Chasing Stars Lib/E: The Myth of Talent and the Portability of Performance

by Boris Groysberg

MP3 CD Format 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 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.

Genres: Business, Nonfiction, Leadership, Education, Historical Romance

Audio CD

First published April 19, 2010

Reviews

[Andre Kubota · Rating 4 out of 5]

This is a book made by Boris Groysberg, a teacher of leadership in HBS. It’s about the portability of star employees on different companies. The study considered several professions, but chose equity analysts on Wall Street. This was the only profession to have enough public data to be studied and reduced factors that could affect the study. It found that most star analysts were not as successful on the new company as they were in the previous one. Interesting results on the performance of analysts that moved with the whole team and different performance when considering gender.

It starts with the history of Ezquiavel, a textile analyst of Lehman Brother. It tells a little on her story, that she studied in HBS and ended up in Lehman were she had a very good “menthor”. He had the idea on becoming better ranked on the institutional investor pool. He made the teams work together were analysts from different sectors could exchange info and also had cross sector reports. He also focused on developing people instead of hiring stars from other companies. Ezquiavel got to top ranking really fast mainly when released a controversial report on Nike. She also exchanged a lot of info with her high ranking friend on the aeroespacial sector.
After her boss left the company she had some doubts on continuing.

In the following chapter the author explain the job description of the equity analyst and why it is a good group to study. It a “knowledge” job, the client base is the same, the industry they cover maintains the same, they don’t have to move and be negatively affected (most investment banks are located in Manhattan) and they are able to maintain their network outside of the work (contact with CEOs, industry experts , etc). This would be clear group that would prove that the portability is truth.

However, there are other several issues to be taken into account. The relations build in the company (sales force, jr team, peers, etc), the knowledge to leverage the companies capabilities. These are very important factors that impacted the performance when star analysts changed companies. The most relevant factor was the jr analyst.

Most of the changes made the performance to fall. In cases were the analyst went to a better firm (better resources and expanding), brought its team and the receiving company had the strategy for integrating faster, had better performance.

Hiring stars from outside also had other problems on the hiring company. The other employees might feel not motivated, don’t integrate the newcomers as needed, feels there is a new person to compete for funds and budget.

Statistics analyses made on stock performance found that hiring companies usually had stocks declines after hiring stars. Its a signal of higher competition and increasing costs.

There is a big differential on companies that focused on human capital and human firms specific capital. Companies with the second approach had much lower turn overs and better performance. These companies instead of focusing on star analysts, focused on collaboration between analysts, between offices abroad, on internal processes (like databases, cross function reports, interviews based on collaboration and made by different areas) and hiring smart people outside the capital markets. Also focused on training and development on the jr team and also focusing on innovation and impartiality.

The hiring process of Goldman Sachs vs DLJ Goldman has a very different profile when compared with DLJ. The first had a very cooperative and firm oriented strategy and the second a “entrepeurnership” strategy focused on the analysts franchise. The hiring process on Goldman was considered insane by a Ryan Reynolds partner that helped the company. It was more than 20 enter views with several different areas. In this case, the integration was more efficient because everybody had buy in for the new employee. They believed that he was good enough to take place from a possible intern hiring.

Another thing is if the acquiring company is hiring for exploitation (to exploit an existing area) other than exploration (to explore a new area) , the results are better. The traders and sales force for example knows how to sell and trade something they already know.

Hiring teams have better probability on succeeding, but there are some paths to improve the probability. You have to align before moving with team the expectations on the team as whole and not only with the leader. After joining the new firm you also have to align with the team. The next step is to integrate operationally and them culturally.

Women have also higher probability in succeeding in new firms. There are some thesis on psychological behavior and about women being more qualified when they reach certain levels on a company (they might need to prove themselves more than men needs - there is an mention on this on the Grit book). But the book focus on things women did more than man. For example, they build a external network better and rely less on the firm specific (this might be caused because the team are more inclined to favor man, a cause they have lower turn over and since its a majority of man, its easier to relate). Another thing is they usually analyze better when changing firms. They look at into the culture and not only the money.

The culture of development results in lower turn over ratios and better engagement than hiring stars from the outside. Training programs and mentoring are examples and firms that adopted this strategy had lower turn over and higher percentage of “star” creation. This lower turn over was truth from stars to average employees. There also a big difference when the company adopted intentionally the strategy of making the employees portable with a company that makes that unintentionally.

