Chasing Stars

The Myth of Talent and the Portability of Performance

Boris Groysberg

• Publisher: Princeton University Press
• Year: 2010
• Print ISBN: 9780691154510, 9780691127200
• eBook ISBN: 9781400834389
• Topic: Business
• Subtopic: Decision Making
• Index: Business

Why corporate stars often lose their luster after changing jobs

It is taken for granted in the knowledge economy that companies must employ the most talented performers to compete and succeed. Many firms try to buy stars by luring them away from competitors. But Boris Groysberg shows what an uncertain and disastrous practice this can be.

After examining the careers of more than a thousand star analysts at Wall Street investment banks, and conducting more than two hundred frank interviews, Groysberg comes to a striking conclusion: star analysts who change firms suffer an immediate and lasting decline in performance. Their earlier excellence appears to have depended heavily on their former firms' general and proprietary resources, organizational cultures, networks, and colleagues. There are a few exceptions, such as stars who move with their teams and stars who switch to better firms. Female stars also perform better after changing jobs than their male counterparts do. But most stars who switch firms turn out to be meteors, quickly losing luster in their new settings.

Groysberg also explores how some Wall Street research departments are successfully growing, retaining, and deploying their own stars. Finally, the book examines how its findings apply to many other occupations, from general managers to football players.

Chasing Stars offers profound insights into the fundamental nature of outstanding performance. It also offers practical guidance to individuals on how to manage their careers strategically, and to companies on how to identify, develop, and keep talent.

Part One | Talent and Portability

1 | Moving On

In 1994, Josie Esquivel was in her seventh year at Lehman Brothers.¹ Though barely forty, Esquivel was a legend on Wall Street: having arrived at Lehman in 1987 with almost no experience, she had been voted one of the best equity analysts in her industry a mere eighteen months later. And a few weeks earlier she had finally achieved the goal she had set for herself upon first arriving in New York: she had been named the number-one apparel-and-textiles analyst on Wall Street. Yet here she was, pondering a move to Morgan Stanley.

“I never would have even considered such an offer before,” Esquivel said at the time. “I am very loyal to Lehman Brothers. In the past, I have never even taken calls from headhunters or gone to interviews. I’ve seen a lot of people go to other firms. They received an increase in salary, but it wasn’t worth trading in the privileges they had in Lehman’s research department. We have always been given the freedom to be ourselves and create our own style. As long as I was producing, my style didn’t matter.”

But over the previous couple of years Lehman’s research department had been rocked by cost cutting, defections, and the abrupt firing of Esquivel’s mentor, research director Jack Rivkin. Two weeks earlier a client had warned Esquivel that her franchise would deteriorate unless she found a new employer. Another client had remarked that she deserved “a better firm than Lehman.” After days of weighing the pros and cons, Esquivel had to decide. “Should I stay or move?” she asked herself repeatedly. “Can I move my franchise from Lehman to another firm? What should I look for in another firm if I decide to leave?”

Over the last few decades, an increasing number of employed Americans have been, like Esquivel, knowledge workers.² And the growth of this employment sector is expected to continue: the Bureau of Labor Statistics reports that professional occupations will grow most quickly and add more jobs than any other employment category in the United States between 2002 and 2014.³

The individuals who hold such jobs—consultants, engineers, software developers, scientists, professors, physicians, technicians, attorneys, and the like—view themselves as free agents with portable skills. They attribute their job performance largely to their own talent, skills, and knowledge, and thus regard themselves as equipped to be equally productive in any appropriate workplace. This outlook has been endorsed and promulgated by scholars. Knowledge workers “own the means of production,” as the management visionary Peter Drucker memorably put it, unlike manual workers whose skills are likely to be specific to a particular employer or production process. “They carry that knowledge in their heads and can therefore take it with them.”⁴ In the words of economist Oliver Williamson, knowledge-based workers such as artists, researchers, and administrators have “unique skills [that] are rarely of a transaction-specific kind. On the contrary, most of these individuals could move to another organization without significant productivity loss.”⁵

The concept of an elite workforce composed of free agents with portable talent gained currency in the 1990s.⁶ Books and articles on the protean career, the boundaryless career, the career-resilient workforce, career pluralism, self-centered career management, and the free-agent career all emphasized career flexibility.⁷ Consultants urged talented knowledge workers to view themselves, in the words of one such book, as “free agents using different jobs and organizations as stepping stones in their self-managed careers.”⁸

The free-agent outlook places a premium on portable skills that can be put to use in a series of jobs, and in which validation and marketability derive not only from the employee-employer relationship but from external networks of clients and peers.⁹ Thus knowledge workers who expect to change jobs frequently—from one firm to another, between occupations, or by switching to self-employment—have been repeatedly advised to acquire a portfolio of flexible skills transferable to other work situations and to cultivate extensive external networks.¹⁰

More and more workers appear to be making employment choices on the strength of these propositions.¹¹ Thus Josie Esquivel’s caution about how moving set her apart from most knowledge workers. One outcome of the tendency for knowledge workers to view themselves as free agents with portable intellectual talent is a fundamental shift in prevailing employment patterns from long-term employment to short-term transactional relationships between knowledge workers and their employers.¹² The transferability of talent is particularly alarming to employers in businesses where the bond between top performers and their clients renders an individual’s client base mobile as well.¹³ As a result, firms have become increasingly willing to poach top talent from rival firms.¹⁴ In the New Economy, as Peter Cappelli has insightfully argued, companies must find ways of hiring and retaining workers who are increasingly far more committed to an occupation than to an employer.¹⁵

