people you have, Or it may be something you can develop in those people, or you may just get a new muscle, right? In terms of infusing your talent, whatever the case may be, I think you were spot on for your context, for what you were trying to solve for. You have to look at through that lens rather than individually, because what happens when they're individual, you may get a good talent in, you may have a design, but they're not connected. And lack of connective tissue, actually what it does, all that hard work that business owners and CEOs put in to build those individual pillars. They're just not firing systematically and in synchronous form, right? And so you're actually losing value, not just in the form of economic financial value, but long-term scalability of the business that goes away. So interestingly, all I'm saying is you've got these three pieces, let's bring them all together, let's have them talk to each other, let's help you prioritize what you're doing to what you're solving for. And I think then you'll just see magic happen. So, but I love the fitness analogy. I'm going to think about that more. Yeah.

Well, listen, bring it to— let's take each one of these points and let's break them down, right, over the next 15, 20 minutes. So let's start with leadership capability. How do you define leadership capability? But more importantly, bring it to life for me and our listeners, Rohit, in terms of a story, right? Where did you see this either being done really well or this bring a company to its knees?

Yeah, look, we've all got examples that we either read about or we've been part of where when leadership is doing well, everything is going phenomenally great and everyone loves being in the company. And then there are people that people can't stand in senior roles and you see a lot of attrition happening even in middle management. And so from the perspective of an example, it came to life for me, first of all, when I was running a very small P&L in Northeast Pennsylvania. It's a landscape business. I got given this small business that we had acquired many, many years before I joined the company. And the business was basically losing a lot of money often. So when I walked in there, I wasn't sure what I was walking into. And very quickly what I realized was the issue there was leadership. And it wasn't surprising, but sometimes you go in there, you realize that it's an operational thing. It's a lean of Six Sigma type work, but it, in this case, it was truly at the top. You know, Ashish, one of the things, I'm an eternal optimist, so I love coaching and mentoring. So the GM who was the incumbent GM, I decided to help him improve their capabilities as a leader, as a GM, as a P&L owner. In about 6 or 8 months, I realized that that was a bit of a lost cause. So the big lesson for me there was that, first of all, there were two lessons. One is you can't coach anyone, everyone. There is a plateau. And then the second piece is that You know, the more time the leader at the top is unable to flourish, to use your words, and I love that word, you know, two things happen. They themselves go in a downward spiral because they know they're not performing because they see the results. They see the numbers, they see the attrition of the humans, they see the lack of commitment from their teams, right? The second thing that happens is that the team of good people that are around them by accident or by the fact that they might have found really good people, right? They did the work, start to leave. So it becomes this downward spiral where the lack of leadership, what I found was that we were having good people leave the business and the people who were sort of average performers stuck around because they realized that management wasn't strong so they could get away with things. So the whole, we were basically going down the bottom in terms of our overall capability as an organization. So that was a big lesson, I think, how much in a, and this was a 100-people business, it wasn't a huge business, you could see the very direct impact of lack of leadership capability. And so when we changed that, so I brought in an external leader, actually from overseas even, because, but from the industry, and as it turned out, the game completely shifted, right? People started to get really energized, individuals started to step up.. And it was the same people, different leader. And so that's when I realized that leadership has such a phenomenal, profound impact, not just from an economic perspective, but from really switching on humans that are just wanting to do really well. They want to be inspired. They want aspirational leaders around them, right? And so I just found that the whole team, just that there was like the mood, the energy in the, in the, in this branch just went up. So that was the example of like, when I'm like, okay, I've got to really pay attention to the top layer of every organization. We had 160 P&Ls that I was eventually overseeing. So that lesson then helped me go and look at everyone differently. So that's, that's one example of where I, you had a bad start, but then it turned into something really beautiful. And what changed was that sort of top, top layer.

