The grass is not greener: Why star recruits rarely shine

If you’re a top biller and you wonder whether the grass might be greener on the other side, the evidence is likely to have you recommit to your current employer.

Here’s why:

Recently LeadingCompany published a Harvard Business Review article based on detailed research over seven years into the world’s best-performing CEOs.

This research produced many revealing stats (BTW Steve Jobs was ranked #1) but the one that caught my eye was the overwhelming number of the top-ranked CEOs who were insiders (17 of the Top 20 were insiders), rather than high profile external hires.

Co-incidentally in the same week, while I was sorting through my filing, I came across an AFR BOSS article I had kept from a few years ago entitled The Trouble With Stars. This fascinating article by a Harvard associate professor in organisational behaviour has recently been extended into a book (that I am yet to read); Chasing Stars: The Myth of Talent and the Portability of Performance by Boris Groysberg (Princeton University Press, 2012).

The research underpinning the article discovered that top performers (in the positions/sectors researched ie CEOs, researchers, software developers, plus executives in investment banking, advertising, PR, management consulting and law, (all fields in which ‘star’ performance is quantifiable by a very specific and comparable measure eg profit, client lists/ratings, specific skills or individual fees/revenue) were more like comets than stars – blazing successes for a while who quickly faded out when they left one company for another.

Research that analysed 1052 ‘star’ stock analysts who worked for 78 investment banks in the US from 1988 to 1996, revealed that when a company hires a star:

1. The star’s performance plunges, and stays well below previous achievement levels (performance dropped an average of 20% and even 5 years later had not returned to previous levels)
2. There is a sharp decline in the functioning of the group the person works with
3. The company’s market value falls
4. Stars don’t stay in their new organisation long (one-third leave within 3 years)
5. Every additional job held, increased the probability of the individual leaving

Groysberg had the following to say about the differential between expectation and reality with respect to a star’s performance subsequent to their hiring as a ‘star’:

‘Obviously, a star doesn’t suddenly become less intelligent or lose a decade of experience overnight when he or she switches firms. Although most companies overlook this fact, an executive’s performance depends upon both personal competencies and the capabilities, such as systems and processes, of the organisation joined. When stars leave they cannot take their firm-specific resources that contributed to their achievement’

Groysberg goes on to identify additional problems for the newly hired star including; learning new procedures, building new relationships across the organisation, understanding the new culture/politics and dealing with potentially resentful colleagues.

In trying to make some objective conclusions about the level of success attributable to the individual ‘star’ versus the organisation’s resources, a study of 2086 mutual fund managers between 1992 and 1998 concluded that only 30% of the fund’s performance could be attributable to the individual and 70% to their employer.

Groysberg continues:

 Most companies underestimate the degree to which stars’ success depends on the following company-specific factors:

1. Resources and capabilities: Only after a star quits do they realise the company’s reputation, as well as financial and human resources, allowed them to do the things that really mattered.
2. Systems and processes: Although stars often complain about them, corporate procedures and routines contribute in many ways to individual success.
3. Leadership: In most companies, bosses give talented employees the support they need to become stars.
4. Training: while in-house training programs may not add market value to stars, it helps them perform better within the organisation. Smart companies use such programs to inform executives about the resources available and how best to use them. In fact, the ways executives leverage a company’s capabilities often decide who becomes a star and who does not. (my bold)

Groysberg summarises his research thus:

‘Most of us have an instinctive faith in talent and genius, but it isn’t just that people make organisations better – the organisation also makes people perform better. ‘In fact, few stars would change employers if they understood the degree to which their performance is tied to the company they work for.’ (my bold)

The HBR research into top-performing CEOs would appear to reinforce Groysberg’s research that developing people through your organisation is a much more cost-effective way to build sustained high performance in both individual employees and the company as a whole.

Although recruiters were not part of this study I would be prepared to bet a very large sum of money, based on my 23 years of observing big billers moving agencies, that had they been included in the research, the conclusions would be exactly the same: A big biller in one agency is unlikely to replicate the same level of ‘star’ performance if they move to another agency (Groysberg’s research concludes that the ‘star’s’ performance drop is most pronounced when they leave a large company for a small one).

The moral of the story for recruitment agency owners and managers: It’s better to recruit inexperienced people with the required core competencies and motivation and then work like hell to develop their potential and retain them.

Groysberg’s research would strongly suggest that this talent strategy has the highest probability of a win/win for both the company and the ‘star’.

So there you have it top billers, the verdict is in; the grass is rarely greener on the other side