Josie Esquivel grew up in Miami. Her mother, a former high school teacher, and her father, an entrepreneur, had emigrated from Cuba in 1952, two years before she was born. “My mother set equally high educational standards for me and my younger brother Raul,” Esquivel recalled. “Another important family value was meritocracy. We were taught that if we worked hard to meet our goals in life, we would be rewarded.” The day after her high school graduation, Esquivel went to work as a sales clerk at Burdines, a Florida department-store chain. That fall she entered the University of Miami. Her original goal had been clinical psychology, but her experience at Burdines piqued an interest in business management: “Despite my father’s protests that ‘no daughter of mine will have a job,’ I retained my position at Burdines so that I could have my own money,” Esquivel said. “I also loved my job at Burdines. I was very inquisitive, and I had a great manager, an older gentleman who took the time to explain purchasing, sales, and inventory to me. He also encouraged me to take management and economics courses.”

Esquivel graduated in two and a half years and stayed on at Burdines. “I thrived on trying new layouts for the floor,” she later recalled, “and beating the previous year’s figures for sales and profit.” Her zeal led to promotions, first to assistant buyer and then to manager of the juniors’ department in Orlando where she increased profitability 55 percent by introducing a contemporary “Miami-style” look. After three years without another promotion, Esquivel asked herself what had happened to the rewards of hard work and began to notice that most of those who were promoted were men.

In 1980 she took a sales position at Borden’s Dairy, responsible for the firm’s dairy and frozen foods account with the large grocery chain Winn-Dixie. In this position, too, she took a hands-on approach: “No one had ever called on these accounts to ask them, ‘What do you need from us?’ The bigwigs would always play golf together but no one talked to the store managers who stocked the cases. . . . The store managers were surprised when I began to call on their accounts.”

Esquivel performed well at Borden’s, but at age twenty-six she left for Harvard Business School (HBS). Her brother was at HBS and had urged her to apply. She arrived apprehensive but determined.

Since I had set this goal of succeeding at HBS, I absolutely could not fail. I was really nervous about my first case discussion, the Fieldcrest–St. Mary’s Blankets case in Marketing. The case protagonist, David Tracy, came to our class. At that time Tracy was the CEO of Fieldcrest; he had engineered a remarkable turnaround for the company. I studied hard to prepare for that case discussion and I was eager to get into the conversation. I waited and waited, until finally Professor Ben Shapiro called on me. I remember that I brought up the fact that women were the primary consumers of Fieldcrest’s products, which no one had mentioned yet.

Esquivel made an impression on Shapiro and Tracy. “Josie had an interesting combination of intelligence and street savvy. She was average in smarts for HBS but had a better understanding of how people behave and more nerve than most people,” Shapiro recalled. “She played well in that environment because she wouldn’t let anyone push her around. She wasn’t hard-hearted but she was tough-minded.”

As president of the HBS Marketing Club, Esquivel invited Tracy back to HBS as a guest speaker shortly after he had left Fieldcrest for J. P. Stevens. He in turn invited Esquivel to interview for a job. “Josie had a great combination of tenacity and a drive to achieve,” Tracy later said. “She also had a great reputation on the job market, so we put on the full-court press to hire her.” Esquivel joined J. P. Stevens and was assigned a $16 million department-store towel brand that was losing market share.

Prevailing business wisdom suggests that Tracy’s intense wooing of Esquivel was warranted. “The basic resource in any company is the people,” Nobel Prize–winning economist Gary Becker observed in a 2001 interview. “Remember Bill Gates’ famous comment that if you took away the top 30 employees at Microsoft, it would be a pretty ordinary company. . . . In the New Economy, the reliance on people hasn’t fallen, but has increased. We are much more a human capital based economy than the economy was even thirty years ago.”¹⁶ It has become almost commonplace, in fact, for professional firms to hail their employees as their most fundamental and valuable asset.¹⁷ Sometimes this is mere lip service or cheerleading, but countless knowledge-based firms today are treating their human resources as, in essence, their business strategy, seeking to build competitive advantage on the skills and talents of their most productive employees. In a study of eight companies, management scholars Charles O’Reilly and Jeff Pfeffer wrote that the best companies concentrate hard on fostering the talents of their employees and went on to argue that developing and leveraging talent is the most sustainable source of competitive advantage.¹⁸

But a competitive strategy constructed on a faulty premise could spell disadvantage rather than the advantage the firm is seeking. In Hard Facts, Dangerous Half-Truths, and Total Nonsense, Jeff Pfeffer and Bob Sutton have demonstrated that many popular management practices (including star systems) are simply wrong, arguing that organizations must base their decisions on hard evidence.¹⁹ Specifically, as we will see, talented workers can only be a source of sustained competitive advantage if their talents are imperfectly mobile. Thus, a sound grasp of what factors are responsible for the performance of talented employees has obvious urgency for employers of knowledge workers. And an empirical inquiry into ...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• Introduction
• Part One Talent and Portability
• Part Two Facets of Portability
• Part Three Implications for Talent Management: Developing, Retaining, and Rewarding Stars
• Appendix
• Notes
• Index