The value of external networks

In the February 2008 edition of the Harvard Business Review there is a feature article on research into the performance of star fund managers after they move firms. Analysis shows that most stars’ performance decreased after moving, but women stars did not. This difference in performance was in large part put down to the women’s external networks being portable to their new jobs.

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Below is a summary of the article which shows that an individual's network may be a key component of their success and that companies ought to be aware of this when looking to hire in stars. Are they stars where they are because of their internal networks, which are likely not the be very useful at their new employer, or because of a portable personal network? If you are hiring them explicitly because of their internal network - how good is it really?

"How Star Women Build Portable Skills"
by Boris Groysberg

“In May 2004, with the war for talent in high gear, Groysberg and colleagues from Harvard Business School wrote in these pages about the risks of hiring star performers away from competitors. After studying the fortunes of more than 1,000 star stock analysts, they found that when a star switched companies, not only did his performance plunge, so did the effectiveness of the group he joined and the market value of his new company. But further analysis of the data reveals that it’s not that simple. In fact, one group of analysts reliably maintained star rankings even after changing employers: women. Unlike their male counterparts, female stars who switched firms performed just as well, in the aggregate, as those who stayed put. The 189 star women in the sample (18% of the star analysts studied) achieved a higher rank after switching firms than the men did.

Why the discrepancy? First, says the author, the best female analysts appear to have built their franchises on portable, external relationships with clients and the companies they covered, rather than on relationships rooted within their firms. By contrast, male analysts built up greater firm- and team-specific human capital by investing more in the internal networks and unique capabilities and resources of their own companies. Second, women took greater care when assessing a prospective new employer. In this article, Groysberg explores the reasons behind the star women’s portable performance.”

The full article is free on HBR’s web site.