The book mentions also the turn over of stars to the entreupnership life. Some were out to hedge funds, consultancy or other industries. This kind of turn over is a little bit different than to a competing firm. It is more difficult to retain a star in this case. Normally the star wants more independency and flexibility and also more upside.

In case of compensations the portability and non portability also had very different methods. The non portability focused also in more qualitative items like training the team and helping the company as a whole and not only its specific area. Also companies tried to track, calls, trips, visita to clients, training sessions, number of reports and the relationship with other areas. The portability firms usually focused more on trading commissions and II rankings.

This study was also made on ex GEs employees and got similar results. People who moved with teams, in their area of expertise and on companies that needed their skills, ended up performing better.

Also it depends on the role you are hired. CEOs and CFOs for example are more specific and depends less on relations and are more portable. COOs and marketing for example depends more on relation and are less portable.

The most common mistakes when changing jobs is focusing on compensation, not doing a proper research on the new company, thinking short term instead of long term and wanting to left your job instead thinking on the new one.

[Gonzalo Baquero Sanz · Rating 2 out of 5]

A book that could be summarised in one sentence: high performance is more dependent on the culture and the context of a company than on the capabilities of the worker

Quite boring to read because almost every example is to illustrate the same idea

[Sarah · Rating 2 out of 5]

If you're an analyst on Wall Street, you'll want to read the entire book. I, however, could have done with just reading the last chapter. That covered everything applicable to my career and interests. The book is unfortunately marketed to a general audience when it is has been written for a very specific one.

[Jason Orthman · Rating 4 out of 5]

An excellent book and a must read for anyone that works in an investment firm ("sell side"). Shows how hard it is to transfer your success from one organisation to another where relationships, structures and support systems vary. Some excellent detail.

[Marcell Nimführ · Rating 4 out of 5]

Excellent scientific book. No management mumbo jumbo but first hand research. Focusses on financial analysts but I think some learnings are transferrable.

[Brent Brockerville · Rating 4 out of 5]

Good book that highlights the systems of a business can be the reason some people appear to succeed.

[Anandh Sundar · Rating 4 out of 5]

Backed by 10 years of solid research, this book explores the widely held belief of "Free agents". Modern day knowledge workers are quite willing to switch jobs hoping that they can replicate their success at the new employers. This book uses equity research profession as a proxy for analyzing this belief. Equity research is chosen being a compact profession(in the US just around 10,000 analysts in 1996) with publicly available accurate performance ratings(II rankins), and apparently being firm independent(depends on knowledge, client contacts etc).

Unsurprisingly, the author's research shows that people with more external contacts(versus internal ones), who shift with teams(instead of alone) and who are hired to expand(rather than explore) are likelier to maintain/improve their II rankings.

What makes the book a pleasant read is the deep insight on what makes an equity research analyst succeed. Anyone wanting to switch jobs is advised to read this book first to decide under what situations will he be able to replicate his performance.

What goes against the book is the dated period of research(1988-1996)but still the conclusions seem quite valid.

[Ken · Rating 3 out of 5]

A very enjoyable book with in depth insight looking into the portability of people's skills in new job environment by using Wall Street analysts as the research subject.

The book shows that performance is highly affected by a web of relationships, and for workers looking for the next career move, don't be hasty and solely consider pay but also the support networks of the company.

For companies, it is not always worthwhile to hire stars as the performance is not guaranteed but instead they should pour resources into developing their own stars and provide them with support for growth.

[Devin Partlow · Rating 2 out of 5]

Is this a book about the portability of performance or is it just about Wall St. analysts? I was confused halfway through the book because the author goes on and on about these analysts. I guess its because the reader is just supposed to accept that the analyst's world is a microcosm of entire workforce (which I'm still not sold on btw) and the portability of an analyst applies to everyone.

I'll give this book an extra 0.5 stars for the little tidbit included about the c-suite employees though.

2.5 stars.

[Luke Kanies · Rating 5 out of 5]

The best book you'll ever read on portability of talent, and the only academically rigorous one.

If you hire and you care about hiring, you need to read this book. Done.

[Mallory · Rating 1 out of 5]

Assigned for management course: I understand and appreciate the study. However, it could have been accomplished in one chapter rather than 13 in my opinion.