I have written about research on superstars by Harvard Business School's Boris Groysberg before, both here and in Hard Facts. He has complied compelling evidence from both investment analysts and GE senior executives suggesting that star employees are less “portable” than many executive search firms might lead you to believe. BUT as I’ve blogged about, if you are going to hire a star from another firm, their odds of success go up substantially if you take both the star and his or her team. Boris tells me that he is currently finishing a book on the topic, which I look forward to reading.
But this post is about The No Asshole Rule. Boris wrote me a pair of detailed notes about a series of case studies that he has done that track Lehman Brothers’ research department over a 20 year period. Boris reports that “the rule” helped fuel the rise of the research department there, and then when it was abandoned, was linked to performance problems, and when it was reinstated, performance again improved.
You can buy these case studies at www.hbsp.com. Here is a link to all of Boris’
Harvard Business School Press writings (his HBR articles are very thoughtful
too). I will order and read the cases. But here
is his summary of the power of the no asshole rule from the four cases that
Boris and his collagues wrote:
In the “Lehman Brothers: Rise of
the equity research Department” case (the A case), Rivkin was emphatic about
who he would not hire. “I have a ‘no jerk’ policy,” he declared. “No matter how
good an analyst may be, given the structure we are trying to create here I am
not going to bring a jerk into the department. To me, a jerk is someone
difficult to manage, marching to his own drummer, not interested in what was
going on within the department and within the firm. We are just not going to
have people like that here.” Recalled
Balog, former star analyst and associate research head, “Jack was very clear in
telling us that life’s too short to have prima donnas in the department even if
they were number one ranked people. We wanted people that were well rounded and
could have fun with others.”
As one after another analysts attested,
they loved working there under Jack Rivkin and Fred Fraenkel, and many passed
up attractive offers to stay at a firm where their performance was supported in
every conceivable way, and to be part of something they valued. “The research
directors of other Wall Street firms were flabbergasted,” Fraenkel recalled.
“Our people . . . were better analysts than they would be somewhere else
because of the people in their team helping them and giving them insights into
their industry. Our competitors were offering them jobs with hundreds of
thousands of dollars more salary, yet they didn’t find it worthwhile to
dislodge from what they had here.”
Under Rifkin and Fraenkel, Lehman’s research department achieved high performance with a budget considerably smaller than that of Merrill Lynch and Goldman Sachs. (In 1992, Lehman’s research department budget was about $70 million, compared with Goldman’s $105 million and Merrill’s $125 million.) This is a phenomenon known in the department as “the Jack Rivkin discount.” Also, the Lehman A case tracks the turnover statistics which are significantly lower than the industry. The quotes and numbers are from the Lehman Brothers A-D cases.
Boris wrote me a second email that further documents the
power of the no asshole rule in another firm:
In our study of research departments, a
number of firms had “no-asshole” rule as an important organizational practice.
So you are capturing something that more and more managers are explicitly
thinking about and advocating. Let me offer you another example. In our study
of research departments between 1988 and 1996, Ashish Nanda and I found that
star analysts had 11.8 percent turnover rate, however, there were big
differences by firms. More remarkably, Schroeder Wertheim lost only two ranked
analysts over the course of nine years, for a total star turnover rate of about
2 percent (the lowest turnover rate).
Attached is an excerpt from my interview with Barry Tarasoff, research director at Schroder Wertheim, who elaborated on the strategy that he took, which resulted in the lowest star turnover rate in the industry from 1988 to 1996. “There isn’t any one magic potion. But the number-one thing—I called it Tarasoff’s First Principle—was ‘no assholes.’ When we recruited, we made an enormous attempt to bring in reasonable people. So we had a group of people that liked each other a great deal. Number two, we had a distinctive culture that you could never export to another firm.” The “no-asshole rule” was able to contain turnover.
Thank you Boris! This is great stuff. I continue to be surprised how many firms have
explicit “No Asshole” rules. In fact, I visited SuccessFactors
last week and will be writing more about their “no assholes” rule and how it is
woven together with 12 other “rules of engagement” such as transparency and
teamwork. CEO Lars Dalgaard has built an impressive culture – energetic,
performance-driven, and refreshingly free of bullshit. I especially love has
last rule for all employees (including himself) ‘I
will be a good person to work with – Not territorial, not be a jerk, and as
Lars says often “it’s OK to have an asshole – just don’t be one”’ Now
that is my kind of workplace!
"We wanted people that were well rounded and could have fun with others." Umm, that's a far cry from simply don't be a jerk. This is something I struggle with; at my last job I felt really out of place in terms of my hobbies and interests. I tended to eat healthier (home-made lunches, salads vs. the local pub); I didn't go to happy hour. In a shared-work context I think I could have fun with others, though not when the fun was a kind of snark. I came from a more PC environment; that seems like a problem, that was de-energizes one person is just harmless teasing to another. Does that make it a jerk-infested workplace, or does that make me hard to manage?
Posted by: RG | October 13, 2009 at 06:18 AM
It'll sell a million copies just on title. See you on "Oprah". I'd just hate to have to handle the paper used during the litmus test of determining who is and who isn't. We might be @ 50/50.
Posted by: john | December 30, 2006 at 09:24 PM
Bob - great post, thanks for sharing it with us and thanks to Boris for what had to be a long, hard pull on an intuitively appealing but hard to sell notion. A story there I'll bet. Speaking of which the no-A rule is intuitive because it's widespread experience but to have hard data begin to accumulate changes it into a business case argument. Judging by the responses to the book and to this site you've hit a sweetspot indeed. The question that then needs to be asked, and a lot of us need to ask it, is what then ? How can we implment it ? And get it pushed thru, supported and sustained ?
Dave Livingston
Posted by: dblwyo | December 28, 2006 at 05:42 AM