Chasing stars

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Chasing stars

  1. 1. August 30, 2011Chasing StarsThe Myth of Talent and thePortability of PerformanceBoris Groysberg©2010 by Princeton University PressAdapted by permission of Princeton University PressISBN: 978-0-691-12720-0IntroductionIn the knowledge economy, companies take it for firms turn out to be meteors, quickly losing luster ingranted that they must employ the most talented their new settings.performers to compete and succeed. Many firms try Groysberg also explores how some Wall Streetto buy stars by luring them away from competitors. research departments are successfully growing,However, in Chasing Stars, Boris Groysberg shows retaining, and deploying their own stars. Finally, thewhat an uncertain and disastrous practice this can be. book examines how its findings apply to many otherAfter examining the careers of more than 1000 star occupations, from general managers to football play-analysts at Wall Street investment banks and con- ers. Chasing Stars offers profound insights into theducting more than 200 interviews, Groysberg comes fundamental nature of outstanding performance. Itto a striking conclusion: star analysts who change also offers practical guidance for individuals on howfirms suffer an immediate and lasting decline in to manage their careers strategically, and for compa-performance. Their earlier excellence often depends nies on how to identify, develop, and maintain talent.heavily on their former firms’ general and proprietaryresources, organizational cultures, networks, and col- Unexamined Reliance on Starsleagues. There are a few exceptions, such as stars that Many knowledge-based firms view their employeesmove with their teams, and stars that switch to better as their most valuable resource. At such companies,firms. Female stars also seem to perform better after managers work hard to attract the best and the bright-changing jobs than their male counterparts do. In the est. When companies do find first-rate talent, they areend, Groysberg suggests that most stars who switch often willing to offer those stars huge salaries, sign-Business Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved
  2. 2. Chasing Stars Boris Groysberging bonuses, and stock options—in short, whatever ittakes. The value of stars is a powerful idea, one thatnumerous books and management gurus have popu- Key Conceptslarized over the past decade by invoking a so-called“war for talent.” This assumption is the cornerstone • Companies should not assume that findingof many companies’ people-management strate- and buying the best and brightest perform-gies. In essence, the star hypothesis makes sense. But ers will ensure success. Often, a star’s perfor-reliance on stars is a highly speculative managerial mance declines after moving to another job.policy, because not much is known about what drives • Companies must perform due diligence tooutstanding individual performance. Both stars and ensure a good fit between the firm and thetheir employers often assume that outstanding per- star in order to preserve the star’s perfor-formance is the result of a combination of innate mance.talent and good education preparation. However,little clear-cut evidence supports or refutes prevailing • Hiring a star should be a strategic decision,beliefs about why some people excel. undertaken to fulfill a specific operational aim. Firms should guard against overpayingAnother hazard of an unexamined reliance on stars for talent, and not underestimate the risk ofis that the prevailing belief of the portability of talent demoralizing the existing employees whenis actually a “double-edged sword.” For a particu- the star comes onboard.lar company, a prize-winning scientist, for example,might be a unique resource, but unless he or she is • Female stars are cautious when evaluatingdeeply embedded and loyal, the attractiveness of his new offers and tend to more thoroughly re-or her talents makes that scientist an unreliable source search the new role to ensure the companyof a sustainable competitive advantage. In other is an advantageous environment for women.words, the company never knows when another com- Star women who change employers do notpany might lure the scientist away. On the other hand, experience the decline in performance thatthe other company might attract the scientist to gain star men do.his or her skills and experience but they run the risk • Team-specific processes and relationshipsof the star scientist becoming a comet, quickly fading count as significant factors for a star’s per-out in a new setting. The question of the portability formance. Therefore, when stars move inof talent offers a promising point of entry into the teams to other companies, their performancelongstanding debate about the fundamental nature is more likely to be sustained.of exceptional performance. Groysberg examineswhether stars’ performance is indeed portable from • Ambitious professionals should stick withone employer to another in the hope of discovering the highest-quality organizations. Manysomething