Why hiring a star employee is bad for your firm

Washington, July 30 : Hiring star employees to up your firm's performance is a futile exercise, suggests a new study, which shows that managers who seek to appoint a 'star' staff are likely to be disappointed.

According to the Management Insights feature in the current issue of Management Science, the talented bunch are not going to perform well in the office and they themselves are likely to be unhappy.

"Can They Take It With Them? The Portability of Star Knowledge Workers' Performance" is by Boris Groysberg and Linda-Eling Lee of Harvard Business School and Ashish Nanda of Harvard Law School.

In the study, the scientists asked two major research questions: Does switching firms have an effect on the short-term and long-term performance of stars? And is hiring a star a value-enhancing or value-destroying activity for a firm?

From an empirical analysis of star analysts over a period of nine years (1988-1996), they find that hiring stars is advantageous neither to stars themselves, in terms of their performance, nor to hiring companies in terms of their market value.

The performance of a talented worker depends in part on firm-specific human capital embedded in colleague relationships and firm capabilities.

The issue of whether workers' performance is portable across firms is relevant for firms that seek to build a sustainable competitive advantage on star talent.

The researchers find that stars are imperfectly mobile resources that can represent a potential source of sustained competitive advantage for firms.

The findings suggest that managers hiring stars and the stars themselves should be wary of performance declines following moves to a new firm.

ANI