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Michael Mauboussin: Why Poaching “Stars” from Competitors is a Terrible Idea

Here is a wonderful excerpt on the pitfalls of hiring star performers from Michael Mauboussin and found in the treasure Think Twice: Harnessing the Power of Counterintuition:

What is the quickest way to improve your organization’s results? Many companies, sports teams, and entertainment businesses opt for the same solution: they hire a star. At first glace, signing a star seems like a great idea because of the promise of a quick performance boost. More often than now, however, stars fail to live up to expectations in their new roles. One explanation lies in our next system-related mistake, isolating individual performance without proper consideration of the individual’s surrounding system.

To be clear, reversion to the mean probably accounts for some part of a star’s fading performance. But that’s not the whole story. A star’s performance relied to some degress on the people, structure, and norms around him—the system. Analyzing results requires sorting the relative contributions of the individual versus the system, something we are not particularly good at. When we err, we tend to overstate the role of the individual.

This mistake is consequential because organizations routinely pay big bucks to lure high performers, only to be sorely disappointed. In one study, a trio of professors from Harvard Business School tracked more than one thousand acclaimed equity analysts over a decade and monitored how their performance changes as they switched firms. Their dour conclusion, “When a company hires a star, the star’s performance plunges, there is a sharp decline in the functioning of the group or team the person works with, and the company’s market value falls.” The hiring organization is let down because it failed to consider systems-based advantages that the prior employer supplied, including firm reputation and resources. Employers also underestimate the relationships that supported previous success, the quality of the other employees, and a familiarity with past processes.

All three mistakes have the same root: a focus on an isolated part of a complex adaptive system without an appreciation of the system dynamics.

For more information read the Harvard Business Review article: The Risky Business of Hiring Stars and check out The right number of stars for a team.