We have Star performers!

A  The difference between companies is people. With capital and technology in plentiful supply, the critical resource for companies in the knowledge era will be human talent. Companies full of achievers will, by definition, outperform organisations of plodders. Ergo, compete ferociously for the best people. Poach and pamper stars; ruthlessly weed out second-raters. This, in essence, has been the recruitment strategy of the ambitious company of the past decade. The 'talent mindset' was given definitive form in two reports by the consultancy McKinsey famously entitled The War for Talent. Although the intensity of the warfare subsequently subsided along with the air in the internet bubble, it has been warming up again as the economy tightens: labour shortages, for example, are the reason the government has laid out the welcome mat for immigrants from the new Europe.

B  Yet while the diagnosis – people are important – is evident to the point of platitude, the apparently logical prescription – hire the best – like so much in management is not only not obvious: it is in fact profoundly wrong. The first suspicions dawned with the crash to earth of the dotcom meteors, which showed that dumb is dumb whatever the IQ of those who perpetrate it. The point was illuminated in brilliant relief by Enron, whose leaders, as a New Yorker article called 'The Talent Myth' entertainingly related, were so convinced of their own cleverness that they never twigged that collective intelligence is not the sum of a lot of individual intelligence. In fact, in a profound sense, the two are opposites. Enron believed in stars, noted author Malcolm Gladwell, because they didn't believe in systems. But companies don't just create: 'they execute and compete and coordinate the efforts of many people, and the organisations that are most successful at that task are the ones where the system is the star'. The truth is that you can't win the talent wars by hiring stars – only lose it. New light on why this should be so is thrown by an analysis of star behaviour in this months' Harvard Business Review. In a study of the careers of 1,000 star-stock analysts in the 1990s, the researchers found that when a company recruited a star performer, three things happened.

C  First, stardom doesn't easily transfer from one organisation to another. In many cases, performance dropped sharply when high performers switched employers and in some instances never recovered. More of success than commonly supposed is due to the working environment – systems, processes, leadership, accumulated embedded learning that are absent in and can't be transported to the new firm. Moreover, precisely because of their past stellar performance, stars were unwilling to learn new tricks and antagonised those (on whom they now unwittingly depended) who could teach them. So they moved, upping their salary as they did – 36 per cent moved on within three years, fast even for Wall Street. Second, group performance suffered as a result of tensions and resentment by rivals within the team. One respondent likened hiring a star to an organ transplant. The new organ can damage others by hogging the blood supply, other organs can start aching or threaten to stop working or the body can reject the transplants altogether, he said. 'You should think about it very carefully before you do a transplant to a healthy body.' Third, investors punished the offender by selling its stock. This is ironic since the motive for importing stars was often a suffering share price in the first place. Shareholders evidently believe that the company is overpaying, the hiree is cashing in on a glorious past rather than preparing for a glowing present, and a spending spree is in the offing.

D  The result of mass star hirings as well as individual ones seems to confirm such doubts. Look at County NatWest and Barclays de Zoete Wedd, both of which hired teams of stars with loud fanfare to do great things in investment banking in the 1990s. Both failed dismally. Everyone accepts the cliche that people make the organisation – but much more does the organisation make the people. When researchers studied the performance of fund managers in the 1990s, they discovered that just 30 per cent of the variation in fund performance was due to the individual, compared to 70 per cent to the company-specific setting.

E  That will be no surprise to those familiar with systems thinking. W Edwards Deming used to say that there was no point in beating up on people when 90 per cent of performance variation was down to the system within which they worked. Consistent improvement, he said, is a matter not of raising the level of individual intelligence, but of the learning of the organisation as a whole. The star system is glamorous – for the few. But it rarely benefits the company that thinks it is working it. And the knock-on consequences indirectly affect everyone else too. As one internet response to Gladwell's New Yorker article put it: after Enron, 'the rest of corporate America is stuck with overpaid, arrogant, underachieving, and relatively useless talent.'

