Fight the War for Talent Right: Bring Aboard Intact Teams and Networks

Tom Davenport and Larry Prusak wrote a wonderful book a couple years back that is called What’s The Big Idea. One of their most clever observations was that, if you start digging into the waves of management fads, you can see that the emphasis tends to shift among three different themes: efficiency, innovation, and people.  They showed how, even though all three themes matter to all organizations, at any given time, one and sometimes two of these themes seems to be in vogue, while the other one or two are in the background.

If you think back over the past 8 or 9 years, it works pretty well. So, after the dot.com bust it was all efficiency all the time – layoffs and outsourcing. Then it was innovation and innovation is still hot (but doesn’t feel quite as hot as it did about 6 months ago), and I am starting to see signs – look at the cover of the current Economist – that people are starting to move toward center stage.

 If you read this issue of The Economist, if you consider standard HR practices for recruiting, hiring, evaluating, and compensating employees, if you listen to most HR consulting firms, and if you look at how employee records are organized in enterprise software you will see that the – usually unspoken but pervasive – assumption is that a focus on people means a focus in hiring the most talented individuals. Indeed, talent is the word people like to use talk about good people, a word that conjures up images of superstar actors and athletes. Certainly, having talented individuals is important. But focusing on individuals alone – as the HR mindset seems to do, in an automatic mindless way without ever questioning the assumption – is a dangerous half-truth. It blinds managers and executives to a growing body of literature that shows performance is heavily dependent on having people who are experienced at working together and who work together for a long time. Just look at that Economist’s cover, at how implies a search for that lone beautiful pearl, one that is fixed in its hardness and beauty. This analogy mirrors the talent mindset and its fixation on individuals.

I thought of this when Boris Groysberg sent me a Harvard Business Review article that he published earlier in the year with Andrew McLean and Nitin Nohria.  It is called “Are Leaders Portable,” and it examines what happened to 20 former General Electric executives who were hired as CEOs between 1989 and 2001. The article focuses on what they call annualized abnormal returns. In English, this means: How did the company do in the three years after the new CEO from GE was hired compared to market as a whole and similar firms?  The main finding of the article – which I don’t think the article quite comes out and says – is that these GE CEOs did a lot of damage, perhaps more harm than good. For example, they show that the 11 CEOs who “matched” their new companies were associated with a 14.1% positive return, while the 9 who didn’t match were associated with a -39.8% return. I actually doubt that the CEO’s alone had this much effect, as more controlled research shows that leaders of large firms usually have much weaker effects on performance, but the number of firms that apparently weren’t saved by an executive riding in from GE is instructive.

One of the most interesting findings – and a challenge to HR’s obsession with practices aimed at individuals rather than teams or networks – was that GE executives who brought along 3 or more GE alumni to join their teams had “annualized abnormal returns” of 15.7% above average; while those that hired one or none from GE had -16.7%. Groysberg and his colleagues call this past experience working together “relationship human capital,” horrible language from economics. Other researchers call it “prior joint experience,” which isn’t much better. But whatever you call it, while HR practices turn attention to individual stars, study after study shows when people have experience working together – and have learned who knows what, how to read those little signals that people send off, and can communicate ideas quickly and efficiently – their teams and organizations perform better. The list of studies is long and uncover consistent findings. My Stanford colleague Kathleen Eisenhardt found – in a large longitudinal study of new semiconductor firms – that those firms that were founded by people who had worked together before were more likely to survive and be financially successful, and such positive effects got stronger as the firms got older. Exhibit one in this industry is Intel, which was founded by the “traitorous eight,” a group of executives who fled from Nobel Prize winner (and racist) William Shockley to start their own firm, which included Gordon Moore and Andy Grove. Similar findings has been replicated in studies of start-ups funded by venture capital firms, surgical teams that do coronary bypasses, airplane cockpit crews, and product development teams. The only study I know that challenges this pattern showed that, after about 4 or 5 years of working together, the productivity of product development teams starts to slow if they don’t start moving out some old members and moving in some new ones.  But productivity gets higher and higher in these teams every year until about the fifth year.

The implication of this research is pretty clear and shows the limits of modern HR practices, assumptions, and even the enterprise software systems that they use. If you are going to hire some “talent,” don’t focus on just landing that lone star – focus on hiring as much of his or her team, or network, as possible. You win the war for talent by bringing aboard talented sets of people, not talented solo acts. Indeed, if you recall my earlier posting about the hazards of mergers and acquisitions, I showed how the typical merger fails, but I used the example of Cisco to show how when the focus is on acquiring small companies and on going through great effort to weave the people into the culture – and I would add now, keeping their relationships in place – it can be quite effective. Some of the most effective companies – Google appears to be an example – do this informally. People who are hired by Google are often pulled from intertwined networks and groups that have worked together in the past. In fact, speaking of Google, if you look at the history of the company, the two founders started working together when they were doctoral students at Stanford, as did the founders of Yahoo! Paul Allen and Bill Gates met each other – and started working on computer stuff – in high school, as did Steve Wozniak and Steve Jobs.

