How do companies hang on to high performers? If the competition really wants to poach your brightest people, throwing money at the problem will only go so far
There's probably no single individual employee who wields more bargaining power than Jonathan Ive. With Steve Jobs, the creative genius behind the resurgence of Apple on medical leave, the Englishman credited with the ultra-sleek design of the iPod, the iPhone and the iPad may well be vital to the continued success of the company.
But while Ive is in an enviable position, Apple's plight is worrying. By placing so much responsibility on one person it appears to have created a colossal hostage to fortune. And the tech giant is not alone. The corporate world is awash with high-performing stars who almost transcend the organisations that pay their salaries. So why do businesses allow this to happen? And once it does, what is the best way to proceed?
At this point, it's worth making a distinction between large process-driven multinationals such as Johnson & Johnson and more people-facing businesses such as advertising agencies, law firms and investment banks.
The former tend to employ people who are happy to make their way up the corporate ladder and lack entrepreneurial ambitions. The latter type of company has a more challenging task. In worlds where the key to client retention is to cultivate close ties with the people responsible for buying services, the employer is constantly vulnerable to a breakaway.
In the case of an organisation such as Johnson & Johnson the management's challenge is to identify the stars of the future at an early stage and nurture their careers so that if a senior executive retires or is poached there is a supply of replacements in the pipeline.
At Johnson & Johnson, stars of the future are known as "high potentials" and they are enrolled in the company's LEAD programme for fear that they will not be stretched in their current roles or hoarded by their line manager, who may be afraid of their talents being recognised and losing them as a consequence.
Candidates are picked on the basis that they have the potential to run a business unit within the next three years. They are then asked to develop a product, service or business model and their progress is assessed at a leadership conference held in a developing market such as China, India or Brazil to extend their global knowledge. At the end of nine months participants leave the programme with a multi-year individual development plan and are periodically reviewed by senior human resources executives.
Johnson & Johnson is not alone in adopting a hot-housing approach for high performers. Hewlett-Packard has its Key Talent Program, British Airways runs Leaders for Business and Lord Bell's Chime Communications group offers a scheme called the Chime 100 Club.
Management specialists Jean Martin and Conrad Schmidt of the Washington DC-based Corporate Executive Board sound a note of caution. In an article for the Harvard Business Review, they say that not all high performers should be seen as high potentials. Martin and Schmidt say that 70 per cent don't have what it takes to reach the top. They break down those set to fail into three categories: engaged dreamers, disengaged stars and misaligned stars (see panel).
Professional services companies, where employees have a high degree of client-facing exposure and a greater propensity to defect, may have less of a problem identifying winners and more of an issue with holding on to them. One solution is to invest in so-called "intrapreneurs". These are people who occupy a halfway house between conventional salaried employment and running their own businesses.
The employer identifies individuals who might leave to set up on their own and offers them the backing to pursue their dreams but with less of the downside and, of course, less of the upside. And so while the employer/investor takes care of costs such as seed capital, office space and overheads, the employee, or entrepreneur, is given a stake in the business.
Another solution is more straightforward. Dr Mark Batey, a lecturer in organisational psychology at Manchester Business School, says: "Companies need flexible, innovative and creative people who can solve problems but if they feel like a cog in a machine and can't express themselves, they will quickly switch off."
Turning on the money tap is by no means the only answer. "In terms of retaining talent, a lot of the research says that one of the key aspects is that people want to continue to develop and grow, and organisations that cut back on training tend to lose people," Batey adds.
"It's not just about technical and leadership training, there is a growing demand for creativity training. At the team level, people are looking for a supportive group around them. The role of the organisation is to build an effective, high-performing team where people feel they belong but which also gives them the freedom and autonomy to express themselves and fulfil themselves."
The danger of not offering these sorts of opportunities was vividly illustrated by the experience of a firm of commercial lawyers familiar to Batey. "There's a law firm in the north-west, which started a management development programme for their senior partners to develop their leadership capabilities," he says. "They showed genuine enthusiasm and interest but the people at the top were not interested in making any changes. It was a complete waste of time and eight or nine lawyers left to work for competitors."