fundamental about the origins of perfor- highly talented people will trade portabilitymance. for a nurturing environment.Knowledge Workers as Free Agents g g g gOver the last few decades, an increasing numberof Americans have been employed as knowledge Information about this book and other business titles:workers. These employees view themselves as free pup.princeton.eduagents with portable skills. They attribute their jobperformance largely to their own talent, skills, and Related summaries in the BBS Library:knowledge, and thus regard themselves equipped to Talentbe equally productive in any appropriate workplace. Making People Your Competitive AdvantageThis outlook is endorsed and promulgated by schol- Edward E. Lawler IIIars and authors of business research. The free-agentoutlook assumes that skills are portable and can beput to use in a series of jobs. The validation and mar-Business Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 2
  3. 3. Chasing Stars Boris Groysbergketability of a person’s skills derive not only from environment, companies must find ways to hire andthe employee-employer relationship but from exter- retain workers who are increasingly far more commit-nal networks of clients and peers. Thus, knowledge ted to an occupation than to an employer.workers have been repeatedlyadvised to acquire a portfolio of Over the last few decades, an increasing number of employedflexible skills transferable to otherwork situations and to cultivate Americans have been…knowledge workers. And the growthextensive external networks. of this employment sector is expected to continue: the BureauThis free agent knowledge worker of Labor Statistics reports that professional occupations willview has produced a fundamen- grow most quickly and add more jobs than any other employ-tal shift in prevailing employment ment category in the United States between 2012 and 2014.patterns from long-term employ-ment to short-term transactionalrelationships between knowledge workers and their Not all researchers agree that all of knowledge work-employers. This constant transferability of talent is ers’ skills are portable. Some distinguish betweenalarming to employers in businesses, especially con- two types of human capital: general skills, whichsidering the bond between top performers and their are of potential value to numerous employers, andclients renders an individual’s client base mobile as firm-specific skills, which are useful only to a singlewell. As a result, firms have become increasingly will- employer. General skills, such as literacy or initiative,ing to poach top talent from rival firms. In this new raise workers’ productivity at many potential places of employment. Firm-specific skills, such as mastery of a proprietary computer system, increase workers’ About the Author productivity at only one firm. Those who assign little importance to firm-specific human capital tend to Boris Groysberg is the Thomas S. Murphy assume that a given worker will be equally produc- Associate Professor of Business Administration tive in comparable workplaces. Those who emphasize in the Organizational Behavior unit at the Har- the firm-specific component of human capital argue vard Business School. He currently teaches the that changing employers will cause a decline in per- Managing Human Capital course in the second formance until an employee develops skills specific to year elective course of the MBA program and in the new firm. several Executive Education programs. Groys- The performance of any worker is made up of a mix of berg’s research focuses on the challenges of innate, acquired, and organizational capabilities. But managing professional service firms. In par- when so much strategic advantage can be gained by ticular, his work investigates how a firm can be hiring, developing, and retaining stars, the question systematic in achieving a sustainable competi- of how the performance of stars differs from that of tive advantage by leveraging its employees. He the merely competent is a matter of great interest. In examines how firms develop, hire, retain, and everyday psychology, the notion that some people are utilize star knowledge workers. Groysberg has born with more talent than other is a firmly ingrained won, for two consecutive years, the Strategic idea. Success is commonly thought to be the result Management Society PhD Fellowship (Booz of personal factors, such as intelligence, creativity, Allen Hamilton/SMS fellow) for his research on or talent. If a star’s performance is predominantly a talent management. In 2001, he was also named function of his or her individual talent, or of learned runner up for the Best Conference Paper Prize. but generally applicable skills, it is by definition read- He holds a DBA in Business Policy from Har- ily portable to another employer. vard Business School and a bachelor’s degree in If the performance of star employees depends on accounting from New York University. resources and unique characteristics of the firm, and is thus attributable as much to the firm as to it stars,Business Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 3
