Companies That Make Stars, Instead of Taking Them, are More Successful

Investing in your own people is the only way

For many people, there is a temptation to find the stars of their industry, the high-performers, the ones who look like they’ve done a stellar job in their own organization, market, or whatever, and recruit them. The assumption being that if that person is a star there, then they will be a star here. Remember that old saying about “assuming?”

The problem is that a star in one firm is rarely a star in another. What tends to happen, then, is that the star’s performance falls, as does the share price of the acquiring company (see Boris Groysberg’s research and HBR publications) and then the star leaves. It’s bad for everyone concerned, especially the shareholders.

Instead, grow your own people.

Find, recruit and retain those who you can make into stars. As Peter Drucker would say: it’s easier to turn a good person into a star than it is a mediocre one into a good one. Not only is growing your own a better strategy, it’s cheaper and less risky. It is much easier to retain the champions you grow.

Part of the trouble with bringing stars in, is with organizational culture. Each firm has their own culture, their way of being. Organizational culture is normally built up over time from what the key people determine as success factors (think of a culture as a set of behaviors that ensure success). These success factors are rarely the same in two companies. They started differently, have different customers, different segments and often different geographies. Not to mention product and service differences. Adding all this up, it makes for a dangerous cocktail with a high price.

I started to think about this topic while I was reading about Andrea Orcel, the former executive of UBS who was offered the position of Chief Executive at Banco Santander. Santander eventually withdrew the offer because of a disagreement on how Banco Santander should compensate Mr. Orcel for the loss of some 50 million Euros of deferred pay from UBS.

There comes a time when stars are only in it for the money. Partly I can understand this, but the highest performers are never in it for the money. The elites are driven intrinsically, their motors fueled by something less corrupting and more powerful.

It’s difficult to know why anybody is actually successful. What their critical success factors are — how much was luck, how much skill and how much hard work. Are they successful because of their brains or their ability to manage? Or were they just in the right place at the right time?

There are many genuinely talented people out there, and they are the ones who tend to be quieter about it and are harder to notice. They are less likely to want to move because they have things called loyalty and ethics, and they will be less motivated by the size of a paycheck. They are more interested in the problem that needs to be solved, or the goals to be achieved, and they understand where they can contribute the best.

However, in terms of growing your own stars, all of us have in our organizations people who are objectively “good.” Those are the people where resources should be going to turn them from good performers into excellent, or star, performers.

If you meet someone in your organization, and you think “hmm… they’re OK” get them out.

You shouldn’t invest in anything, or anyone, that is just “OK” because, statistically, you will never see an improvement, nor any real returns. The cost of any marginal improvements are expensive. The return from good-to-great, is better than OK-to-good.

If you think they’re alright, it’s time for them to go. I know this is not easy to realize and it’s never nice to have to let people go for any reason. However, in order to excel we must focus.

For the business to succeed and for the shareholders to get value we must limit our time to where we can realize excellence. This is not only more profitable, its sustainable and is a virtuous circle. Excellence breeds excellence.

Instill that excellence in the self selection of people who populate our teams, to the products and services they design and deploy. It’s always going to mean a firm that will outperform its peers as the team is focused on being the best, doing what it loves, and as a result, highly compensated. All this adds up to a business where people will want to stay. This is not just the team, it’s the shareholders, customers, suppliers. Business is people and people are business.

It’s not just about the work either. It’s about their character and culture. Do they bring your company atmosphere up or down. Do they contribute? What slack do they pick up? Do they help? How attentive are they to the team or customers? details? Are they better at the bits and pieces, the small things?

Smiles and laughter are sometimes much more important than work. As is making time for people. Have a coffee, lunch, or run, and a chat. Build something solid and meaningful — after all, people who are happy where they work do so for 16% less on average.

You can find people with stellar output everywhere you look, but if the team doesn’t like them, or they’re a one-man-band, then you’ve shot yourself in the foot. Sometime the team output doesn’t improve simply because your new star player can’t work with other people.

If they can’t change and help others grow, then the team suffers. That person should go.

Or, better yet, don’t hire them at all. Focus on your own people.