Christmas was a bummer,” says my friend Dave (not his real name), president of the retail business started by his father half a century ago.
“Remember our finance vice president Pete? We got him from a multinational in 2016 because we wanted to try our hand at pawnshops, maybe insurance, so we needed a finance head.
“Pete was the highest-paid in our company, matching my salary, with more benefits. His resumé was excellent; we had high hopes. Pete created programs, invested in IT, hired consultants.
“But he achieved nothing! Dad wanted him fired. Pete knew what was coming and resigned before Christmas. Good riddance, but we had to give him a huge exit bonus, even if he does not deserve it.
“Sadly, he left no replacement. We have to work double time to handle what used to be his responsibility. Susan, our accounting head, canceled her leave to help out.
“Do you know of anyone we can pirate to take Pete’s place?”
I sigh. Dave and his father are entrepreneurs with dreams of expanding their business. Pete is not the first executive they have poached over the years: four human resources heads, three marketing heads, two operations heads.
The latest marketing and operations heads appear to be doing well, though Dave still has to often “babysit” them. Everyone else has left, all with large exit packages, and up to now, HR still reports to—you guessed it—Dave himself.
The family business is more than 50 years old, with double the number of employees, a third of whom have been working with them since the start. Loyal to the patriarch, they have watched Dave and his siblings grow up, and are now his most trusted employees.
“Why don’t you choose from among your best people, in-house?” I ask.
“They don’t have the expertise,” Dave says.
“Susan,” I say. Street smart, Susan was in the top 20 in the licensure exam. Through the years, she has saved the business a lot of money, making her the favorite of the patriarch.
“Susan is my age. We need someone younger to start the pawnshop or insurance enterprise. She has too many things to do already.”
“Susan has more energy than you,” I say. “She may not yet have the specific expertise in insurance, but send her to workshops. She is a quick study, and can work with your consultants. It’s also about time for her to delegate responsibilities to her team.
“You say Susan is taking on Pete’s tasks?
“It’s just temporary till we—”
I cut him off, pointing him to Wired editor Bryan Gardiner’s July 2016 article “Blinded by the Light.”
“Companies are better served when they double down on cultivating in-house talent,” says Gardiner. “Sure, superstar workers [hired from outside] exist…They can be extremely productive and beneficial to a company’s bottom line. But their stardom is frequently context-specific, and it doesn’t always survive the transfer.
“When Harvard Business School professor Boris Groysberg looked at the talent portability of 1,052 rock-star financial analysts, he found that about half did poorly in the year following their switch. And those whose work suffered never recovered.”
Gardiner gives examples of highly paid poached talent who did not deliver: Ron Johnson of Apple became CEO of JCPenny, but when shares fell by more than 50 percent, he was fired 17 months later. Marissa Meyer of Google became head of Yahoo, but could not stop the latter’s hemorrhage.
G. Richard Thoman of IBM became CEO of Xerox, but the board fired him after only 13 months. The board chair became interim CEO, telling the New York Times, “We have not and are not going to look outside for the next CEO.”
Thoman himself agreed that “it made more sense to implement our strategy with an internal team.”
“This new year, instead of pirating from the outside, use your resources to develop in-house talent,” I tell Dave. “Start with Susan.”