So now think about this and let's, let's tell, talk a little bit. So, you know, you started with this one P&L, you kind of had your lesson and then eventually you kind of, as you said, we're working over like 160 different P&Ls. What are some of those, you know, what are 3 to 5 consistent, like, leadership qualities, behaviors that you have found that now you look for, right? Or you advise CEOs to say, hey, look at your team objectively around these 3 to 5 things. And if you don't have them, either develop them or more importantly, make the change. Because, you know, that's one of the most common regrets I've heard from leaders is that they didn't move fast enough on people.

Yeah.

Right? And as a result, like the whole, like they lost 20, 30% of their people because they didn't move fast enough because they just kept hoping for somebody to change. So what are those 3 to 5 key things that you want CEOs, board members to look for and make the call to say in or out?

Yeah, good, good question. So I actually went in as part of my diligence, I again went through the data and looked at the people who were outperforming the rest of the class and there are 3 attributes that stand out when it comes to an operational leader. And this is from the lens of being an operational P&L owner, you know, a lead. Number one is, can they execute? Right? So can they execute the strategy? Can they actually execute the mandate? What are their executional capabilities? Number two is, can they build? Can they build competent, you know, committed teams? And I think that piece is massive because you can execute, you have great leaders who are very good at getting stuff done, but they do this stuff, they own this stuff. They're not able to build a team under underneath them that are committed towards the mission. And so guess what happens? You have very short-term gains, but medium to long-term, you don't have sustainability. And the third piece in, so execute, build, third piece is retain. Leaders that are very good at retention, both retaining customers as well as retaining people, they're the ones who are able to then sustain the gains that they had from execution. So you need all three. Do you need to have all three in every leader? No, it's just, again, going back to the early part of our conversation, it's context, role dependent. And not every leader needs to actually showcase all three at all times, because you may be in a situation if you're a CEO or CXO or even middle management where your focus needs to be on holding on to people. You may want to leverage your retention muscle more than the execution muscle. On the other hand, if you're a smaller team and you really want to be able to build capability, you may say, you know what, I need a leader that has more build strength in them. It changes both by what are you solving for at the company level, but even at the team or project level, you can look at these three traits. I call them, you know, the three pillars of what I call PQ leadership. And that's what I found as to be the most critical elements. And underneath them, Ashish, there's a bunch more that feed into this, but primarily these are the three.

Yeah, I wanted to get there because I think for me, these seem more like outcomes, right? Like, can you execute? Can you build? And can you retain? Right, customers and employees, but what are the behaviors or the skills underneath that, that contribute to these outcomes of a good executor? Like, what are some things that a good executor is doing that is enabling them to be a good executor?

Yeah, great question. So for me, there are 3 things that a good executor does, right? So they, first of all, they're driving change, right? So execute what? So ultimately, any leader in any role, whether you are managing 1 person or 1,000 people or 10,000 people, you are a change manager, right? We're all change agents. So can you drive change? So that's the big piece of like their ability to influence the team, their ability to communicate clearly and provide clarity to the team, their ability to make sure that the team's got the right incentives, right? So can you drive change management behavior? That's number one. Number two is can you empower the teams? And so their ability to actually empower those around them. And the reason this is important, Ashish Kothari, and you know this, is because a lot of leaders tend to Can they can provide, they can be the drivers of change, but then you find people saying, well, I don't have the tools to get this done, or you're getting in the way, or I need more resources. So leaders that actually, in addition to driving, can actually empower their teams is really, really key. And then the third piece is speed to action. And so for me, velocity of change is really important. And what I found was that this goes back to your, your example. If you don't move quickly enough, right, not only do you lose market opportunity, right, because the market is going to keep moving, your competition is going to go faster than you are, but you're also going to lose people and lose that commitment from people. So, so when it comes to executing change, the 3 traits that I found to be most helpful are those 3: drive, empowerment, and velocity. I'll pause there in case you have questions on that.

Yeah, no, I love those. I love those. Let's think about the same for build. So if I'm looking at a leader, Are you a good builder of teams? Are you a good builder of functions? What are some 3 skills that I should be looking for there?

