Boris Groysberg (Harvard University), Jeffrey T. Polzer (Harvard University), and Hillary Anger Elfenbein (Washington University in St. Louis)
The U.S. men’s 2004 Olympic basketball “dream team” featured star NBA players such as LeBron James and Allen Iverson. Yet the team underperformed and captured only the bronze medal, upsetting a long history of gold-medal wins. The same scenario can victimize teams in more pedestrian jobs as well, according to this study. To reach this conclusion, the authors examined Institutional Investor magazine’s annual rankings of industry analysts from 1996 to 2001. The magazine ranks the performance of more than 6,000 analysts through polls and surveys of investment officers, money managers, and institutional investors. The authors also considered data from the Greenwich Associates institutional research services survey, which asked 3,000 clients to classify equity research departments using such criteria as the number of reports each firm produced, the level of service they received, and the accuracy of the analyst estimates.
Up to a point, the stars — that is, those who have earned a coveted position on Institutional Investor’s All-America Research Team — increased their team’s effectiveness. But hiring too many high-status employees dampened effectiveness, the authors found. Moreover, companies with high-level expertise tended to fare worse with superstars in tow than did more run-of-the-mill outfits. For example, Greenwich Associates’ client scores for the research departments of blue-chip companies like Morgan Stanley waned when more than 44.6 percent of the analysts could be considered stars. But for firms with less-seasoned, less-well-regarded analysts, ratings didn’t suffer until 70 percent of a group’s employees reached star level. At these tipping points, the researchers contend, the egos of status-driven employees likely took over; they began competing with one another and stopped sharing information.
The lesson is clear for human resources managers assembling groups of employees: Don’t overspend to recruit high-status employees. Once the prestige of a firm is established, each additional star contributes less to the group than the previous hire, and the additional expertise and visibility become redundant. According to the authors, these results imply — and many professional sports team managers would agree — that people with big egos may find it challenging to collaborate with one another, are difficult to manage, and contribute to dysfunctional dynamics while demanding huge salaries.
Work groups that have too many star employees can curtail a company’s effectiveness. Managers should curb their desire to hire numerous high-status employees; in so doing, they will help ensure greater collaboration and fewer ego-driven conflicts among team members.