  4. 4. Chasing Stars Boris Groysbergsuch a firm is well positioned to create a sustainable 2. The number of analysts is relatively small (aboutcompetitive advantage. The difficulty lies in deter- 10,000), making it possible to collect reliable datamining how much of a star’s performance lies in his on the entire population of analysts instead ofor her own innate talent and unique skills and how relying on statistical data.much relies on the resources of the company he or she 3. Due to the existence of rich, thorough, and trust-works for. worthy data, analysts’ achieve-A brilliant, Nobel-prize winning scientist may be a unique ments could be examined at different levels: demographic, de-resource, but unless he has firm-specific ties, his perfect mobil- partmental, firm, sector-specific,ity makes him an unlike source of sustainable advantage. [Does] and at different points in time.his productivity [have] to do with the specific team of research- 4. Security analysts encounterers of which he is a part? Does it depend on his relationship few external distractions whenwith talented managers who are exceptionally adept at manag- they change employers, mostlying creativity? Does it depend on the…unique culture of the because a very large majority of these analysts continue to live andfirm? work in New York, continue to focus their analysis talents in theIn the absence of hard answers to questions about the securities of one industry, and dealt with the samedrivers of outstanding performance, employers tend clients they served when working in the previousto act on the assumptions embodied in their corpo- firm.rate cultures. Companies that embrace the view thatknowledge workers are free agents with thoroughly 5. Virtually without exception, top jobs on Wallportable skills tend to deemphasize company-specific Street are filled with the help of search consul-skills. Instead of developing their own stars, they tants, who have an unusual degree of embedded-believe that they can simply hire talented individuals ness in the industry and acute insight into indi-from an efficient labor market. Nevertheless, the ques- vidual and environmental factors that conditiontion remains: Are those who excel in the workplace the fit between an analyst and a new employer.truly mobile free agents with highly portable skills, Their role is to enhance the portability of perfor-or is their performance primarily driven by adept use mance.of the resources of the specific organization in which 6. Star analyst’s job changes are reported promi-they thrive? The answer to this question has profound nently in the financial press, making it possible toimplications for how organizations hire, develop, capture the market’s reactions to such moves.retain, compensate, and deploy their best performers.Moreover, it has a direct bearing on the decisions for By analyzing what happened to the job performanceindividuals concerning their own careers choices. of star Wall Street security analysts when they moved from one firm to another, Groysberg’s research offersA Look at Wall Street Security Analysts new insight concerning the nature of work perfor-Groysberg focused his research on the capabilities of mance among knowledge-based professionals.star performance in the security analysis profession.These researchers and their Wall Street employers Star security analysts claim they have portability,hold a strong prevailing belief in free agency, and thus because they can carry their relationships with thein the portability of outstanding performance. They companies they cover and the clients whose informa-also exhibited six other features that positioned them tional needs they fulfill. They maintain relationshipsas excellent subjects of his research: with managers of the companies they track, including CEOs. It is rare for a star analyst to lose a client after1. The performance of analysts is assessed annually transferring firms. Analysts also seek out relation- using clear standardized measures and is publicly ships with suppliers and other sources of information, reported. including relationships with the press to promoteBusiness Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 4
  5. 5. Chasing Stars Boris Groysbergtheir expertise. The type of training analysts receive cess of their employers’ capabilities and resources.is general enough to apply to the work done at other • When contemplating a move, stars should try tofirms as well. undertake a dispassionate and systematic as-Star analysts that switch firms often leave behind sessment of the drivers of their past performancerelationships with other in-house professionals upon before taking any other steps. They should weighwhom they have become interdependent. These rela- an increase in compensation against the probabil-tionships are essential to performance and contribute ity of a future performance decline.materially to analysts’ success. Access to other capable • These individuals should also conduct a clear-colleagues who cover a closely related sector makes eyed assessment