Yeah, so on build, I found 2 things, and we're breaking away from our 3s, so we're going to the 2s. But the 2 things I found for builders is, can you build commitment and can you build competence? So the way I think about build is both for self and those around me. So as a leader, when I'm evaluating a person or I'm thinking about the person or mentoring them, What I think is, are they themselves committed to the leadership role? Because if they're not committed, it's very hard for them to build committed teams. Committed to the mission, committed to the vision, you know, are they going to be able to stand up to when things get rough, they're not going to abandon ship and change track. They're going to go, no, let's figure this out because we're still thinking about the end goal. And then separately, it's the competence, right? Are they competent in leadership itself? And I think you, you know more about this because you've done a lot of deep work in this stuff. I know that. But the idea is that, are they able to actually have followers? Do people want to work with them? Are they able to bring clarity to the problem? Are they able to lay down what needs to happen and then get out of the way of the others around them? So competence is obviously a function of the problem they're solving for, the role they're in, the company they're in, what the company does. So it's a broad term, but again, Going back to what you said at the beginning of our conversation, it's context-driven, but commitment and competence are the two things that really, if you have those two firing, your ability to build a company or build an organization, what I found is just completely skyrockets. If any of those are down, you've got to really look at your leadership saying, hey, competence I can probably work on because it's coachable. Commitment, you really got to pause, like, is a commitment issue because they're not getting empowered, so somebody above them, or is it commitment issues because they don't believe in the mission, vision of the company, or is there something else? So commitment is a bit more of that sort of really need to dig in and have a deep emotional conversation with the leader to really understand why they're not committed. But competence is something you can work on. So those two lead to build. Yeah.

Well, I think there's a third one, right, which I think come to, and I'm curious about it, which is I've seen that quite often in leaders. There's so many people who are stuck in the here and now. And for me, an implicit principle of, if you want for a builder, I want a futurist. I want somebody who will think about where the organization needs to be 3 or 4 years from now rather than what I need right now. And I think often people don't think about it that way, right? Because the reality is what you might need today— I just had a conversation on skills with folks from Atheon. Who are kind of building the skills matrix. And I think this is why this topic is so present for me, where they said, listen, don't solve and build for what you need now. You need to be clear on what you're going to need for the future and really, one, help your teams grow towards that. Because if you don't have that in your sight, you'll always be—

Chasing.

Chasing. So that Gretzky quote on skate to where the puck is, not where it is right now.

Yeah, no, I love that. I think that makes a lot of sense. Yeah, absolutely. I think, I think also as part of being a competent leader, you've got to, um, that, that is part of, in my definition, that's part of the repertoire. I like, I think maybe that's implicit and I think you've called it out explicitly because there is leadership in the now and the present. And then there's the leadership for the future. And I think that's a good call out because that does define, and sometimes you just need that now in the present because the problem has to be solved, some burning customer issue, product issue. But if you're still doing it from a myopic lens of the next 3, 6 months, you may make choices that may affect you downstream.

And so some reason I think that is— And for me, I think about that both in terms of people, which is what we are talking about because we're talking about PQ, but I think I'm also thinking about enabling technologies, right? So are you actually building and implementing a technology layer that allows you to kind of your people, a good example right now is AI. Right? So if I have a call center, I have an outbound, and I can think about what skills do I need, where do I go? But if I'm not fundamentally thinking about agents and how do I augment my team and build that kind of a tech layer to amplify 2, 3, 4x the people I have, I'm never going to get there. And I think small, medium businesses in particular are one of the slowest adopters of technology and hence consistently have 30 to 50% productivity gaps. It's not because they can't execute, but oftentimes because they're not building for the future, leveraging things that most of the big companies are adopting and moving forward with.

