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As these more senior roles are added, every business must determine whether to promote from within or hire from outside the company. It's easier to make this decision if leadership understands how their people fit into each of the categories in the chart above. Here is how it breaks down:

* Underperformers: These are the people who start at the company's baseline of performance but don't have the ability or desire to improve over time. As the company grows and an employee's role demands new and different skills, this underperformance becomes more glaring. Soon enough, it becomes clear that an Underperformer just isn't getting the job done, and it's time to exit them from their organization.

* Unicorns (Stars): A Unicorn is the highest-level performer you can have at an organization. These are the rare employees who grow even faster than the company requires. When you hire a Unicorn as a manager, they deliver director-level work before your expected promotion timetable and can continue as the leader of their given function. When you do promote them, they continue to set the new standard. A company may only have one or two of these Unicorns at any given time, and it's up to leadership to do whatever it takes to keep them happy—be sure to pay them well and load them up with equity.

* A-Players: An A-Player is not an absolute label that describes a particular person. Instead, an A-Player is the right person in the right role at the right time. Someone can rise to an A-Player level, and they can fall out of that tier. A consistent A-Player grows at the exact rate that the company grows and can be promoted to higher levels of the organization in a leadership capacity as the company requires those roles.

For example, a startup might hire someone to serve as their HR Manager. As the company grows and requires a Director of HR rather than just a manager, that person has built the capacity to elevate into that director seat. Then, when the company grows further and suddenly needs a VP of HR or even a Chief HR Officer, the A-Player is ready to take on that role as well. Whatever the company demands as it grows, a consistent A-Player is ready to fill that role— because they are growing at the same rate, they are always the right person in the right seat at the right time.

* The Capacity Building Zone (CBZ): The majority of employees in a growth company will fall into this category. These are the people who are below the company growth line at a given moment. While most employees in the CBZ are dedicated to improving, not everyone can build their capacity up to match the organization's growth line. And when it comes time to make a tough call, it is the employees in this group that will keep managers and leaders awake at night.

Employees who can't climb to the top of the CBZ aren't necessarily poor performers. They may be improving dramatically each year and earning promotions, but their individual rate of improvement is still below the company's growth line. For example, getting 20 percent better each year is typically a huge achievement, but in a company or team that grows 40 percent each year, it's usually not enough to stay in the most senior role within their given function. In especially fast- growing companies, most people fall into the CBZ because it's really hard to get that much better each year. For example, it's very unlikely for even the best employee to grow from a bookkeeper into a CFO in a few years, but if a company is growing 200 percent per year, the role needed for the leader of the finance department will move from a bookkeeper to a controller to a CFO quickly.

While many of the principles in this book will apply to employees who are in the CBZ, the same principles extend to your A-Players and Unicorns, who often have the most upside. The coming chapters are a guide to how you can build your people's capacity—across the organization—at the same rate that the company is growing. It's easier to build a scalable business when your people can grow with the company and take key leadership roles as they become available.

Leaders can use capacity building as a cornerstone strategy to achieve more growth with less turnover, give their most talented people a reason to stay, and build a culture where improvement is incentivized and contagious. Let’s talk about how.

How Capacity Building Works

Capacity building is a framework to build a team that grows with your business rather than ending up with a team that is trampled by your business’s growth. This book goes into detail on how to leverage each of the four capacities to elevate your team’s performance and describes actionable ways to help your team grow in all four key areas.

As I first defined in my previous book, Elevate, capacity building is the method through which individuals seek, acquire, and develop the skills and abilities to consistently perform at a higher level in pursuit of their innate potential.

Remember earlier when I described your perfect employee? Here’s how I knew—capacity building in an organization gives employees what they need to excel in four areas:

* Spiritual Capacity: Understanding who you are, what you want most, and the standards you live by. People with high spiritual capacity have a clear understanding of their purpose in life, the nonnegotiable core values that guide their most important decisions, and their strengths and weaknesses in their personal and professional lives.

* Intellectual Capacity: How you think, learn, plan, and execute with discipline. People with high intellectual capacity are the ones who seem to get more done in less time—they set clear goals for themselves, build the skills necessary to achieve those goals, learn constantly, and develop the habits they need to stay on track.

* Physical Capacity: Your health, well-being, and physical performance. People with high physical capacity have built the resilience and stamina needed to excel in stressful or challenging situations. They manage their energy and avoid burning out by working smarter, not harder.

* Emotional Capacity: How you react to challenging situations, your emotional mindset, and the quality of your relationships. People with high emotional capacity always bring good perspective to challenging situations. When others are panicked by high stakes or frustrated by setbacks, people with high emotional capacity are calmly navigating challenges, learning from failures, and rallying the troops. They work well with others and command respect from direct reports, colleagues, and leadership alike.

This excerpt is from the hardcover edition.

Monday we begin the book BURN THE BOATS by Matt Higgins.

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