of the quality of their currentan analyst’s research more insightful. Also, strong firm when compared to that of likely futuresenior analysts need the support of strong associates employers. A firm with fewer resources and lessand a strong sales force. When a star analyst moves to accomplished colleagues might have a debilitatinganother firm, the relationship with junior analysts is effect on performance, no matter how talented thelost and must be rebuilt. Relationships with company star is or how hard he or she works.traders who buy and sell stocks and provide the ana-lyst with valuable informationare broken. Research directors in [T]he stock market viewed [announcements of departing starfirms have an enormous impact analysts] as negative but not significant events. We found thaton the performance of star ana- [announcements of the acquisition of star analysts by invest-lysts, because they providedirection and support, and they ment banks traded on the New York Stock Exchange] weredecide how the analysts allo- accompanied by an immediate average loss in the value of thecate their time, how to staff the bank’s stock of 0.74 percent….A loss of three-quarters of aresearch department, and how tocompensate each analyst. Several percentage point over a three-day period…corresponds to another relationships and channels immediate reduction in investors’ equity averaging $24 million.of support are interrupted whena star analyst moves. No longer can they rely on the Do Firms Benefit from Hiring Stars?help and advice of portfolio strategists, technical ana- Many articles and books promulgate the existencelysts, and the investment committee. Training that the of a war for talent and state that the increasing tech-analysts received for firm-specific products and offer- nological and knowledge-based tilt of advancedings is not transferable to their new roles in another economies is creating an army of footloose free agentsfirm. with portable skills. Some writers proclaim that the most talented employees move most often, and theGroysberg’s research revealed that star analysts who kind of company-specific knowledge that was onceswitched employers paid a high price for leaving: valuable to both employer and employee no longeroverall, their job performance plunged sharply and retains much value for either party. Because talentcontinued to suffer for at least five years after moving is flighty, managers need to get talented employeesto a new firm. The evidence refutes the prevailing up to speed fast so they can begin contributing to thebelief in the industry that analysts’ skills are thor- firm. An alternative scenario asserts that firms shouldoughly portable—independent of the particular firm lure stars with attractive offers and retain them withwhere they work—and that analysts can move with- individualized career customization.out suffering a decline in performance. The researchpoints to a few lessons for star analysts and other Post-industrial economies are no doubt increasinglyexceptional knowledge workers to keep in mind: dominated by knowledge-based work. Many com- panies assume that if their products or services are• Individual star performers have a strong and per- knowledge-dependent that they should stake their sistent—and potentially career-damaging—ten- competitive advantage on the talents of their employ- dency to undervalue the importance to their suc- ees. But the evidence of the study documented inBusiness Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 5
  6. 6. Chasing Stars Boris GroysbergChasing Stars suggests very different conclusions contribute to the firm’s performance. Additionally,about how to pursue competitive advantage in a the study found consistent evidence that investorsknowledge-based field. The author’s evidence points viewed were weary about such appointments, andout that building capacity in a company by hiring perceived them as value-destroying.stars might not work well, and could result in three Ultimately, the research study suggests that compa-undesirable outcomes: nies should re-evaluate their practices for stars. Their hiring should be a strategic deci-[T]he research department at Lehman Brothers excelled at gen- sion, not a knee-jerk reaction to aerating firm-specific human capital. During its heyday in the perceived opportunity or emer-late 1980s and 1990s…, Lehman essentially mounted a ‘triple- gency. In general, a firm should contemplate hiring a star only tothreat’ department: in hard, soft, and product-based ways, it fulfill a specific operational aim: tobuilt a team of analyst whose skills were firm-specific….