I totally agree with you. And I think, I think if you're not building, it's hard to retain as well. So it actually flows in that direction. If you've not got that capability, because then what I've seen on the human side is people get taxed, they're overworked. And now that you've, you know, you haven't really adopted some efficient ways and the rest flows, right? In a negative way. And so I think small, medium businesses, and that's where I spend a lot more of my time, if not a large percentage of my time, is that that's where also there's a lot of work to be done. And what's interesting, actually, I've found business owners in that space are just hungry for change. They want to implement. It's not a, to your point, it's not a lack of intention. It's just, how do I apply things that I can digest and my people can digest so we can move forward rather than the big swooping changes? That will cripple the organization with the burden of change. And so, I think helping them through that has been a really fun journey. And I think to your point, it is, it's one or two things that can actually unlock a lot of value.

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Yeah.

So, well, my friend, let's wait on retention and then we'll go to the other pillar of your PQ. And for me, when it comes to retention, I actually liked what you just said. You talked about retention both in terms of employees, which is how people typically talk about retention. But you also talked about retention of your customers.

Right. Yeah.

So talk a little bit about that and what are leaders who are good retention or retainers, whatever you want to call it, are doing that makes them be great at retention.

Yeah. So retention, I think there, there's two pieces that, that come up on retention. One is emotional intelligence, right? So I, I, and so I was specifically talking about the people inside your business, your assets. So leaders that are switched on, they're aware of themselves, they're aware of the people around them, they're aware of the context. And so that emotional intelligence component, sometimes I use the word empathy. I haven't fully landed on exactly the right, because I'm not a psychologist, but I think for those who are listening as an operator investor, that's the word I use that have they got enough empathy, EQ, emotional intelligence. The second piece is long-term thinking. I think that goes back to what you were saying a few minutes ago, leaders that actually think in that long, they have a longer-term view of things. That includes longer term view of the people. How do I invest in Ashish? So Ashish is going to be my next CXO, CEO, whatever the case may be. How am I going to invest in the whole pool of my team, of my staff to uplift their capabilities? So having that longer term lens, I've found those leaders who've had that long term lens on their people, because a lot of leaders can talk about strategic long term, but I'm specifically talking about humans, people, and customers. It starts for me, it starts with the inside team, the staff. If you can retain your people, what I found was that a higher correlation of you being able to retain your customers, especially true for B2B service businesses, but even in manufacturing where you've got long-term relationships with distributors, OEMs, you've got to be able to hold on to your people. So I often say, if somebody says, where do I start, right, on retention, I start with how is your to your point, how is your internal retention, right? What are the numbers? How do you do that? What, how do you approach your people retention strategy? And then I look at the external numbers because sometimes if you start externally just on the customers, you may get some false positives. Customers may be sticking around and they may also be shopping because the relationships they have with your people are broken. And so I start in the, in the middle and then work out. I don't know if that answers your question. That's how I do it.

It definitely does. And it's very much in line, right? So, uh, a researcher, Somebody who's been doing amazing work is Zeynep. So she and I are partnering on a couple of different client opportunities. Zeynep Tawne is a professor at MIT. She's an operations professor and has really worked and driven transformations at Sam's Club, Quest. And she really highlights this example, right? So Sam's Club had come to her with a challenge. They needed to drive growth and profitability. They knew to drive growth and profitability, they had to provide distinctive value to their customers and the consumers who were walking through the stores, right? They had to kind of keep them there. They had to give them a high customer experience. As Ashish highlights in her case, to do that, they needed a stable workforce. They needed a workforce that was motivated. They needed a workforce that actually had the skills. They needed a workforce that actually was— had a mindset of continuous improvement and kind of this high level of operational and customer excellence, right? They were like obsessed with it. And so that story and her model that she created in her Good Job System is really like tying the point that you're making to, I want to win. I need higher profits. I need to win with my customers, but I can't win with my customers unless I win with my employees. And I think I love that point that you're also echoing, which is you want to solve retention, start looking inward at your employees because it's your employees and frontline, especially in service businesses, that are shaping the entire experience of your customers. So you might think you have a product or a pricing issue, but fundamentally what you might have is a loyalty issue and a fundamental issue because your employees aren't loyal and that's translating into your customers not being loyal.

