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Why Some Star Performers Fade Away

As I mentioned in a previous post, in today’s globalized and networked world there are no secrets: everything is known and everything can be imitated more easily than in the past, no matter whether it is technology, strategies, structures, or processes. The challenge for many companies therefore is to find a sustainable source of adaptability (and competitiveness) in that hyper dynamic scenario. And that factor may be their people. Among other reasons because people, and in particular their performance, is not as easy to transfer from one organization into another as many business leaders and HR executives believe.

In 2008 professors Groysberg, Lee, and Nanda, from Harvard University, explored this question in a revealing paper titled Can They Take It With Them? The Portability of Star Knowledge Workers’ Performance. The three scholars focused their research on a specific category of professionals (security analysts), but they came to a conclusion that is valid for many other jobs in the knowledge economy:

The human capital of star performers has a firm-specific component that cannot be easily transferred across firms.

(At least not as easily as many companies — and star performers — think).

In brief, the idea is that some of the factors that enable a person to achieve an outstanding performance in a particular organization are company-specific and, consequently, they are not 100% portable from one company to another. And I’m not referring to the different technological and financial resources organizations provide their employees with, but to factors that form part of the human capital of each individual.

This looks somehow counterintuitive in a context such as the knowledge economy many characterize as a world of knowmads, freelancers, etc. Yet most knowledge workers (including a significant number of free lance professionals) still work in specific organizational contexts where they learn many of the skills they need to do their jobs, and collaborate with other professionals. That’s why some many star performers in a given organization face serious difficulties to achieve similar results in a different context.

And this is good news for companies that invest in their human capital: if “star performance” is not transferable across organizations, then their “star performers” can become a source of sustainable competitive advantage for them.

As the authors explain, the performance of an outstanding employee is not the sole property of the individual, but a shared property since it encompasses both individual capacities and firm-specific human capital in the form of firm-specific capabilities and colleague relationships.

In regards firm capabilities, there are always some company specific knowledge and skills, e.g. understanding the details of the products or services the company sells, or knowing how to use certain tailor made tools or systems.

However, in a world of portable technologies, where products are easily imitated, and processes and systems become obsolete in the blink of an eye, what counts the most is colleague relationships, since these relationships are the channels through which a person gets most of the information, help, or advice she needs to do her job.

In this regard, it has been argued that informal relational networks among employees represent how work is actually done in an organization more accurately than the company’s organizational chart. Particularly in today flatter organizations playing in a highly dynamic, knowledge-intensive economy, where value-added work, innovation, and adaptability are increasingly accomplished collaboratively through informal networks.

The literature has also recognized how these informal relationships modulate the generation of strategic initiatives, the development of new organizational capabilities, or the propensity of organizational actors to adopt new technologies. There is also research on how the characteristics of middle managers’ networks influence their managerial performance and innovativeness.

Moreover, it has been argued that informal relationships are crucial to achieve lasting change, and can play a significant complementary role to more formal, structured approaches raising awareness and helping to embed change in the organization.

As Goysberg, Lee and Nanda argue, they constitute an important component of firm-specific human capital, contribute directly to outstanding performance, and are not readily replicated in a new organizational setting.

Unfortunately, both organizations and star performers tend to undervalue the role played by those relationships.

Many organizations hire employees focusing on their past and present results without considering the contribution of firm-specific factors to those achievements, and they end up hiring candidates whose performance is outstanding in their current organizations but who might not achieve a comparable level of performance in a different setting.

Likewise, many star performers, who believe their success is mostly due to individual attributes, decide to jump ship only to find that in the new organizational context they struggle to perform at their best…

Link to Spanish version.