Wednesday, August 25, 2004

Hiring Star Employees

I re-read an article recently called The Risky Business of Hiring Stars. It's in the May 2004 Harvard Business Review. The authors of the article followed 1052 of the very best investment banking stock analysts. These star analysts are very high profile in the industry and earn between $2-$5 million per year. The researchers found that when a star employee is hired by another firm, the star's performance plunges dramatically. Plus the rest of the team is disrupted by the newly hired star's presence.

I certainly won't argue with that. Most of us probably haven't had the opportunity to hire $2 million dollar per year employees. We have however probably all had the experience of hiring someone we really thought was going to be one of our superstars only to have him fizzle out below our optimistic expectations. I know I have.

The basic premise of the article is that much to everyone's surprise, there is more to being a star than just innate ability. The company environment, resources, leadership and relationships all contribute to whether or not an employee will shine.

When a company courts and then hires (at great expense) a star employee from another firm, they generally expect the star will immediately begin to produce at superior levels. What the researchers found was that:

- it's difficult and time consuming for a newly hired star employee to learn company procedures, personalities, relationships and subcultures

- star employees have a difficult time being accepted by his or her new coworkers (for a variety of reasons) who might avoid the star, cut the star off from important information and/or refuse to cooperate

- stars tend to take a long time unlearning old procedures

A couple of other interesting tidbits from the article:

1) The research on these star employees confirmed what we all know about Job Hoppers. They found that once the star employee started changing jobs, he or she kept moving to the highest bidder. They also found that every additional job increased the probability of them leaving again the next time. Sounds like confirmation on something I've been saying in Carvin's Rules for Hiring the Best for many years.

2) Hiring a new superstar employee hurts the performance of the team they join. To quote the article, "The arrival of a highflier often results in interpersonal conflicts and a breakdown of communication in the group. As a result, the group's performance suffers for several years. Sometimes, the team (or what is left of it) returns to normal only after the star has left the company."

3) The biggest problems occur when star employees move from a large company with lots of resources to a smaller firm. In most of these cases, the star never recovers to star status. Employees who move to similar sized companies experience a dip in performance but generally recover after two years. There is no dip in performance for employees that transition from small to large firms. I think this points to something else that we generally know in Human Resources about hiring people from similar sized firms to our own.

The researchers conclusion is that companies should focus on growing their own stars internally and then do everything they can to retain them. The article provides additional information on how to do that. If you'd like to read the article, you can purchase a reprint from Harvard Business Online by clicking here

Beth C.


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