Yeah. And I'll give you some data, right? Like retention, when I look at what should be a healthy retention number, you know, 87% people retention in-house is a good number. Now I'm being very precise. It's plus or minus a couple of points. So 85 to 90 is probably a good range for people to think about. But, you know, when you think about this, I also think about good retention and bad retention. And so, you know, bad retention is when you're retaining people that shouldn't be retained. And so I think when, and because that has very significant cultural implications. So when CEOs come to me and I've worked with a few of the larger organizations as well, what I've found is that when people try to strive for 100% retention, I actually say it's probably not a good thing because you can't, first of all, mathematically, you might be able to somehow finagle that, but it's practically impossible, but also are you retaining people? Is everybody in your organization worth retaining? So I want to like double-click on that just to say that, look, if you're 85 to 90, you're doing pretty good. You're already at the top of the class. If you try to hit 95, that's healthy because that motivates you to build in systems that allows you to actually turbocharge the human capability. Beyond that, you know what, go for it, but just be mindful. Are you holding on to all the people for just hitting a retention number? Or should they actually be, some people have to move on. And I've seen more often than not that to the reverse, and I don't know if the MIT professor actually has that data as well, because when you hold on to people that are not great, now you lose customers too. And you lose—

Oh no, absolutely. Well, I think, you know, I think the work that she's done with retail, with call centers, with even in manufacturing, I mean, these are organized. I was talking to somebody to talk about the impact of this. I was talking to somebody and I said like, hey, how are you doing on attrition? And she said, we're doing actually pretty good.

We only have 8%.

85% attrition. It used to be 140% attrition, but now it's 85%, right? So not retention, attrition, right? But I mean, there are, there are these industries which operate, you know, QSRs, um, uh, retail, many of the kind of dialysis centers, et cetera, service home care, right? Senior care. There's so many of these industries that they're small, medium businesses, they're service businesses, they're working on it, and they have these high attrition and they just accept it to say that's a part of the job, but I think if you want to win, you want to grow, and you want to win with consumers and customers, cannot— most people underestimate the real cost of what that attrition is costing them.

100%. 100% agree with you. Yeah.

Right? And so unless people are really tuned into that challenge and kind of can affect retention and basically fix the core way the work gets done and how they lead, I think it's hard to grow when you have a leaky boat, right? You don't go that far.

100%. I think you just used the word lead. I think that's why it goes back to that leadership element because every time I've seen retention issues, it's the people at the top. Are they actually talking about it? Are they doing something about it? If the leadership group is not putting retention, you know, I often tell CEOs to say, what's the word of the year for you this year, right? Is it growth? Is it profit? Is it people? Is it retention? Pick what it is. And very few CEOs often start with retention. They'll pick the big macro word, which is often tied to a P&L. And then I sort of say, well, how are you going to get this done? And they're like, oh, I've got, I've got to build a team. Like, okay, what do you, who do you have? And so very quickly that conversation goes to, I better hold on to the people I've got because if I'm going to like build and execute. And so I think Ashish, this, this point on leadership retention is a leadership trait, which is why it's part of the three pillars of PQ. 'Cause if you are not thinking about retention as a leader, I will have concerns, right? Like, is that a blind spot or is that something you don't believe in? Because I have not found a company yet that has scaled without retaining its good people.

Yeah, I love it. So 3 elements, we spent a fair bit of time talking about leadership capability. As you know, I'm deeply passionate about it. And I spend a lot of my time right around this topic of how do you create flourishing leaders? How do you help them? Because we know the research, right? $12 trillion in economic value. That can be unlocked through creating a culture of flourishing, 2% to 3.5% alpha that can be created year over year, right, if you really invest in your people. So that's why I'm like, I love the framework. I love, love the work that you're trying to do, especially with small-medium businesses. Let's talk a little bit about organizational design. And what are some things that— everybody has an organization. If you have an organization, you have an organization design, you have an org chart. So what does great when it comes to organization design, What does great organization design look like?

