The Wall Street Journal Saturday featured an article on the “high beta” rich – those who own multiple mansions and multiple jets one day, nothing the next, and then may well bounce back to the top. I can name a long list of people in this category, perhaps the most notable being the Ted Turner of a few years back. Turner was “all in” on every iteration of his original television empire, but fortunately his major bets always paid off. He is now well beyond the high beta stage of his life.

Friday’s edition of the Economist had a thoughtful article on The Art of Selling. I have written frequently of late on the importance of selling skills in ventures from startup through growth stages. The Economist piece reports that three McKinsey consultants have authored a book observing that “the performance of salespeople within a single company typically varies by a factor of three. And the difference between the best and worst companies when it comes to selling is far greater than the difference for functions such as supply chain management, purchasing, or finance.”

The WSJ piece is a bit of a titillating look at ups and downs of the rich (and sometimes famous), and the drift of the Economist article is the notion of the “Chief Sales Officer” (CSO) – something rarely found in the C-suite. However, I can see a link – the notion of a high beta theory as it applies to the important jobs in your business. With no disrespect for any job function, I think it is fair to say that some have more binary results. You either do the task or you don’t, and it’s pretty measurable and pretty obvious. Certain more production-oriented roles, whether in purchasing management or even in technical jobs with clearly defined deliverables deep inside a broad-scope project fall into a low beta category. The employee either has the skills and performs the work as assigned or is miscast in the role. You may have made a hiring mistake if the results are bad, but chances are you are limited in your remedies other than finding a replacement.

(I always enjoyed hearing former Georgia Tech football coach George O’Leary talk about the importance of making “big mistakes.” In his world that meant hiring a 350-pound player was less risky than a 250 pounder. At least the big guy could get in the way of something on the field. I’m not sure that thought process applies to the thesis of this article, but, hey, it’s football season.)

The more a job demands creativity and leadership, the higher its beta. Clearly the CEO is at the top of the list. If there were a way to measure, there might be a factor of 100 between CEO’s of the best and worst companies. It’s indeed a very lonely job riding all the ups and downs of a growing company, rewarding subordinates who over-deliver and coping with those who let you down, making the ultimate decisions from minutiae to “make or break, ”and still maintaining high energy and focus sufficient to accomplish the goals of the firm. You would do well to have a strong support group of advisors or directors to keep you sane in this process.

I would assign a pretty high beta to the CFO function in venturesome companies. Keeping one step ahead of payroll and maintaining decent equity for the founders requires more than a little creativity. I don’t mean creative bookkeeping, but I do mean being very clever at balancing all the constituencies of the company. There’s probably a 10 to 1 differential from top to bottom in this field. In the financial realm I would have previously contrasted this with commercial banking, where heavy regulations historically forced everyone down a narrow path and into more low beta roles, but recent years have shattered that thinking as a point of contrast.

How about the CTO? If you are a tech business, this is another very high beta area. There are lots of overarching choices as to tools, methods, and infrastructure, and the CTO has the distinct privilege of managing one of the most difficult breeds of employee. I have only the highest regard for developers, but there’s a genetic gift associated with their careers, not just training, and even the most well meaning can go down some mighty wrong pathways if not properly supervised. Combine all that with a backdrop of technological change where what used to happen in a year now happens in day, and your CTO could easily deserve to be in the 50 to 1 range.

As to the CSO, more likely the CMO in most companies, I think the McKinsey guys may have underestimated at 3 to 1. There is a huge difference between the contributions of the true rainmaker, or the person who can sell products not quite yet invented, and one who can tote a bag and sell from a pretty well defined catalog. Even in a hardware store (recalling my very early experience in that arena), most customers come in looking for a solution to a problem, perhaps one they can barely describe, and have no wherewithal to ask for a specific item. Problem solving is a key part of that selling process. Good salespeople are those who possess this skillset along with all the creative arts of the true complex sales process. I’d also give this category more of a 50 to 1 beta, the earlier stage of the company the higher.

So what does all this suggest from a practical standpoint? I suppose the more you can design your business to depend on low beta employees, the more the business as a whole will function with stability. If your shop is loaded with the high beta types, then expect to ride the roller coaster and to have a more challenging management role. You can do fabulously well either way, but perhaps it helps to take stock of your company’s rank on this measure and adjust your leadership style accordingly.

<image from Wikipedia>