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  • May 2004
  • Article
  • Harvard Business Review

The Risky Business of Hiring Stars

By: Boris Groysberg, Ashish Nanda and Nitin Nohria
  • Format:Print
  • | Pages:9
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Abstract

With the battle for the best and brightest people heating up again, you're most likely out there looking for first-rate talent in the ranks of your competitors. Chances are, you're sold on the idea of recruiting from outside your organization, since developing people within the firm takes time and money. But the authors, who have tracked the careers of high-flying CEOs, researchers, software developers, and leading professionals, argue that top performers quickly fade after leaving one company for another. To study this phenomenon in greater detail, the authors analyzed the ups and downs of more than 1,000 star stock analysts, a well-defined group for which there are abundant data. The results were striking. After a star moves, not only does her performance plunge, but so does the effectiveness of the group she joins--and the market value of her new company. Moreover, transplanted stars don't stay with their new organizations for long, despite the astronomical salaries firms pay to lure them from rivals. Most companies that hire stars overlook the fact that an executive's performance is not entirely transferable because his personal competencies inevitably include company-specific skills. When the star leaves the old company for the new, he cannot take with him many of the resources that contributed to his achievements. As a result, he is unable to repeat his performance in another company--at least not until he learns to work the new system, which could take years. The authors conclude that companies cannot gain a competitive advantage or successfully grow by hiring stars from outside. Instead, they should focus on cultivating talent from within and do everything possible to retain the stars they create. Firms shouldn't fight the star wars, because winning could be the worst thing that happens to them.

Keywords

Staffing; Employee Retention; Selection and Staffing; Employees; Retention; Competitive Advantage; Human Resources; Performance

Citation

Groysberg, Boris, Ashish Nanda, and Nitin Nohria. "The Risky Business of Hiring Stars." Harvard Business Review 82, no. 5 (May 2004): 92–100.
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About The Authors

Boris Groysberg

Organizational Behavior
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Ashish Nanda

Strategy
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Nitin Nohria

Organizational Behavior
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    Now You See Me, Now I'm Gone

    By: Boris Groysberg, Derek Haas and Eric Lin
More from the Authors
  • Zaoui & Co. (B): Executing the Odyssey SPAC Transaction By: Ashish Nanda, Alex Kitsberg and Zack Kurtovich
  • Zaoui & Co. (A): Consigliere for High Stakes M&A Transactions By: Ashish Nanda, Alex Kitsberg and Zack Kurtovich
  • Now You See Me, Now I'm Gone By: Boris Groysberg, Derek Haas and Eric Lin
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