[A] raise standards or introduce freshnalysts were encouraged to work in teams, and to collaborate ways of doing business. Even withacross sectors. …Lehman also adopted proprietary information this clear-cut goal in mind, a firm must watch out for the potentialsystems…The result was a culture and a set of work practices corrosive effects that a newcomerthat analysts knew they would find at no other firm. has on morale and dedication from other employees. It is imperative for a firm to perform pre-acquisition research. Com-1. The performance of the star can suffer in the wake panies should develop accurate projections of growth of the move. and profit margins to ensure anticipated gains from2. The much-publicized outside hire can cause hiring outstanding performers for the company, not resentment in the department, which can result in just an advantage for the stars themselves. a breakdown in morale, teamwork, and commu- Firms of Origin and Portability nication. of Performance3. The firm might find that it paid more for its new The phenomenon of performance portability is star than is justified by the results. closely linked to questions of retention and turn- over. Efforts by firms to keep employees from leavingIn his study, Groysberg found that the most active often go hand in hand with practices that lessen por-seekers of star analysts were firms that were unsuc- tability. Particularly in a fluid and opportunisticcessful at developing their own talent or less interested job market, non-portability and retention intersectin doing so than in pursuing short-term performance. when some analysts recognize that they are betterStar analysts tended to quit their jobs at a point in time off, and perform better, if they stay. Firms that keepwhen their firms of origin were underperforming employees embedded in firm-specific processes limitthe market. The acquiring firms attempted to better their employees’ ability to achieve star performancetheir performance by stealing talent from firms expe- elsewhere. Conversely, those companies that focusriencing significantly worse performance. Research less on firm-specific processes tend to have a higherdepartments that lost talent were anxious to replace turnover rate of high performers. However, pro-it, but that effort usually took months. Other analysts moting non-portability of performance is rarely anwere asked to step in to cover the gap caused by their explicit corporate goal. Firms that employ knowledgedeparted colleagues, which concerned clients and workers seek to make the most of those employee’sthreatened to downgrade the rankings of the over- valuable skills, and different approaches to doing soworked analysts. In this type of job market, bidding happen to promote or limit portability. Fundamen-wars for star performers raised the cost of filling these tally, the performance of stars is more likely to bepositions to dizzying heights. Typically, a firm over- portable when the new employer uses an equivalentestimated the value of an outside star and paid more process model as the company of origin. When thefor the star’s services than he or she would ultimately way a company manages and develops its employ-Business Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 6
  7. 7. Chasing Stars Boris Groysbergees reinforces the idiosyncratic characteristics of its ence a change in performance tend to overvalue theirproducts, processes, structures, systems, and cul- universally applicable general skills, and underesti-ture, it becomes difficult for stars to achieve similar mate their intellectual tool kits firm-specific origins.performance levels in another company. Firms can This unwelcome discovery is matched by the sur-benefit by strategically communicating to employees prise of hiring firms’ executives when they discoverhow much value the company’s products, services, the degree to which the stars’ brilliance was specificculture, and processes add to their employees’ perfor- to the culture of the company from which they came.mance. Employees often over-estimate the portability Stars that are hired to exploit their existing set of skillsof their performance, and by reinforcing their notion in similar surroundings often have the most successthat their performance is dependent on unique char- in achieving star performance again. Those stars whoacteristics of their employer, the company helps them are hire to explore new capabilities and skills are leastrecognize that they possess and benefit from firm- likely to achieve star performance.specific human capital. In the study, some companies Hiring an entire team of stars, know as a lift-out, hashighly valued and rewarded work from analysts that become more common in several industries. Whenrequired firm-specific skills. Even though the analysts stars move in teams from one company to another,realized that they were compromising their porta- bringing team-specific processes and relationshipsbility, they felt irreplaceable and invested heavily in with them, their performance declines the least. Formastering the firm-specific processes. They passed up the most part, stars do not develop in a vacuum;many offers from other companies, because they felt their performance depends heavily on the peoplevalued and supported. with whom they work. If they can bring some of thatThe Hiring Firm and Performance firm-specific relational capital with them from onePortability employer to another, their chances of maintainingCompanies often have difficulty assimilating a star. their exceptional performance increase dramatically.The study