Saturday, May 19, 2007

The Key to Managing Stars? Think Team

by Martha Lagace
[HBS Working Knowledge / May 14, 2007]

What contributes to an individual's ability to remain a star? To what extent does past star performance predicate future star performance? And to what extent does a key organizational factor - colleague quality - help or hinder the ability to sustain star performance? The performance of stars is an important career matter for individuals as well as for managers who want to inspire, nurture, and recruit stars.

A new study by Harvard Business School's Boris Groysberg and Linda-Eling Lee on star knowledge workers, specifically security analysts, addresses these questions. As they explain in a forthcoming article in the Journal of Organizational Behavior, it is true that a star's past performance indicates future performance - but the quality of colleagues in his or her organization also has a significant impact on the ability to maintain the highest quality output.

"Stars need to recognize that despite their talent, knowledge, experience, and reputation, who they work with really matters for sustaining top performance," say the authors.

The article, "The Effects of Colleague Quality on Top Performance: The Case of Security Analysts," outlines important implications for star players as well as their managers. Groysberg and Lee explained more in this interview with HBS Working Knowledge.

Martha Lagace: Let's begin with the key question you ask in your paper: Who "owns" top performance: individual stars or their organizations?

Boris Groysberg and Linda-Eling Lee: Both. We found that even though an individual's past performance can indicate future performance, the organization also significantly affects top performers' ability to maintain their performance.

Specifically, top performers rely on high-quality colleagues in their organizations to improve the quality of their own work and to deliver it effectively to clients.

Q: What is important now about knowledge workers from both a business and a theoretical perspective? Where do you see beliefs about performance playing out in business today?

A: Some have pointed out that the main difference between knowledge workers and, say, manual workers, is that knowledge workers own the means of production. That means they carry the knowledge, information, and skills in their heads and can take it with them. As the basis of competition shifts to superior knowledge and information, organizations have naturally become increasingly concerned that they attract, leverage, and retain the best knowledge workers.

In addition, our culture is very enamored of stars and with the idea that extraordinary talent accounts for individuals' extraordinary performance. The business media likes to treat star knowledge workers, such as top analysts, bankers, lawyers, and CEOs, as if they are star athletes. There is an assumption that these star knowledge workers, like star athletes, actually "own" everything they need to perform at the top level and can take that knowledge and skill anywhere. They are treated as free agents who can take their top performance to work for the highest bidder.

Our study debunks that myth. Star analysts rely a lot on the quality of the colleagues that their organization provides to sustain top performance. They cannot simply replicate their top performance in any organizational context.

Q: Why did you construct your study as you did?

A: Our study focuses on the performance of Wall Street analysts because this is a population that is commonly believed to "own" their performance. Interviews we conducted prior to the study indicated that analysts themselves as well as their managers believe that top performance in this industry is due to individual talent. This could be one reason that there is a great deal of mobility in this labor market.

We were interested in why some star analysts were able to maintain their star rating over this period while others had a harder time doing so. We found that having high-performing colleagues in different locations in the firm - at the team level, at the department level, and in an entirely different department (sales) - had a significant impact on star analysts' ability to maintain their stardom.

Our dataset is also one of the few that has been able to measure the performance of knowledge workers for a large sample across a large number of firms in an industry. In addition, it contained very good information about the quality of colleagues for each analyst. Because we had data over a long period of time for all these factors, we were able to distinguish the casual effects of individual and organizational factors on star performance more clearly than previous studies that lacked longitudinal data.

Q: How should top performers consider their next career move?

A: We think our study has important implications for both individuals and managers. Stars need to recognize that despite their talent, knowledge, experience, and reputation, who they work with really matters for sustaining top performance. Stars are courted by headhunters all the time. When considering a career move, it is very important for stars to evaluate the level of support they are receiving from their colleagues in different parts of the organization. It may not always be obvious that someone sitting in a different department can really impact your performance. But losing those ties, especially ties to the top performing colleagues, can be detrimental to maintaining top performance.

Q: How should managers at the firm level evaluate their organization's environment in terms of its ability to inspire and sustain top performance?

A: For managers, it is imperative to understand that stars are not self-contained silos. Producing top-quality knowledge work requires collaboration and flows of information among a network of top performers. That means any one decision on hiring and retention can have a real impact on the performance of top employees in an entirely different part of the firm. It also means that it is not enough to have a few star performers here and there within the organization. If these stars lack high-quality support and information-sharing with other star colleagues, they will have a harder time maintaining their star performance.

Firms that already have a large stable of high-performing individuals might have built a competitive advantage. Their stars make it more likely for each other to sustain top performance. Firms that lack this advantage fight an uphill battle. They can hire or cultivate stars. But if there are only a few stars, these individuals will tend to have a tougher time sustaining top performance.

Q: What else are you working on?

A: We also examine the portability of performance in a different labor market: star general managers from General Electric. These findings are presented in the Harvard Business Review article "Are Leaders Portable?" co-written with Andrew N. McLean and Nitin Nohria. The records of former GE general managers demonstrate that even skills widely perceived as generalizable are constrained by context and imperfectly portable.

We continue to extend our research into other labor markets in order to understand conditions that help and hinder portability of performance. The "Recruitment of a Star" case explores this model of human capital as a portfolio of skills, and asks which of four candidates for a job is likely to possess the most portable skills.

The frequency with which workers move in teams suggests that at least some individuals are aware of the value of colleagues. Lawyers, doctors, consultants, bankers, programmers, creatives, and general managers often leave with a team of colleagues to join a competitor. This phenomenon is called a lift out. It is observed in industries as diverse as medicine, advertising, software development, and apparel manufacture. The Harvard Business Review article "Lift Outs: How to Acquire a High-Functioning Team," co-written with Robin Abrahams, describes the effects of team moves - or lift outs - on performance portability. We found that a successful lift out typically unfolds over four consecutive interdependent stages that must be meticulously managed. We are continuing to work on this topic.

Finally, we are working on a paper that examines whether higher-quality colleagues can act as a retention mechanism for knowledge workers.

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