Why Do We Chase Stars?
Summing Up: Is it wise for companies to recruit "star" performers? Discussing the book "Chasing Stars", Jim Heskett's readers support the idea that talent is portable between employers and that women are better at it than men. (Next Forum opens December 2)
Three themes appear to characterize many of the responses to this month's column: (1) leadership talent is portable, (2) the reasons that we chase stars are traceable to human nature, and (3) women have qualities that explain why they have greater success in porting their talent from one organization to another.
Several discussants maintained that portability is high for certain leadership talents. C. J. Cullinane stated, "The manager who is experienced in cost-cutting and turn-arounds can use this talent in many different situations and be successful." Philippe Gouamba said that "Management performance is 75% portable … (but) today's tough environment has forced upper management to adopt a 'welcome to the team, good luck, here is the deep end of the pool, hope you survive'" approach. Guy Higgins added, "Management is highly portable if people will take the time to learn their new company's management processes." Stephen Basikoti put it this way: "The fact that some transplanted leaders do not succeed does not negate the fact that management performance is portable; it simply points to the uniqueness of the learning curve for each change."
Transferability was thought to be particularly difficult in a move from a large, successful organization to a smaller, struggling one. In Gerald Nanninga's words, "If you put a super-operator in a place where the position is poor and resources are weak, they have nothing to leverage. Their skill-set is wrong."
We chase stars for a number of reasons: "… corporations and the media encourage stardom and discourage team work" (Nauman Lodhi); "It is the expectation that some 'miracle worker' or 'hot shot' can come in and fix issues without the board facing the pain and agony of doing the hard work themselves." (Phil Clark); "It's about selling the dream that the star will add to the bottom line fast with new clients, etc." (Jacoline Loewen); "Rather than create succession plans to hone existing talents, it's so much easier to scavenge for those floating around in the industry." (Vanitha Rangganathan); and "We chase stars because we are fallible …Glamor always is enticing." (Vadeed Lobo)
Women are particularly successful in porting their skills because "… women are more associated with transformational leadership," according to Fidel Arcenas. As Ratnaja Gogula put it, "…traits (that) make women better contenders for talent portability (include) … women's ability to better cope with stress, better communicate and multi-task …" Tom Dolembo asks "are women really different, or have they simply evolved in management by gender bias with skills and talents so alien to their male counterparts that they are uniquely powerful in an information world?"
Other questions come to mind. Do we continue to overstate the portability of star talent? If so, how much of it is attributable to our need to believe that management is a profession? What do you think?
How many times have you seen this happen? An organization seeking to make a senior management change goes after someone from outside with a reputation for, and record of, high performance. It pays a premium, thereby disrupting its compensation scheme, and discourages promising internal talent that isn't considered quite ready for the job. Then the outsider fails to perform up to (probably inflated) expectations, and the staffing process starts again.
Is this the exception or the rule, we ask ourselves? Boris Groysberg, in a new book, Chasing Stars: The Myth of Talent and the Portability of Performance, based in part on earlier research with Ashish Nanda, Andrew McLean, and Nitin Nohria, seeks to find out answers to the question.
Groysberg and his colleagues studied what he calls "the portability of performance," and reaches conclusions that might give pause to many who chase stars. Their subjects are top investment analysts (as identified annually by Institutional Investor magazine) and the organizations that develop and hire them away from each other. Their analysis is based on a large base of data for 1988 through 1996. It includes ratings before and after an analyst's transfer from one investment bank to another as well as the results of extensive interviews over several years of study.
Among other things, they found that "star analysts who switched employers paid a high price (in performance, not compensation) for jumping ship relative to comparable stars who stayed put." (The same might be true for their employers as well.) Groysberg emphasizes that the more appropriate question is, "Which stars are portable under which circumstances--and why?"
For those hiring stars, Groysberg says the evidence "strongly suggests the wisdom of hiring from firms with similar orientations … and lesser or equivalent quality" that are less "resource-rich" than one's own, with every effort made to redress the asymmetry in information and inadequate due diligence that almost always accompanies hiring from outside. (The italics are mine.) He suggests that every effort should be made to avoid the "winner's curse" of overbidding to get talent without a clear picture of how they fit into a longer-term strategy.
Groysberg, along with Andrew McLean and Nitin Nohria, extended the inquiry to 20 General Electric top executives who moved to high positions in other companies. They concluded that those who "took over, built, or implemented management systems that resembled GE's were more successful," while "those who went to different industries, those who moved solo (rather than with a team), and those who joined companies whose needs (exploiting existing business opportunities as opposed to exploring new business opportunities) called for different skills performed poorly."
These studies trigger a number of issues for us. For example, to what extent do they raise questions for those who argue that general management performance is highly portable? If it isn't portable, at least under many conditions, what does this say about the associated thesis that management is a profession? Or the notion of the individual high-performing, newly-hired CEO as an important key to a turn-around? Can a study of investment analysts do much more than suggest hypotheses for the study of general management and governance? How "portable" are its findings? Why do we chase stars? What do you think?
To read more:
Boris Groysberg, Chasing Stars: The Myth of Talent and the Portability of Performance (Princeton, N.J.: Princeton University Press, 2010).
Boris Groysberg, Ashish Nanda, and Nitin Nohria, "The Risky Business of Hiring Stars," Harvard Business Review, May, 2004.
Boris Groysberg, Andrew N. McLean, and Nitin Nohria, "Are Leaders Portable?," Harvard Business Review, May, 2006.