revealed that many companies did not Most often, team members are motivated to moveintegrate new stars properly, and their new analysts’ together, because they can perpetuate relationshipsperformance deteriorated accordingly. Few compa- and networks that they value highly, especially withnies had put in place carefully considered strategies other high-performing colleagues.for assimilating incoming starspost-hire. Most of the studied Though the plug-and-play scenario [of hiring star analysts] isinvestment banks expect that largely a fantasy, it is important to move fast on multiple frontsthey can simply “plug and play” to orient the new star to the department and other parts of thea star. But the integration processis rarely that simple. Even stars firm…[H]ire with care but integrate deliberately and fast….[A]need time to adjust. The firms d hoc efforts at integrating a new employee are insufficient.that were most successful atassimilating stars were those that had thought deeply One group of analysts in the study reliably main-about the hiring and assimilation processes. These tained their star rankings even after changingfirms analyzed their own cultures and pinpointed the employers: women. Unlike their male counterparts,desirable attributes of the stars they had developed female stars that changed employers performed justin-house. They then sought stars with the same quali- as well as those who stayed put. Two reasons canties from firms with similar cultures. In some firms, be offered to explain this phenomenon: (1) the bestthis analytical hiring process is considered a vital female analysts appear to build their franchises onsource of competitive advantage. external relationships with clients and the companiesCasual or impromptu efforts at integrating a new they cover, rather than on relationships within theiremployee are insufficient. Smart companies do a firms, and (2) women evaluate prospective employ-good deal of preliminary work to plan the integra- ers more cautiously and analyze more factors thantion of an incoming employee and provide plenty of men do before uprooting themselves from a com-hands-on orientation after the move. Stars that experi- pany where they are already successful. Star womenBusiness Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 7
  8. 8. Chasing Stars Boris Groysbergseek new employers who will allow them to continue formers. They became involved in a hands-on waybuilding successful franchises their own way. These with development initiatives.women made certain their new firms would provide • Ongoing development of experienced analysts.the resources they would need to overcome the drag The feature of development cultures that wason performance that a job change entails. directly pertinent to stars’ performance was theDeveloping Talent conviction, embodied in practice, that trainingIf portability of star-quality performance is more often and mentorship are appropriate for experienceda myth than a reality, it is crucial for knowledge-based practitioners as well as beginners. This practicefirms to figure out how to cultivate and retain their has implications for retention of outstanding per-own stars. Firms that nurture a development culture formers, for individual and departmental morale,are far more successful at both producing and retain- and for the departmental budget.ing stars. Directors of research analysts at the studied Turnover of Starsfirms who opted to develop stars in-house tended However, the effort to develop stars clearly is not ato share a positive, can-do outlook. Techniques for wise investment if the stars then depart to shine indeveloping knowledge-based talent vary, but they some other firm’s constellation. Understanding theshare the following characteristics: patterns and drivers of turnover among the best and brightest is crucial for knowledge-[R]esearch departments [on Wall Street] rarely provided formal based firms, whose star employeestraining or mentoring to supplement the traditional appren- constitute their primary strate- gic assets. Some of these patternsticeship method….Even less common was a concerted internal include:effort to develop analysts into stars; the most popular means • Turnover among star- andof acquiring star analysts was to lure them from other firms… non-star analysts. Star researchOver the course of our study, only nine firms developed more analysts examined during thethan 8 percent of their analysts into stars. study were half as likely as non- stars to change employers. Most commonly, stars tend to leave firms for increased• Individualized developmental agendas. The goal compensation and the desire to join a firm or team of successful in-house development efforts is not with more resources and capabilities. to nudge participants toward a formulaic model • Turnover within different cultures. Stars are but to help them better pursue their individual more likely to change employers if they work for strategies and creative impulses. firms in which the culture promotes learning and• Cross-fertilization and flexible development mastering portable