By Francesca Gino, Harvard Business School
Taibbi and other journalists who came to First Look believed they were joining a free-wheeling, autonomous, and unstructured institution. What they found instead was a confounding array of rules, structures, and systems imposed by [founder Pierre] Omidyar and other First Look managers…
So what happened? All organizations look for the best talent and try hard to retain it. Could it be that First Look Media had too much talent?
In fact, recent research has found that a high level of talent can damage overall performance in team settings. One study using data from sport teams found that a team with a number of dominant, high-achieving individuals is susceptible to hierarchical disputes and deteriorating performance. More specifically, using data on team performance in both basketball and soccer, the researchers found that once the ratio of elite to non-elite players surpassed approximately 2:1, teams’ results began to diminish.
The negative effects of too much talent seem to extend beyond sports – and even beyond our species. As we might guess from its name, the concept of “pecking order” influences the productivity of chickens: a 1996 poultry science study found that keeping too many high-egg-producing chickens in a colony actually reduced the colony’s total egg production.
So, bringing together the most talented individuals (whether they’re chickens or basketball stars) might not necessarily yield the best results.
Now let’s consider another milieu: Wall Street firms. Analysts who work for these firms specialize in particular industries and write reports about the current and expected performance of companies. Their reports predict companies’ future earnings and include recommendations about whether to buy or sell stocks. The publication Institutional Investor designates some of these analysts as “stars” – employees who are among the top in their industry. To the individual analyst, being picked as a star is worth hundreds of thousands of dollars in annual compensation.
But how do these stars impact their employers? Harvard Business School’s Boris Groysberg and his colleagues examined this question by studying over 6,000 industry analysts from 246 research departments in Wall Street firms. They found that having a few stars helps a firm and that having a few more doesn’t hurt or help. But at a certain tipping point, having too many stars dampens a firm’s performance.
In other words, in both Wall Street firms and sports teams, there is a curvilinear relationship between the number of stars in the group and their overall performance. When a group is filled with stars, group dynamics degenerate because members spend too much time competing for status. For example, they hold back information that could help the group as a whole but threaten their own standing. When a group has too many stars, members focus on what is best for themselves, view other top performers as obstacles rather than collaborators, and don’t work hard enough to help the team achieve.
It would be easy to conclude from this research that organizations should prioritize creating a balanced team and stable hierarchy over pursuing top talent. Yet some very successful organizations do not experience the potential negative consequences of too much talent, in part because they remove one of its root causes: the presence of hierarchy.
Take the case of Valve Corporation, a video-gaming company based in Bellevue, Washington, that my colleagues and I had the opportunity to study and write about. Founded in 1996 by former Microsoft employees Gabe Newell and Mike Harrington, Valve is the maker of the video game Half-Life and the social-distribution network Steam. A private firm, Valve claims it makes a lot of money: according to its handbook for new employees, its profitability per employee is higher than that of Google, Amazon, or Microsoft. The handbook also presents the company’s position on organizational hierarchy:
The Hierarchy is great for maintaining predictability and repeatability. It simplifies planning and makes it easier to control a large group of people from the top down, which is why military organizations rely on it so heavily. When you’re an entertainment company that’s spent the last decade going out of its way to recruit the most intelligent, innovative, talented people on Earth, telling them to sit at a desk and do what they’re told obliterates 99 percent of their value. Maybe it’s too much to ask the rigid hierarchies at other development houses to drastically shift to this free-loving hippie way of conducting business, but it shouldn’t be too much for those companies to treat their employees like adults. After all, hiring someone is a sign of trust. Extend that trust to every aspect of the position.
As the handbook explains, all of Valve’s employees are free to decide which project they should be working on: “This company is yours to steer. Toward opportunities and away from risks. You have the power to green-light projects. You have the power to ship products.”
Other companies utilize a similar strategy. One of them is Morning Star – the world’s largest tomato processor – where employees make all the decisions, like choosing which projects take on, and hold their peers accountable.
If an organization can remove root causes – which can include eliminating stifling hierarchies – it can avoid the dysfunctional behavior caused by the presence of too many cooks who could spoil the broth. As the cases of Valve and Morning Star demonstrate, when you give freedom to talented people (no matter how many there are), you give them opportunities to reach their full potential.
And perhaps if Taibbi and his peers were given the creative freedom they’d been promised, First Look Media wouldn’t be in the mess it’s in.
Francesca Gino does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.