Call it whatever you want, but as the war for talent seems to be heating up again, companies that fight it right will spend less time looking for solo stars and more time looking for dynamic duos, teams, and networks of people that have worked together in the past and want to work together more in the future.  And perhaps it is time for modern HR practices to catch-up with the evidence.

Comments

[anonymous]

Mr. Zhang's point seems to make it clear: people don't know how to build a new team from scratch, or even from existing individuals. Instead, they know how --whether through Providence, luck, or hard work--to keep an existing team together. And in a well functioning existing team, they've already weeded out the assholes, the slackers, and anyone else that didn't actually simplify or smooth the working relationship. Isn't that enough right there to show that teams priorly built outperform other groups, which may or may not succeed in creating a functioning team?

The value of a team is in its self selection.

[Erik Gordon]

Concerning the effects of importing a team, e.g., from GE, not just an individual leader, see the article by Christine Beckman in the Academy of Management Journal, Aug. 2006, Vol. 49, No. 4, at pp 741-758.

She says more or less that a team with a common company heritage is more likely to pursue exploitation (in the March sense), and that one with a more diverse heritage is more likely to pursue innovations (exploration).

[nraynaud]

Erik,

Often the HR doesn't have any mean to really select people on a skills basis, that's why in my company, screening is done by the team (actually, the team leader, and I fear the social cloning it might induce), HR is only involded with revenue negociation and other HR stuff after initial screening by the team.
We (the team that will work with the new mate) prefer spending time at recuiting than at other useless boring things like timesheets, mandatory useless meetings, vacation forms or other "necesary bureaucraty" that clutters productivity, reduce confidence in the team and give the work to people who don't benefit from it.

[Erik]

At the risk of offending the HR pros who have made insightful comments, I will say that I have favored having the teams that a candidate will join handle the hiring, at least after the HR people screen out applicants who lack the required technical skills or experience.

HR quickly leaves the process because it seems unlikely that HR people who juggle so much and work across so many teams can understand a particular team well enough to spot who is more likely to fit (in the sense of making significant contributions directly and by supporting team-mates making their own contributions).

This approach imposes a cost on the team. People are busy, but good teams know that they have something special and generally want to preserve that, so the investment of scarce time in earlier stages of the hiring / recruiting / welcoming process is worthwhile to a lot of team members.

Being a sort of generic "team player" is good but it's not sufficiently diagnostic when you want to predict how a person will do in this specific team. The best assessors of that fit seem more likely to be the team members than the HR professionals.

[John R. Atkins]

Lead on, Ally!

I would like nothing more than to do that, as well, but you must know from your own experiences that few companies want an HR department that does much more than reinforce the status quo. And perhaps the ultimate paradox of any “bottom-up movement” coming out of HR is that its leaders would likely find themselves being criticized for not being “team players.” That paradox is a function both of our powerlessness, as Bob mentioned in his comments, and our perhaps excessive eagerness to sit at the same table with senior executives. The challenge is to win acceptance and exercise real influence at the top of the organization without losing credibility with the larger employee population. Most HR departments are unable to pull this off – the result being a sort of general ineffectiveness at all levels of the organization.

I think the whole creaking edifice of the traditional “administrative model” of HR will eventually collapse on its own. The challenges employers increasingly face with disaffected and disengaged employees – the inevitable legacy of a few decades’ worth of stagnant wages, serial lay-offs, and so forth -- are not going away and my management team, at least, is beginning to understand that finding and keeping good people is among the most strategic issues it faces. “Revolution” is too strong a word for what will happen, but the changes that employers must make across all their “human capital management” programs will likely originate from executives like you who stand outside traditional HR but still appreciate that, as Tom Peters would say, “It’s the people, stupid.”

[Ally Polly]

So, let's do it!!
I'd love nothing more than to be a part of a team that revolutionizes HR. ( Those who know me will not be surprised at my eagerness, having spent the past 18 years calling myself a VP/Talent, having been loathe to be associated, even in "dotted-line reporting" status with the HR department)

[Bob Sutton]

You folks are both 100% on target. I agree that simply blaming standard HR practices without acknowledging that they reflect general cultural norms and, alas, the lack of power that HR has at times, was an unfair oversimplification. BUT I'd still argue that some companies do seem to get the teamwork and network thing better (even if they usually are not part of the HR system) than others -- P&G comes to mind immediately. I'd also argue that if a bottom-up movement started by some HR folks aimed at changing or at least questioning the practices, some progress would be made. On the whole though, you are right about the root cause and I appreciate your wise points.

[Michael D. Haberman, SPHR]

What an excellent article and series of comments. John Atkins makes an excellent point that our culture has long been a "star" culture. Sports, movies, TV, music and even business celebrates the star and seldom are there awards for the team, or at least those awards don't get the notority that the stars' awards get.