skills. Companies that foster processes. With individualized development firm-specific skills experience a low turnover rate programs, analysts can be offered a diverse and of stars. flexible set of developmental practices. Some ana- Groysberg’s study revealed that a number of factors lysts could be mentored and others could attend affect turnover rates. Stars are less likely to exit if individually designed training programs. Many they have a high rank among colleagues, work with companies offered developmental programs that high-quality colleagues, have longer tenure, are part included peer mentoring, critiquing of colleagues’ of a mid-sized research team, work for directors who work products, and sharing best practices across have long tenure, are supported by a high-quality sectors. sales team, and are well compensated. Stars are more• Intense support from the research director. For likely to change employers when their directors leave those companies that embraced developmental or when they perceive they are part of a small team programs for analysts, the directors expressed an with little resources and/or a large team with minimal intense, passionate belief in nurturing star per- support.Business Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 8
  9. 9. Chasing Stars Boris GroysbergGroysberg’s study found three types of turnover Lessons from Wall Street and Elsewhereamong research analyst stars: (1) moving to a com- For both firms and individuals, there is more than onepetitor, (2) leaving the profession, and (3) leaving for path to superior performance. But they should keep inentrepreneurship opportunities. None of the factors mind that firm-specific human capital is highly likelythat drive turnover have a significant influence for to have performance-promoting value for those whothose analysts that leave to become entrepreneurs. possess it and who remain with the same employer.The study also suggests that analysts’ skills were not Firms that provide these sources of firm-specificreadily portable to their new enterprises. Analysts processes and skills training, compensation, and/who become entrepreneurs must learn new skills as or tenure can reap a powerful benefit: they can keepthey became managers as well as producers. It is not their star performers and create a potential source ofunusual for former analysts to abandon entrepreneur- sustained competitive advantage.ship and rejoin their former firms.Fundamentally, turnover is a com- As a rule of thumb, incentive and compensation systems tendedprehensive measure of numerousdecisions that individuals make to become embedded and to change very little over time. Oncein the expectation that they can do specific goals had been put in place, the compensation sys-better elsewhere. Those decisions tem built around those goals operated like an informal con-might be strategic; individuals tract. Change the goals and the metrics could alienate veteranmight move because they seeroadblocks in their path, or they employees and prompt them to seek another employer who stilldislike their directors, or they rewarded the behaviors they had worked hard to perfect.receive offers they cannot refuse.Quite often, stars who left a firm failed to grasp how Hiring a star should be a strategic decision, under-much they had relied on its resources. taken to fulfill a specific operational aim. For firmsCompensating Stars that look to the labor market for fully formed talent, in preference to taking the development route, itAll the research directors interviewed for the study should be a high priority to guard against overpay-reported significant differences between total com- ing. It is also easy for firms to underestimate the riskpensation rates for stars and for average performers. of demoralizing the existing employees when anThree factors largely determined analyst’s pay: overcompensated star comes onboard. Finally, reten-their publicly-published rankings, the results of the tion appears to be a function of organizational factorssales-force survey, and job offers from competitors. like first-rate colleagues, suggesting that talent tendsGroysberg’s study discovered that analysts with simi- to attract and keep other talent in a self-reinforcinglar rankings could receive different compensation manner. Development of star performers is not abased on their specific sectors. Assessment practices matter of pampering, crude incentives, or lavish out-at non-portability and portability firms showed a con- lays. It involves a joint recognition from both the starsiderable difference. Non-portability companies did and the firm that they need each other’s capabilities tonot ignore external metrics like client votes or exter- fully succeed, and can both benefit from making thenally-published rankings, but they often used internal most of each other’s resources.assessments and measures of activity as well, on thegrounds that the market could not be expected to Ultimately, star performers should be aware of theunderstand their particular needs and idiosyncratic most frequently made job-change mistakes:products. The internal metrics are typically more 1. Doing inadequate research on the company or jobsubjective that external ones. Analysts watch compen- in question.sation decisions carefully. Ultimately, the amount oftheir bonus is an incentive to stay as well as the belief 2. Changing employers solely for financial reasons.that the contributory input and process were fair and 3. Allowing discontent in one’s present positionnonpolitical, and that the firm was committed to itsanalysts’ success over the long term. to force a move “from” a company, instead of aBusiness Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 9
