The Risky Business of Hiring Stars

Abstract

An in-depth study of 1,052 star stock analysts who worked for 78 investment banks in the United States from 1988 to 1996 finds that when a company hires a star, the star’s performance plunges, there is a sharp decline in the functioning of the group or team she works with, and the company’s market value falls. Moreover, stars don’t stay with the organizations for long. For all those reasons, we conclude that companies cannot gain a competitive advantage by hiring stars from outside the business. Instead, they should focus on growing talent within the organization and retain the stars they develop.