Yeah, so I evaluate org design, and again, this is part of the study that I did, was there are 4 variables or 4 characteristics that make up for a great organization. Number 1 is clarity, right? It's clarity of individual roles, titles, job descriptions, clarity of what the strategy is. And there's a lot under clarity. We probably need another whole podcast to double-click on that. The second one is accountability. I think organizational— people say accountability, but when you actually go into the organization, there are a lot of people who are getting away with things. A lot of people who wish that the senior team was held more accountable. Accountability is a very favorite topic that people like to talk about, but not necessarily actually implement. And so there are very specific strategies you can actually deploy, which are not complicated to implement accountability. But the first is clarity. Second is accountability. The third is structure, and what I mean by structure is reporting lines. You know, you go into organizations, ah, you find people reporting to multiple people, multiple people are giving them directions, or the fact that they don't know who they report to, or they think they report to someone and, but may not be the person they should be reporting to. And so structure of the organization is pretty important. Also, the structure of incentives is really important, right? And so how are people motivated economically? All of us work hard to earn a living, right? We're not altruistic for the most part. There are some people who have built altruistic life. That's great. But majority of us wanting to earn some, how are we getting incentivized for the big profits that we bring into the business? So structure is the third one. And the last one, which by far I think is the most important, is trust. The thing that I have seen over and over again, you know, what I would call a team that is not the top team, the best team you can get, but they all implicitly trust each other will fire on all cylinders in a way that can beat a team full of rock stars that don't trust each other. So foundation of a high-performing team, a high-performing organization is trust. So those four, so I, you know, if you spell it out, it's basically C-A-S-T, CAST. It's like cast of characters. And again, being from McKinsey, can't get away from frameworks, right? So like, It's in our DNA. And so, I think of it as the organizational structure is the C.A.S.T. structure or the C.A.S.T. model. And each of those 4 variables have got lots underneath them, but principally, that's what I want people to think about.

No, I love it. Look, I think role clarity is one of the biggest drivers of, by the way, stress and burnout. People don't have clarity on what they're meant to, which then results in conflicts and collaborations. I love the point of accountability. I think oftentimes distributed accountability only makes results worse, right? So I think this notion of single nose to touch, who's accountable, there might be many people who you might consult, inform, but in the end, there is one person who is accountable. So I think that— I think, again, people have goals. They cascade them down, but they don't really think about what is each of the person accountable and holding them accountable, right? Also, I think it's an equal part of it. You know, I love structure. And in structure, you talked about really both incentives as a way they shape, but also, you know, are people clear on who's reporting to who? Look, we are increasingly operating in a matrix organization. I think there is another element on, you know, maybe the structure or size that I would say. I feel more and more organizations going towards a 14, 15 to 1 ratio rather than an 8:1 ratio. And I think that's a mistake because at 15:1, first of all, it's not a team, it's a group. But you can't really develop your people if you really think you're just kind of managing process. I think the kind of size and the structure I think you highlighted resonates a lot with me. And then, yeah, your trust, how as part of your design are you fundamentally increasing trust and collaboration? What I find the most missing And I love how you put that together, Ritian, connecting the dots for me. Most organizations, their functions and their structures and their design, they're fundamentally designed for siloed behavior when they want collaboration. And so if you design the right incentives, you design the right lines, you design the right clarity, what you're also fundamentally designing for is trust. And if you have deep trust, you can do great things. So I actually love CAST. I think Ashish Kothari.

Thank you. And one thing I would just add on trust is trust also allows you to actually work through conflict. I think conflict is healthy in organizations.

Conflict is always healthy.

