What It Takes to Make ‘Star’ Hires Pay Off

Many companies hire top-notch talent but then fail to reap the full benefits of those star employees. Often, the culprit is faulty managerial practices.

Image courtesy of Flickr user The Rocketeer.

The current economic recession has provided managers with a tempting environment for acquiring “star” employees on the cheap. Consider, for example, how the recent failures of large organizations like the investment banking giant Lehman Brothers and the venerable law firm Heller Ehrman Partners have enticed competitors to go on a hiring spree, acquiring top-notch talent from those now-defunct businesses. Similar opportunistic hires occurred after the downfall of Drexel Burnham Lambert in 1989 and Arthur Andersen in 2002. But the track record of such acquisitions of human capital has been mixed, with many companies failing to integrate their new talent. Apparently, an organization can’t just hire star employees and then expect those individuals to automatically shine in their new environment. But how, then, can companies ensure that they get the most out of the talent they hire? Our research suggests that co-workers are a crucial factor. In our study of equities analysts, for example, we found that the greater the number of high-quality colleagues an analyst had the better that analyst performed.1 But it wasn’t enough just to have smart teammates: Analysts also benefited from good portfolio strategists (who help investors allocate their entire investment portfolio and whose research complements and contextualizes an analyst’s work) and high-performing salespeople (who ensure that clients are aware of the analyst’s work — and name). In addition, having better colleagues in the immediate workgroup, at the department level and in client-facing roles all contributed to lower analyst turnover, especially among the best performers.

The Leading Question

How can managers get the most from their star employees?

Findings
  • Stars shine brightest when surrounded by colleagues of equally high quality.
  • Because the best employees are typically over-scheduled, managers should never assume that collaboration will “just happen.”
  • High-achieving professionals may be willing to accept a significant pay cut to work with other talented individuals.

In other words, to get the best out of top-quality workers, management shouldn’t treat them as solo performers but should instead surround them with colleagues of equally high quality.

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References

1. Some of the results reported in this paper came from research done in conjunction with Ashish Nanda, which utilized data from Industrial Brokers’ Estimate System, Greenwich Associates, Institutional Investor, Nelson’s Investment Research Database and First Call. This research was funded by the Division of Research at Harvard Business School.

2. B. Groysberg, V.W. Winston and S. Spence, “Amy Schulman: Leadership at DLA Piper,” Harvard Business School Case no. 407-033, August 30, 2006, Harvard Business School Publishing.

3. R. Rosenthal and L. Jacobson, “Pygmalion in the Classroom,” expanded edition (New York: Irvington, 1992).

4. B. Groysberg, “Chasing Stars: The Myth of Talent and the Portability of Performance.” (Princeton, NJ: Princeton University Press, forthcoming).

5. B. Groysberg, A.N. McLean and N. Nohria, “Are Leaders Portable?” Harvard Business Review 84 (May 2006): 92-100.

6. B. Groysberg, L.E. Lee and A. Nanda, “Can They Take It with Them? The Portability of Star Knowledge Workers’ Performance: Myth or Reality?” Management Science 54 (July 2008): 1213 - 1230.

7. S. Balsam and S. Miharjo, “The Effect of Equity Compensation on Voluntary Executive Turnover,” Journal of Accounting and Economics 43 (2007): 95-119.

8. D. Hambrick, “Top Management Groups: A Conceptual Integration and Reconsideration of the ‘Team’ Label,” in B. Staw and L.L. Cummings (eds.), “Research in Organizational Behavior” (Greenwich, CT: JAI Press, 1994).

9. B. Groysberg, J.T. Polzer and H.A. Elfenbein, “Too Many Cooks Spoil the Broth: How High-Status Individuals Decrease Group Effectiveness,” working paper (2009).

10. B. Groysberg and R. Abrahams, “Lift Outs: How to Acquire a High-Functioning Team,” Harvard Business Review 84 (December 2006): 133-140.

2 Comments On: What It Takes to Make ‘Star’ Hires Pay Off

  • Charles Creppy | March 11, 2010

    An important caution that appears to run through this research finding on how to reap the benefits of “Star” hires is the need to hire people who would fit into the team and culture of the organization. As rightly pointed out “Our research suggests that coworkers are a crucial factor.” calls for further research into the processes for determining if a new hire would “fit and gel the team” before you hire them. The “Role Based Assessment” tool developed by The Gabriel Institute appears to have the answers by empirically obtaining insights into the teaming characteristics of potential new hires and existing teams. Great insights into hiring stars!

  • Charles Creppy | March 11, 2010

    An important caution that appears to run through this research finding on how to reap the benefits of “Star” hires is the need to hire people who would fit into the team and culture of the organization. As rightly pointed out “Our research suggests that coworkers are a crucial factor.” calls for further research into the processes for determining if a new hire would “fit and gel the team” before you hire them. An assessment tool for obtaining insights into the team characteristics of potential new hires and existing teams might be helpful. Great insights into hiring stars!

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