Book Notes: Chasing Stars by Boris Groysberg

You should read it - it's probably one of the best career books I've read, and a good counterargument to the bad advice that seems to be circulating, especially in tech circles, that people should change jobs every 2-3 years to maximize salary.

Chasing Stars studies Wall Street financial analysts, who make interesting subjects for study because they're actually ranked according to their job "performance" by the Institutional Investor magazine, among others. The book finds that when a star analyst takes a new job, her performance declines significantly for up to five years following the move.

Why does performance suffer after taking a new job?

We tend to think of ourselves as free-agents with portable skills that we can directly transfer from company to company. If I'm a web developer at one company, I should be able to jump to another company and use my same web developer skills there, right? After all, JavaScript is still JavaScript, regardless of where you are.

Well, it's not that simple - think of human capital as either portable or non-portable. Portable skills are those you can transfer from company to company: how to write code, how to build a valuation model for a company, how to read a balance sheet, etc. Non-portable resources and knowledge you can't take with you when you leave: the people supporting you, internal networks, the processes the company had in place to help you succeed, your knowledge of the inner workings of that company, and experience that has no value at another company.

Not surprisingly... most people overvalue their own contributions to their job performance and undervalue the company's contributions. Meaning, people tend to think of their performance as a result of their own, portable skills (like how to value a stock) and they don't give enough credit to the internal resources in place to help them do their work: the junior analyst supporting them, the internal tools and processes employees use during their day-to-day work, the culture that fosters collaboration and growth, or the people removing barriers to execution.

When you leave a company, you leave all these resources behind and have to relearn how to get work done within your new company's processes. So, it makes sense that the analysts who moved to companies with equal or greater resources fared the best after the move.

I see productivity as a sigmoid-shaped performance curve based on time in your role.

When you're first onboarded at a company, you're mostly unproductive, working on small tasks while you get up to speed. Then, as you learn the domain, the people, and how the company works, you move up the curve and are able to contribute at a higher level.

From what I've seen from others and experienced myself, I would be pretty surprised to see a software engineer contribute at a "star" level before 12-18 months, regardless of seniority. If we take the "change jobs every 2 years" advice, we'd spend most of our careers onboarding instead of contributing - definitely not a good long-term strategy for a career (unless that is your strategy - say, if you wanted to make a career out of bouncing around from company to company to meet new people, work on new projects, or live in a different place every few years, which is great if that's your goal).

What does this all mean for changing jobs?

Well, it certainly indicates that we should be more thoughtful about taking a new position.

Often, the analysts who took a new job did it for a large pay increase, but did so at the detriment to their ranking. Ultimately, they achieved the short-term benefit of a salary increase, but took a long-term hit to their performance from having to start again at a new firm or from moving to a position where they wouldn't perform as well (or both).

The analysts who jumped from companies with a lot of resources (top-tier financial firms) to those with fewer were the ones who experienced the biggest decline in performance. Think about the talented junior analysts, process, and culture that is already setup at a well-resourced firm, and realize that you may or may not have all that at your new company.

Conversely, the analysts who fared the best when changing jobs were those who went to a higher-tier, better-resourced firm than their current one.

Should I avoid changing jobs?

No, of course you can change jobs, and there are lots of reasons to. Sometimes you may find yourself at a company where you are not supported, promoted, or given opportunities to grow, or you might want to try something else. But when taking a new job, think strategically rather than tactically, and scrutinize the opportunity on more than just compensation. And make sure the benefits of the move outweigh the long-term damage done to performance from starting again at a new company.

An interesting note was that female stars tended to perform better in the years after a move than their male counterparts. The author made the point that male stars tended to focus solely on compensation, whereas women much more carefully scrutinized a potential job change to evaluate whether they would be supported in the new position:

• Were there other female role models?

• Would the department be receptive to their individual style, personality, and method of distinguishing themselves?

• Was there a transparent, impartial scoring system that prevented politics and favoritism?

• When walking around the building, were people moping and griping, or were they smiling and happy?

The female stars "made certain that their new firms would provide the resources that experience had taught them they would need to overcome the drag on performance that a job change entails."

A few more things to look for in a new position:

• Is there systematic training and mentoring?

• Are there individualized development agendas and sharing best practices across the organization?

• Are new hires integrated quickly into the company?

• Do people get the opportunity to get new responsibilities, rather than having someone hired over them?

Top Job-Change Mistakes

The job-change mistakes most frequently identified by recruiters, from the book:

• Doing inadequate research

• Being swayed excessively by money

• Moving "from" rather than "to"

• Overestimating oneself

• Thinking short-term

Types of job research include:

• Basic market and industry research

• The company's financials, business plan, and model

• Cultural factors

• Job-skills requirements of the position

Highlights

"It's like a baseball pitcher traded away from the Yankees... These people often are totally unaware of the enormous support system they had going for them in the excellent company, and are at the very least initially lost and bewildered without it."

going for the money would not have been a sustainable strategy: the significant short- and long-term decrease in performance was likely to affect their later career outcomes.

Star performers' achievements were partially attributable to the quality and resources of their firms

moving to a firm likely to offer fewer resources and less accomplished colleagues is apt to have a debilitating effect on performance, no matter how talented on is or how hard one works.

Among star research analysts as a whole, however, there appeared to be very little correspondence between actual individual portability and one's perception of one's portability.

former GE executives who took over, built, or implemented management systems that resembled GE's were more successful than those who entered firms with less familiar systems and did not impose changes.

the GE executives who moved to industries they knew did well, as did those who brought other GE people with them... Those who went to different industries, those who moved solo, and those who joined companies whose needs called for different skills performed poorly.

"[Job seekers]" get consumed by compensation and not by fit, so they keep moving, mistaking compensation for recognition, personal satisfaction, et cetera"

"Instead of planning their career moves, they launch from one crisis to the next." Candidates desperate to believe that the grass is greener elsewhere skimp on due diligence and fail to look strategically at their current companies or to recognize opportunities there.

Job candidates often fail to pinpoint the reasons for their dissatisfaction. They are "looking at the current company as being the problem and not acknowledging that they themselves may be a part of the problem..."

An inflated self-image also leads job seekers to overestimate their capacity to cope in the new position... and overestimating oneself can lead one to feel deserving of rewards now, not five years down the line.

Our findings that stars move to competitors less frequently than do non-stars... suggests that those who have a record of performance to protect may be more cautious

For ambitious professionals it clearly makes sense to affiliate with, and stick with, the highest-quality organizations... choosing an organization that offers high-quality colleagues and first-rate technical and supportive resources is of decisive importance in achieving and maintaining outstanding performance.