When it comes to the success of a company, human capital is a tricky equation that’s challenging to solve—and companies are willing to dig deep into their pockets to recruit and retain top talent.
The tech and media industries are especially notorious for recruiting star talent to build hype for their companies during the growth stage, post-IPO period, or when they're trying to reinvent themselves. We saw this when Vox Media hired The Washington Post's Ezra Klein and when Yahoo paid big bucks for Googler Marissa Mayer. After all, hiring these innovative minds can turn out to be huge wins for a company by adding new dialogue into the standard mix.
Researchers from the Georgia Institute of Technology, University of Toronto and National University of Ireland wanted to identify the impact a star talent has on a new company. The researchers found that there was only one good reason to hire big name talent: They help attract future star talents. This was the only positive correlation the researchers found.
Star Talent: Hurt or Help?
"Traditionally when people think of stars, we’re looking at individuals we think are going to be extremely productive," says Alexander Oettl, a co-author of the paper and assistant professor at the Georgia Institute of Technology. After all, "the most productive individuals are much more productive than everyone else. However, what we found is that they don’t really have much of a positive effect on their peers and colleagues."
In fact, the researchers found that new star talent can actually do more harm than good in existing teams.
The findings were concluded by examining a sample of 255 evolutionary biology departments and the articles they published from 1980 to 2008 while paying close attention to occurrences in these departments before versus after the arrival of a big name talent.
Although examining a university department is extremely specific, the researchers say the findings affect other environments as well—especially when it comes to growth stage companies. While new star talent can sometimes increase the productivity of those they work with on a daily basis, this only happens if they engage with them regularly. On the other hand, there's a higher chance the new talent will decrease overall team productivity because competition becomes too intense. Even worse, new star talent often has great influence and will push the rest of the team in the direction they want, which may or may not be a good thing for the company.
When a Good Hire Turns Bad
What should employers do? Not hiring outside talent could stop your company from growing in a healthy, innovative way. But hiring star talent that turns out to be a bad hire can destroy more than your bottom line. Your new hire could potentially lower employee morale and ruin a manager's—or company's—reputation. Marcia Robinson at Yahoo writes that bad hires come in many forms, from someone who has the skills but just isn't the right culture fit to someone whose skills don't match the assignments.
Losing a bad hire will surely cost a company a lot of money, and the higher up they ranked, the more it'll cost to replace them. A post in TalentIntelligence sums up the hidden and unhidden costs of hiring and losing a bad hire:
"The factors in the cost of a bad hire can be broken down into three basic categories—termination costs, replacement costs and intangible costs. Termination costs include expenses such as COBRA and unemployment insurance, as well as potential wrongful termination litigation. Replacement costs include the expense of outsourcing recruitment as well as travel, lodging and meals associated with the interviewing process. Beyond that there's the expense of orientation and testing for a replacement hire. Those are the costs that are easy to quantify and they can be devastating depending upon the departing employee’s position.
The intangible costs are harder to quantify and depend largely on the circumstances of the employee’s departure. Did the bad hire lead to customer dissatisfaction or lost customers and sales? Was there a reduced quality of product or slower production as the result of the bad hire? What kind of impact did the bad hire have on employee morale both while they were with the company and after their departure? These are all factors that ultimately affect the bottom line."
When hiring star talent, employers should always think about balance, says Ryan Holmes, CEO of Hootsuite. Pay extra attention to the employees who grew with your company and understand your purpose and mission. In the process of hiring new employees, pay extra attention to their emotional intelligence as well as their skills and intellectual capacity. Rock star hires often have big personalities, and all the smarts in the world won't help you if they don't fit in with your culture. Also, be very careful that the role you place them in is a good fit.
Read more articles on hiring and firing.
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