Jeffery Zhang makes the point that it is the "knowing-doing" gap. I consult and also teach HR and know from experience that although many organizations talk "team" few really know how to implement it.

And while HR should drive "teamwork" as a talent, the unfortunate truth is that in many organizations HR does not have the connection to strategy to even understand what they need to do promote teamwork, nor in many organizations do they have the power to dictate the direction away from the "star" as talent.

[Ally Polly]

It all goes back to Big Egos. I don't think the problem is HR as much as it is business leaders who want to give credit and take credit, or point blame. Having talented people work together as a group requires trust on the part of the employer - that they can succeed by being part of the whole, and not being the star. I don't think the problem is HR as much as it is about accountability and ownership. HR follows the lead of management, and as long as management is looking over their shoulder, it will always be about individuals and not about teams.

[John R. Atkins]

Bob,

It is not entirely fair to blame “standard HR practices” or “[HR’s] obsession with practices aimed at individuals” for the sorry state of teamwork in many (one is tempted to say “most”) American companies. This is what our companies expect us to do (and you and Jeffrey Pfeffer wrote compellingly about this in “The Half-Truths of Leadership’) – identify and “fast track” high-potential candidates, put them in to developmental roles, promote them aggressively, and then wait for the next Jack Welch to magically emerge ten years later. After all, this kind of hot-house cultivation likely worked out well for the current CEO, and his (and occasionally her) behavior by default becomes the successful leadership model for the rest of the organization.

This focus on the individual is deeply ingrained in American business because it is deeply ingrained in the culture. It was interesting watching our Ryder Cup, World Cup, and World Basketball teams all fail up to live up to expectations this past year despite the undeniable individual talent assembled on each squad. And even more interesting – and I apologize for all the references to sports – finally freed, it would seem, from having to carry the rest of the US squad on his back, Tiger Woods comes out a week or two later and annihilates the competition in his next tournament. That is what we like to see, and the majority of senior managers I have worked with are convinced that hiring and promoting is all about finding the next Tiger Woods – even if we mostly seem to end up with cubicles and conference rooms full of Terrell Owenses.

John R. Atkins

[Jeffery Zhang]

I think the problem with teamwork is the knowing-doing gap. Pretty much everyone knows that teamwork is important, but how do you achieve good teamwork?

I can't say I have ever been on a really great team in a serious endeavor in my life. I have seen great teams, and I admire them. I have also been on great teams for things like online computer games. So I know that it's a blast to be on a great team and good teamwork positively reinforces itself.

But it seems so random how great teams come about. Can I have great teamwork with anyone? Or do I have to pick the right people to work with first?

[nraynaud]

What about people really not able to teamwork effectively but with real abilities in the field ?

[Jan Barkhed]

Thank you. I have always suspected this. What I have seen in projects starts to make sense. It is very easy for managers to surround themselves with heroes, everybody profits on heroes, except the organization as a large. Is it not time to bring HR into this century, and align them with company strategies and customer needs? HR have their own agenda too often, and sometimes it's even political (like equality).

[Bob Sutton]

Great comments! And yes, teamwork is a talent. It is one of the main things we are trying to teach. And it isn't easy for a lot Stanford students to learn, having been solo academic stars for so many years.

[Valeria Maltoni]

Bob -
I was going to make the same comment Ann so aptly made. The context in which people operate matters a great deal.
Systems, processes and culture need to be designed and communicated for teams to thrive.

I am particularly keen on your point about leveraging the network people bring to bear on projects. Part of the strength of that is also the knowledge and influence that is behind members of the team -- even if those people are not physically part of the team.

Maybe they are partners who work outside the organization on projects for the organization. In some cases they may be members of the larger conversation, which includes customers.

Valeria

[Don Cox]

Patrick Lencioni has a related observation in the latest Table Group newsletter. He talks about being involved in selecting a team for a youth soccer league where he was looking for a different kind of talent than just individual domain skill.

What is problematic with conceptualizing teamwork as a talent?

I have a vague recollection of some research a long while back that looked a people who didn't seem to be superstars in terms of productivity but who had key roles in making the team effective.

[keith ray]

If a software company wants to hire a great team, I know four excellent programmers, who worked well as a team, who are looking for a gig.

[Bob Sutton]

Ann,
Your qualifying point is essential. Even the best team will be turned into a group of incompetent idiots in a bad system. Thanks for brining that up.

[ann michael]

Bob -

This is a very interesting point. I'm finding that I've actually stopped calling myself an independent consultant because so many of my prior team mates are out on their own as well.

I may not be part of a company, but I'm part of a proven team and when I can find work that brings in several of us together we're always more productive.

The only qualifying point I would make here is that the systems, processes, and culture in place in an organization also has a tremendous impact on how well a new hire (or I would suppose a newly hired team) will fare.

There was an article about that in HBR a while back - I'll have to see if I can find the reference.

Ann