Same Person, New Company: Why Performance Doesn't Travel

A track record is produced by a person and a place together, and hiring usually credits all of it to the person. The standard brief for a Japan launch says "find someone who has done this before in a similar market." Harvard's Boris Groysberg followed more than a thousand star Wall Street analysts through job changes. Their performance dropped as soon as they moved, and it stayed down for at least five years. They were the same people with the same skills. What changed was everything around them.

What happened to star analysts who changed firms?

Their performance fell at once and stayed lower for years. Groysberg, Ashish Nanda and Nitin Nohria described the research in Harvard Business Review in 2004, drawing on more than a thousand star equity analysts. The full analysis, by Groysberg, Linda-Eling Lee and Nanda, appeared in Management Science in 2008 and uses data from 1988 to 1996. It reports an immediate decline that persisted for at least five years.

I think analysts were the hardest test the authors could have picked. The job looks perfectly portable. You cover the same stocks and call the same fund managers. Only the business card changes. If that job does not travel whole, a sales head or a country manager has little chance.

The hiring firms did not win either. The same paper reports that the stock market reacted negatively when a firm hired a star, and more sharply when the star came from a competitor with stronger capabilities. The authors suggest investors may see such hires as value destroying.

The drop depended on what moved with them

The 2008 paper splits the moves by condition, and the result is the useful part. Stars who moved with teammates, or to a firm with stronger capabilities, showed no significant decline. Stars who moved alone, or to a weaker firm, fell the furthest.

How long a star's performance stays down after a move depends on who came along and where they landed

Star Wall Street equity analysts, 1988 to 1996. Length of time performance stayed below the pre-move level. Bars are in years, full width is 5 years. Groysberg, Lee and Nanda (2008), Management Science

• All stars who movedworst for solo moves and moves to weaker firms
  5+ years
• To a firm of equal capability
  About 2 years
• To a firm with stronger capabilities
  No significant drop
• Moved with teammates
  No significant drop

Part of the performance lives in colleagues and in the firm. When the person leaves, that part stays behind.

Read the two exceptions together. My reading is that teammates mattered because some of a star's output was sitting in other people, such as whoever ran the numbers or set up the client meetings. The stronger firm mattered because some of it was sitting in the platform. The authors conclude that star performance draws on skills that only work inside one firm and on the capabilities of the firm itself.

Surgeons show the same thing

Analysts could be a special case, so here is a field far from finance. Robert Huckman and Gary Pisano studied coronary bypass surgery in Pennsylvania in 1994 and 1995: 203 surgeons, 43 hospitals, more than 38,000 procedures. American cardiac surgeons often operate at several hospitals in the same year, which makes a clean comparison possible.

A surgeon's results at a given hospital improved with the number of operations done at that hospital. In the 2003 working paper's estimate, one standard deviation more cases there went with a 0.34 percentage point drop in predicted mortality, an 18.9% reduction. Cases the same surgeon did at other hospitals in the same year barely helped: about 0.01 points, statistically insignificant.

The hands, the year and the procedure were all the same. Some of the skill had been built with one hospital's anesthetists, nurses and routines, and it did not leave the building.

A miss I saw

I have seen this go wrong with a leader hired for a new team. It was a new market and a new customer segment, and he had succeeded in a similar setting before. After he joined, nothing worked. A month in he had no assumptions about the task and no new moves. He had ideas on specific problems, but they did not land, and there was no overall direction. Looking back, the things the environment had supplied in his earlier success were the product and the brand.

In the four layers I use to read people, this is the fourth one. Core, Patterns and Equipment belong to the person. Context belongs to the combination of person and setting: the boss, the team, the stage the company is in. Skip that layer and you cannot tell "this person is no good" from "this person is no good in this seat."

"Similar setting" is a comforting phrase. The market looks alike, the customers look alike, and the resume reads like the same job. But as I see it, when the product already sells and the brand is already known, the leader's job is to scale. When neither exists, the job is to find the first few customers from nothing. I would treat those as two different jobs, and I think a Japan launch is usually the second one.

Put both sets of conditions on one page

In the interview, list the conditions behind the last success and the conditions you can offer this time, and compare them line by line. The more lines that fail to match, the less that experience counts as the same kind.

The left column is the candidate's last situation. How finished was the product? Did customers know the brand? Who opened the accounts and channels? Was the team already there? Who paid for budget and tools? How did the boss make decisions? What stage was the company in? Each line gets one question: who provided that? I covered the questioning itself in "It was all me": finding what a candidate really did.

The right column is yours, and it is the harder one to fill in honestly. Nobody in Japan has heard of the company. The product has not been localized. The team starts as one person. Companies sell themselves in interviews too, so this column tends to stay blank.

A mismatch is no reason to walk away. In Groysberg's data, people who moved with teammates or into stronger firms held their level. So the employer has two moves. One is to supply some of the missing conditions: let the hire bring one or two people, or put the missing function in place first. The other is to write the expectations and the ramp for your conditions, and leave the previous employer's scorecard out of it. The same logic applies to internal promotions, which I wrote about in Don't promote your best salesperson to country manager.

So when headquarters says "she did exactly this at her last company," the question I would send back is short. Which parts of "this" are we able to give her here?

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