THE RISKY BUSINESS OF HIRING

STARS
GROUP-9
ANKUR TYAGI, 1614015
RAGHVENDRA SHARMA, 1614043
REJEESH RAJENDRAN, 1614047
RIMA BOSE, 1614048
SREEJITH SATHEESH, 1614059

STARS AND COMETS

How many of you consider yourself to be stars in your company?
How many want to manage star employees?
What defines a star employee:
Industry Expert
Dynamic
Charismatic
Brainy

Ambitious

RESEARCH
1052 star stock analysts across 78 investment banks in the United States
- Competitive, high profile, highly paid group, earning $2 million to $5 million a year
- Ranked by Institutional Investor as one of the best in the industry
- Generate more accurate and more frequent forecasts, their reports have bigger impact
on stock prices
- Most companies believed that performance of star analysts, depended on their talent
- Stars dont change sectors when changing organisations, their customers dont
change
- Most analysts lived in New York and did not change their location when switching
jobs.
Studies of 24 investment banks, 167 hours of interview with 86 stock analysts
Having discounted other factors that could have affected the star analysts performance,
the change in organisational setting was accepted as the reason for the change.

WHEN COMPANIES HIRE STARS

The stars performance plunges
Performance plummeted by an average of 20% and had not climbed back to old
levels even five later
There is sharp decline in the functioning of the group or team the person works with
The morale of the people is hurt; results in interpersonal conflict and breakdown of
communication.
The companys market value falls

COMPANYS VALUATION
SUFFERS
In 1994, every hiring announcement by Bear Stearns, Merrill Lynch, and Salomon
Brothers resulted in a fall in their stock prices.
Investors believe- Stars are overpaid while being hired
- They leave when they are near the peak and performance will decline when they join
new firm
- Their recruitment will be followed by hiring spree by the company, and the company
will overpay new recruits
EffectThe stock market anticipates companys wage bill in future and pulls its share price
down.

CHALLENGES IN A NEW
ENVIRONMENT
Attitude of colleagues resentful of rainmaker
Other managers avoid newcomer
Cut off information
Refuse to cooperate
- Once stars start changing jobs, they keep moving to the highest bidder instead of
allowing employers to build businesses around them.
- Every additional job increased the probability of an individuals leaving.

FACTORS LEADING TO STAR

COMPANY SPECIFIC FACTORS

Systems and processes of the organisation

Personalities, relationship, and subcultures of the organisation
Internal networks
Training

PERSONAL FACTORS
Personal competencies and capabilities
Innate abilities
Education social network

Drivers of Star Performance

Andriy Shevchenko

Fernando Torres

Kaka

Transfer Fee - 30.8m (2006)

Transfer Fee - 50m (2011)

Transfer Fee - 56m (2009)

League matches:127 goals in 208 (AC Milan)

9 goals in 48 (Chelsea)

League matches:65 goals in 102 (Liverpool)

20 goals in 110 (Chelsea)

League matches:70 goals in 193 (AC Milan)

23 goals in 85 (Real Madrid)

Drivers of Star Performance

What are the factors contributing to Performance
- It isn't just the people that make organizations perform better, the organization also
make people perform better.
- Research study on the performance of 2086 fund managers between 1992-98
-

30% of funds performance attributed to individual

70% was due to the managers institution
Stars who moved from big to small firms -> Performance drop
Stars who moved between similar firms -> Performance drop for 2 yrs, 3 rd year same as others
Stars who moved from small to big firms -> Performance didnt drop but same as before
Stars who brought with them teams performed better than those who moved solo

Individual factors :1. Innate abilities

2. Education (Professional training)
3. Persons external social network

Drivers of Star Performance

Company Specific factors
Resources and Capabilities

Systems and Processes

Relationships across functions and disciplines help deliver better results

Training

Bosses give talented employees the resources and support needed to become stars

Internal Networks

Corporate procedures and routines contribute to individuals success

Leadership

The companies resources allow stars to do the things that really matter

In-house training helps employees perform better within the organization

Lehman Brothers 13 week training to structure and format reports termed as rocket that took
them to stardom

Teams

Quality of coworkers

Drivers of Star Performance

Other Factors
- Companies may have all the resources but executives forget that every organization
works differently
-

Imported stars need to build trust with people before the systems begins to work for
them

More important to grow star, even though the process is time consuming, expensive,
risky

Not only do homegrown stars tend to outperform imported stars, they are also loyal

How Companies Grow Stars

How Companies Grow Stars - Hiring

How Companies Grow Stars - Hiring

The Magic Bullet

Are you
Difficult to manage?
Marching to your own tune?
Not interested in the affairs of the department and
the firm?
No Jerks Policy.
A million dollars well spent!

How Companies Grow Stars - Training

Lehmann Brothers

How Companies Grow Stars - Retaining

Encourage to broaden skill bases

Speak on behalf of company at conferences
Develop relationship with clients
Flexibility to ease work/life tension

Sense of Achievement and Public Recognition

25 to 30% less salary than rivals!!

If You Must Hire Stars When?

If You Must Hire Stars Who?

Attribute Fit
Stars from similar firms
Performance driven by general skills

If You Must Hire Stars How?

Draw up detailed plans to assimilate
Collect great deal of information
Consult with other functions
Build a presence in the stars area of expertise
Design long term- performance goals
Deal to be structured to reward star performance and
help co-workers with her entry Strike a balanced
compensation structure
Never forget existing stars offer similar compensation

The Difference

1 in 5 Home grown star analysts in Sanford

Bernstein
1 in 30 in Merrill Lynch
First Step to winning the war on Talent is not
to hire but to grow them

THANK
YOU