Should bosses try to hold on to their star performers?
For most of corporate America, the question might seem like nonsense. Star performers are seen as so valuable that managers should pull out all the stops to keep them—or else see their companies take a big hit in productivity.
Yet some of the best managers not only allow their top performers to leave, but actively encourage it.
I’ve spent the past 10 years studying the world’s greatest bosses across 18 industries, luminaries such as Ralph Lauren in fashion, Julian Robertson in hedge funds, Norman Brinker in casual restaurants, Larry Ellison in technology, Michael Miles in packaged food, Jay Chiat in advertising and Tommy Frist Jr. in hospitals, to name a few. As I was surprised to discover, these extraordinary leaders achieved outstanding results in large part because they abandoned conventional thinking about keeping the best employees.
They weren’t afraid to lose their best people. On the contrary, most willingly unleashed their top performers onto the world, going out of their way to help them land outside opportunities. The leaders I studied built iconic businesses, transformed entire industries and in a number of instances became billionaires not by hoarding great people for themselves, but by mastering the flow of talent through their organizations.
Doing so will make an organization far more resilient, sustainable and successful over the long term. The talent-flow strategy is also better tailored to many of today’s abiding business realities, including volatile markets that demand more dynamic workforces; a generation of millennials less inclined to stick around for loyalty’s sake; and an entrepreneurial, gig economy that encourages frequent shifts in employment over the course of an individual’s career.
Not joined forever
The stories of these bosses reveal a crucial shared belief: You’re better off having the best people for a short time than average people forever.
The bosses were uncompromising when it came to recruiting. They didn’t want average; they wanted mind-blowing. They searched high and low for unusually talented individuals, often experimenting with nontraditional hires (and tolerating higher levels of churn when some of these hires didn’t work out).
But once unusually talented people were inside the organizations, the bosses accepted that some would leave. Top employees, the bosses realized, were almost always on a rapid growth trajectory. They were ultra-ambitious, perpetually angling for the next big opportunity, and it stood to reason that at least some of them would eventually need to leave the company to keep their careers moving ahead.
One leader told me that it was “normal” for people to want to pursue their own interests after a while: “We let these people go on an individual basis, and they left with their heads high and with great feelings toward us. It was probably the most successful thing we ever did.”
Another said: “You can’t keep good people down, and if they get a really good opportunity that you can’t match, it’s inevitable you’re going to lose them. But that’s the price you pay for having really outstanding people.”
Unlike most corporate chiefs, the bosses I studied were quite willing to pay that price. Exceptional talent, they thought, is well worth dealing with greater turnover. After all, these bosses were certainly not oblivious to the price of losing top talent.
As these bosses also understood, such turnover isn’t nearly as destructive as most managers think. When a stream of top performers go on to better things, the departures usually hasten the flow of more top talent into the company. Outstanding bosses who let their top talent leave developed reputations as launchpads; their companies were places to go to supercharge a career.
Working with the best
High-potential prospects began flocking to these bosses and not their competitors, eager for a chance to train with the best, build their résumé and partake of the bosses’ magic. Talented young people were so excited to work for these bosses that they even accepted below-market pay. Bosses such as Messrs. Chiat, Ellison and Lucas became widely known as “the guy” to work for in their industries because of all the prominent people who had come through their organizations and gone on to spectacular careers.
If the notion of being a talent magnet seems abstract compared with the tangible loss when a great person leaves, try a thought experiment. Imagine you have outstanding young people, each smarter and more creative and ambitious then the last, knocking on your door every day.
In that context, saying goodbye to some of your best people doesn’t seem especially risky, does it? On the contrary, it becomes desirable, since it makes room for more up-and-comers eager for their chance. In this scenario, your goal in managing talent is not to keep any one person, but to do what it takes to establish a strong talent flow, and to remove any impediments to that flow.
The bosses I studied also took advantage of a wonderful paradox: When you stop hoarding your people and focus on creating a talent flow, you find that more of your top people actually do wind up staying. Most people who worked for bosses like Messrs. Chiat, Brinker or Frist didn’t want to work for anybody else. Why would they? From the employee’s perspective, the environments these bosses created offered unique opportunities for excitement, innovation and advancement. It also offered the prestige of working at a top brand-name employer in the industry.
Alumni network
Another paradox was equally important: Top performers keep delivering benefits when they stop working for you. Great bosses get the most out of their talent flows by building networks of former employees. Although these networks help alumni build their careers, bosses also rely on them for business opportunities, information, vendor relationships and new recruits.
The very existence of these networks has value because it further cements the boss’s reputation as someone who can help foster a career, thus heightening the “talent magnet” effect. So, it’s no surprise that many of the bosses I studied helped their best people move on. As they intuitively understood, every star who left made the alumni network that much more powerful.
Consider one health-care star who left to found his own company. He told me that senior leaders at his company weren’t particularly upset or anxious about his decision. “They were all excited for me. They had a party the day we closed the deal.” That went for the top boss, too. He “was right there every step of the way, and he invested in the company. Without his support and guidance, I never could have made this happen.”
The star-turned-entrepreneur became an important part of his former boss’s network, and as his business grew, the former boss’s equity share grew as well.
Throughout his long career, in fact, that boss helped many protégés start their own businesses, sometimes investing in them or providing advice, other times arranging to buy products and services from them. Partly as a result, his company’s hometown is now the headquarters of hundreds of health-care firms, with the boss having some influence over, or a direct role in, the majority of them.
As an alumnus of that company told me, the company’s network remains vibrant, built on strong personal connections: “The social community around here, the arts, the various things that we do to support human-services organizations here…we all show up at the same places, and we all associate with each other.”
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The next time your top performer talks about leaving, what will you do? I suggest you follow the lead of the world’s greatest bosses and welcome it. Our people are our greatest assets, but not in the way we usually think. To win big, we can no longer afford to keep our best talent to ourselves. We have to be willing to lose it. Our talent will be better off, and so will we.
Dr. Finkelstein is the Steven Roth professor of management and director of the Tuck Center for Leadership at Dartmouth College, and the author of “Superbosses: How Exceptional Leaders Master the Flow of Talent.” He can be reached at reports@wsj.com.