But while companies fret over how to keep their top talent happy, at least one influential study questions to what extent high performers benefit themselves by switching employers.
Last year, Boris Groysberg, an associate professor at Harvard Business School, published Chasing Stars: The Myth of Talent and the Portability of Performance, a study based on an analysis of the careers of 1,053 top analysts at 78 investment banks between 1988 and 1996. His team looked at 546 job changes and compared the stars' performance with that of 20,000 "non-star" analysts in about 400 investment banks. In focusing on analysts, Groysberg chose his sample group well, believes Michael Skutinsky, a former research executive for Paine Webber, Lehman Brothers and Salomon Smith Barney. "Managing a research department is like managing a movie set with 100 Jack Nicholsons," he says.
Ego did not translate into performance, though. Groysberg writes: "Star equity analysts who switched employers paid a high price for jumping ship. Overall, their job performance plunged and continued to suffer for at least five years after moving to a new firm."
Groysberg attributes this sharp dip in performance to the loss of a support system that had, in many cases, been built up and honed over a number of years. "An analyst who left a firm where he or she achieved stardom lost access to colleagues, team-mates and internal networks that can take years to develop... new and unfamiliar ways of doing things took the place of routines, procedures and systems that over time had become second nature," he adds.
In such a context, Groysberg argues, the answer may be to stage what he calls a "liftout", which involves hiring an entire team rather than one individual. But not all such defections go without a hitch. When City inter-dealer broker BGC Partners poached Anthony Verrier and a team of 13 brokers from rival Tullett Prebon in 2008, it found itself at the wrong end of a claim for damages. Three of the team subsequently thought better of the switch and stayed with Tullett and BGC was found guilty of inducing the others to break their contracts. In February, the Court of Appeal dismissed BGC's appeal against the ruling, paving the way for a damages claim.
In the City, filthy lucre all too often turns out to be the catalyst for a move but there are other factors to be considered. As long ago as 1959, when Frederick Herzberg wrote The Motivation to Work, management theorists have understood that there is more to keeping people happy than salary and conditions and their relationship with the boss. Herzberg identified issues such as achievement, recognition and growth. The latter is a particular issue at the moment as companies try to bounce back from the downturn.
In their book, Clever: Leading Your Smartest, Most Creative People, Rob Goffee and Gareth Jones quote an HR director as saying: "I am a master of the dark [financial] arts of retention... Let me tell you, none of these will work if the competition really wants your people. On the contrary, they will only stay if you can offer them a great place in which to express their cleverness and other clever people to work with."
Meanwhile, Apple appears to be taking the old-fashioned approach to the question of how to hang on to its star designer: it is throwing money at the problem. At about the same time as the company launched the iPad2 in March, Ive banked a windfall payment of £18m thanks to a golden-handcuffs deal he had struck three years earlier. While this is said to take his personal fortune to more than £80m, there have been reports that, much to the dislike of the Apple board, he would like to spend more time at his Georgian manor house in Somerset and commute to Silicon Valley as necessary.
As Apple agonises over Ive's position and the Jobs succession issue, Stefan Stern, director of strategy at public relations firm Edelman, has some words of consolation: "In the high-pressure world of knowledge workers, teams matter more than individuals. And few individuals should ever delude themselves that their great achievements are down to them alone."
Dreamers and falling stars
Jean Martin and Conrad Schmidt of the Washington
DC-based Corporate Executive Board identify three types of outstanding performers who will ultimately fail:
... have two of the three qualities that Martin and Schmidt deem necessary for success—engagement and aspiration—but lack the ability to make it to the next level.
... show ability and aspiration but are insufficiently committed to the organisation to be good long-term bets. The good news, however, is that they may respond to treatment if the company identifies the problem and acts upon it soon enough.
... are in many ways the most forlorn figures. They have the ability and engagement but lack the aspiration to make it to the next level, either because they are simply not ambitious or because they are not prepared to make the sacrifices necessary to take on more critical responsibilities.