And people, a lot of leaders shy away from conflict. A lot of, a lot of founders shy away from conflict. Part of the reason is that because they're not trusting their people to be able to handle it. And they're not trusting themselves to be able to handle it in a tough situation. So it's like a self-trust, but also trust your people. And I think The teams that actually trust each other are able to work through conflict and then get to a problem solution that's really powerful versus saying, you know what, I'm just, I don't care. Fine. And that attitude then is a start of the demise of the entire organization. And so when, when someone listening to this, as they go into the next team meeting and when they ask people, when they're sort of paying attention to soundbites and somebody's like, that's okay, I don't care, it doesn't matter. Those are the words when somebody is disinterested. And I think that's the time for a leader to say, hang on, why doesn't it not matter? Like, why do you not care? Maybe it's not big enough to care, that's separate. But if it's a material topic, I'd take a pause and say, hang on, something's happening. You're not trusting either me, the team, the product, the vision. We've got to talk about it. And I think that's where if they are trusting, you can work through that piece of conflict. So I just wanted to highlight that piece there because Trust is by far, if there was, if you say, hey, Robert, there was one thing you would fix out of the four, I'd go and spend more time in figuring out trust before any of the other ones.

Anything else? I love it. Let's go to the last component of PQ. So we talked about leadership. We talked about organizational design. The third component, which by the way, you wrote a whole book on, is talent operations.

Yeah.

So talk to me a little bit about what companies get wrong. When it comes to talent operations?

Look, I think you said this earlier on, every company, every person who's ever hired anybody has got a process. I think there are 3 things that people get wrong, or I would use the word 3 things that could be done better. Number 1 is consistency. Being consistent in your process. You can't call it a process if you change it every time. Yes, it's process within it, but I don't call it, it's not scalable, it's not sustainable. So one is consistency. The second piece that I think they, that I find which is why I wrote the book, is people don't have a methodology by which they can say, you know what, I've been doing this, I have got the data, I've got these steps, where am I going wrong so I can go back and tweak it? What am I getting right? What am I getting wrong? And then the third piece is discipline. You know, pick a process and stick to it and be disciplined about it. Often what I find in leadership ranks, the discipline sort of lacks there. Like, well, you know what, for that hire, I'm just going to— I've had the conversation. I love the person, we're hiring them versus, hey, we should, you should have 3 more rounds. Can you talk to so-and-so and so? And there's no discipline in following the process and being consistent. And so those 3 things for me are the key elements that I think at the macro level, I found to be an issue. The reason I wrote the book and then I've got a copy here, which I keep on my desk. Yeah, can you show it? Just to, just to remind myself. That I've done something like that. And it's to everyone listening, it's only a month out. So, so it's a, it's pretty fresh and new and exciting. But as you know, who's also written the book and it's a journey of love and agony. Point of that book is Ashish Kothari says, I wanted to, when I reflected on 20 years of doing operating investing pretty much across the planet at that point, I realized that how would I want to help businesses worldwide. And what it came down to, talent operation is the single most foundational element that every business needs. If you want to grow, you need to hire people. If you need to hire people, you need a systematic, consistent process that is, that you can apply with discipline. That's the key. Build that and to give that to people, I basically distilled 20 years of everything I learned from McKinsey, from Wharton, from hiring people in the field to executive teams, to boardrooms, I said, what process did I follow for over 100 management teams that I've reshaped that helped me get there? Mistakes I made that I wish others avoid. So I put this in the book. I think the idea behind this book is very simple. I apply what I call an M&A mindset, which is business owners, CEOs, leaders are time poor. We're all very time poor. So what often I used to see in companies is an equal amount of time is being spent in the front end of the funnel. It's almost like if you're looking at deals, you're looking at all the deals at the same amount of time. We don't do that. We very quickly take 700 deals and bring it down to 10 that we care about. And from there, we take 5 that we actually really, really care about and spend time with, and we actually end up doing 2 deals. And so there's a very sharp funnel effect. And that same mindset is what I've used in hiring people, which is in the front end of the pool where you get a lot of resumes, a lot of CVs coming in. And I see the big mistake that companies make and talent managers make, not because they don't, is because the mindset is, I'm going to look at all of them. So what can I get the best? My idea is spend less time with more people and more time with less people. And so the idea of that due diligence mindset and that rigor keeps increasing as you get deeper into the funnel, I think is what reshapes the way in which you can get quality talent. So again, I'll pause there, but that's a bit more than what you asked for, but I get excited.

