In 2014, journalist Matt Taibbi resigned from First Look Media, at the time a fledgling news organization only 10 months old. According to news reports, 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.
First Look Media was announced in October 2013 to much fanfare, with Omidyar pledging to invest $250 million in the company and recruit the industry’s top journalists.
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?
Recent research has found that a high level of talent can damage overall performance in team settings. One study using data from sports teams found that a team with several 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 to 1, a team’s results began to diminish.
Let’s consider Wall Street firms. Analysts who work for these firms predict companies’ future earnings and recommend whether to buy or sell shares. The publication Institutional Investor designates some analysts as “stars” – employees who are among the top in their industry. 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 studied more than 6,000 industry analysts from 246 research departments in Wall Street firms. They found that having a few stars helps a firm. But at a certain point, having too many stars dampens a firm’s performance.
In other words, 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. They hold back information that could help the group but threaten their own standing. Members don’t view other top performers as collaborators and don’t work hard enough to help the team achieve.
It would be easy to conclude that organizations should prioritize creating a balanced team and stable hierarchy over pursuing top talent. Yet some very successful organizations do not experience the negative consequences of too much talent, in part because they remove a root cause: the presence of hierarchy.
Take the case of Valve Corp., a video game company founded in 1996. 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:
Hierarchy simplifies planning and makes it easier to control a large group of people from the top down. When you’re an entertainment company that’s recruited the most intelligent, innovative people, telling them to do what they’re told obliterates 99% of their value.
As the handbook explains, 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.
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.
When you give freedom to talented people, you give them opportunities to reach their full potential.
Francesca Gino is a professor of business administration at Harvard University. Distributed by The Associated Press.