  10. 10. Chasing Stars Boris Groysberg move “to” another. Acknowledgements4. Overestimating oneself with an inflated assess- Introduction ment of one’s skills and prospects and how much Part One: Talent and Portability one’s actions contributed to dissatisfaction with the current employer. 1. Moving On5. Being unwilling to sacrifice short-term rewards 2. Analysts’ Labor Market for long-term opportunity. 3. The Limits of PortabilityFor ambitious professionals, it clearly makes sense to 4. Do Firms Benefit from Hiring Stars?affiliate with, and stick with, the highest-quality orga-nizations. Many highly talented people are more than Part Two: Facets of Portabilitywilling to trade portability for a nurturing environ- 5. Stars and Their Galaxies: Firms of Origin andment and productive interactions. Portability g g g g 6. Integrating Stars: The Hiring Firm and Porta- bility of PerformanceFeatures of the Book 7. Liftouts (Taking Some of It with You): MovingReading Time: 8 hours, 470 pages in TeamsChasing Stars offers profound insights into the fun- 8. Woman and Portability: Why Is Women’s Per-damental nature of outstanding performance. Human formance More Portable then Men’s?resource executives, education and training manag- Part Three: Implications for Talent Management:ers, and other senior executives will benefit from this Developing, Retaining, and Rewarding Starsbook. It also offers practical guidance for individualsabout how to manage their careers strategically, and 9. Star Formation: Developmental Cultures atfor companies about how to identify, develop, and Workkeep talented employees. The book is the culmination 10. Turnover: Who Leaves and Whyof extensive research by Boris Groysberg concern- 11. A Special Case of Turnover: Stars as Entrepre-ing the portability of talent. The first part of the book neursprovides information about the research study uponwhich the book is based, the prior work on the ques- 12. Measuring and Rewarding Stars’ Perfor-tion of portability, the population of employees that mancethe study examined, and the central findings about the 13. Lessons from Wall Street and Elsewhereeffects of job changes on individual performance andon the destination firm. The second part of the book Appendixexamines the findings of the study in a more in-depth Notesmanner, devoting a chapter to each of the factors thatcontribute to variance in performance portability. The Indexlast part of the book examines what firms can do toeffectively develop, retain, and leverage their best andbrightest employees. It also explores the applicabilityof the research findings to other labor markets. Groys-berg intersperses case studies throughout the text todemonstrate the research findings. The extensiveuse of endnotes and citations, along with a completeindex, make this book useful for future reference afterbeing read from cover-to-cover.ContentsBusiness Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 10
  11. 11. Chasing Stars Boris Groysberg A Note to Our Readers We at BBS encourage our readers to purchase the business books we summarize. BBS Summaries are intended as a service to busy professionals, as we recommend only those books that are worth your time to read in their entirety. We apply stringent criteria in selecting only the best business books, and in that selection process, strive to help you make informed book-purchasing decisions. Click to Buy This Book This book is available at bookstores and online booksellers. Business Book Summaries® is a service of EBSCO Publishing, Inc. For more information about BBS, to subscribe to BBS, or to provide us feedback, visit our Web site. www.ebscohost.com EBSCO Publishing Inc. 10 Estes Street Ipswich, MA 01938 USACopyright of Business Book Summaries, Business Book Review, BusinessSummaries and BizSum is property of EBSCO Publishing Inc. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder’s express written permission. However, users may print, download or email articles for individual use.Business Book Summaries® August 30, 2011 • Copyright © 2011 EBSCO Publishing Inc. • All Rights Reserved Page 11
  12. 12. Copyright of Chasing Stars - Business Book Summaries is the property of Great Neck Publishing and itscontent may not be copied or emailed to multiple sites or posted to a listserv without the copyright holdersexpress written permission. However, users may print, download, or email articles for individual use.

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