No, I think it's brilliant. Look, I read your book and I think it's so structured and it's so well executed. I do think it'll serve a really critical need. So for all the small, medium business advisors or CEOs who are listening, I think it's really, really valuable. I think it's really valuable because as companies grow, oftentimes people will say, I need to bring an external recruiter or an HR person and let them drive the process. Versus you actually defining a consistent, disciplined process. And they can do a bit of work to kind of help you find, right, the right talent, but you have to define it. Otherwise, it's haphazard. In fact, I think that was what differentiated McKinsey and the number of people we brought in every year, right? We had a consistent process. We had a way of kind of thinking about candidates and what we were looking for. And we were really disciplined about that process and executing it. Which in the end, you know, if you're able to get the right people in and then we didn't talk about this, but have the right process to develop them, right? That is how you get great performance. That's how you build a 100-year firm that continues to drive unbelievable impact. It's the people that matter and those processes of how we bring and grow them are critical for that.

100%. I think the contents of this book, this methodology has been used by companies that are as small as 3 people. To as large as 10,000 people. And so, so the idea that this kind of like, you know, I am, I'm too small, I don't need it, or I'm too large, you know, I can outsource it. It doesn't matter. I think having a systematic process and you've got to own it at the top. And I think to your point about recruiters, recruiters are extremely helpful, but they're not going to do— ultimately you have to live with the person, you know? And so you, you, this is your team. These are your assets. These are your people. And so I think from my perspective, in the book, I even talk about for those who have never used recruiter, have been hesitant because of costs of recruiters, actually do have a dedicated section that sort of talks about like, what are some of the pros and cons? How do you actually work with them? Because often I find, you know, if you don't have in-house capability to get stuff done, you're going to need external resources. So we can talk about that at length, but I think that's where talent operation sits. To me, it is the building block of. An entire company. And I hope people enjoy it. I hope people read it. I think it's, it's a, it's not a fun, you know, poolside read with a fictional storyline, but it's definitely structured and rooted in years of operational work. Right. And so it's, it's hopefully helpful to the businesses that are out there.

Yeah. Look, we'll put the link in our show notes for the book. I think so many companies could benefit from really thinking about this in the structured way that you've laid it out. And it is so filled with tips, right, and simple things that anybody can execute, even if you're not from an HR background. As you said, it's truly an operational field guide to being able to find and develop, right, really to be able to find some of the best folks out there. So, my friend, just keeping an eye on time, I just wanted to say thank you. Thank you for really bringing such— really kind of authoring this powerful framework, really highlighting and really promoting this concept of people quotient. The fact that your people matter, every business has it. You've gotta know where you are. You have to think about what do you need, and then really similar to your strategy of what you're trying to do, make deliberate choices to actually improve your people quotient so that, you know, you can drive outsized returns for your shareholders so that you can actually delight your customers. But for me, most importantly, so that you can truly help your people grow into their fullest potential.

Thank you. And I think that for me is the last sentence is everything because I genuinely love working with people. This is why I started the firm. This is why I wrote the book. And this is why I coined the phrase PQ. It is all about our people. So, you know, motivate, being motivated to develop people and to help them grow makes me happy. Happy to bring it out. Thank you for having me. You've always been a people-forward human. I've always enjoyed it. It's been years. That I've known you. And so I'm so grateful that you invited me on this podcast and took the time to ask the questions. So thank you for giving me the opportunity.

My pleasure, my friend. Be well.

You too.

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