F  Football is another illustration of the star vs systems strategic choice. As with investment banks and stockbrokers, it seems obvious that success should ultimately be down to money. Great players are scarce and expensive. So the club that can afford more of them than anyone else will win. But the performance of Arsenal and Manchester United on one hand and Chelsea and Real Madrid on the other proves that it's not as easy as that. While Chelsea and Real have the funds to be compulsive star collectors – as with Juan Sebastian Veron – they are less successful than Arsenal and United which, like Liverpool before them, have put much more emphasis on developing a setting within which stars-in-the-making can flourish. Significantly, Thierry Henry, Patrick Veira and Robert Pires are much bigger stars than when Arsenal bought them, their value (in all senses) enhanced by the Arsenal system. At Chelsea, by contrast, the only context is the stars themselves – managers with different outlooks come and go every couple of seasons. There is no settled system for the stars to blend into. The Chelsea context has not only not added value, but it has also subtracted it. The side is less than the sum of its exorbitantly expensive parts. Even Real Madrid's galacticos, the most extravagantly gifted on the planet, are being outperformed by less talented but better-integrated Spanish sides. In football, too, stars are trumped by systems.

G  So if not by hiring stars, how do you compete in the war for talent? You grow your own. This worked for investment analysts, where some companies were not only better at creating stars but also at retaining them. Because they had a much more sophisticated view of the interdependent relationship between star and system, they kept them longer without resorting to the exorbitant salaries that were so destructive to rivals.

Some views on the use of headphones

Whether wearing headphones at work, or in other areas of everyday life, is a good thing or a bad thing has generated a lot of research and opinion.

To visit a typical modern office today is to walk into a room with possibly a dozen songs playing simultaneously but to hear none of them. Up to half of younger workers listen to music on their headphones, and nearly all of them think it makes them better at their jobs. In survey after survey, people report with confidence that music makes them happier, better at concentrating, and more productive.

Scientists do not share this belief; they maintain that listening to music hurts people's ability to recall other things they should be doing, and any pop song, loud or soft, reduces overall performance for both extroverts and introverts. A Taiwanese study linked music that has lyrics to lower marks on concentration tests for college students, and other research has shown music with lyrics scrambles our brains' verbal-processing skills. 'As silence has the best overall performance, it would still be advisable that people work in silence,' another reporter dryly concluded.

The question is therefore: if headphones are so bad for productivity, why do so many people at work have them? One factor to consider is that countries like the USA have moved from a farming and manufacturing economy to a service economy, with an emphasis on jobs in offices that require higher levels of concentration, reflection and creativity. As an estimated 70 percent of office workers work in open-plan office spaces, it is more important to create one's own enclosing bubble of sound. Lending strength to the argument for headphones at work is evidence that music relaxes our muscles, improves our mood, and may even moderately reduce blood pressure, heart rate and anxiety.

The story of headphones began in 1910, when the US Navy received an odd letter written in purple ink on blue-and-pink paper. The letter writer, an eccentric inventor and repairman named Nathaniel Baldwin, from the USA state of Utah, made what at the time was an astonishing claim: he had built, in his kitchen, a new kind of headset that could amplify sound. This was an opportune invention for the Navy, who asked for a sound test and then enthusiastically adopted the headsets, later called headphones, and used them in World War I for naval radio communication.

The purpose of headphones is to concentrate a quiet and private sound in the ear of the listener, which is a radical departure from music's social purpose in history. 'Music, together with dance, co-evolved biologically and culturally to serve as a technology of social bonding,' Nils L Wallin and Björn Merker wrote in The Origins of Music. Songs don't leave behind fossils, but evidence of musical notation dates back to Sumeria, 3,500 years ago, and in 1995 archaeologists discovered a bone flute in southern Europe estimated to be 44,000 years old. If music evolved as a social glue for the species, as a way to make groups and keep them together, headphones have done what writing and literacy did for language – they made music private.

Author and columnist Stephen Marche wrote that separation from other people is one of the first things ordinary Americans spend their money achieving. It is 'a by-product of a long-standing national appetite for independence,' he said. Americans are not alone in their desire for personal independence and privacy. Marche is right; wealth can buy – and modern technology can deliver – personal independence, and it is this that people have always sought.

Dr Michael Bull, an expert on personal music devices from the University of Sussex in the UK, has repeatedly made the larger point that personal music devices change how we relate to public spaces. Controlling our public spaces is more important now that more people are moving from the edges of cities to live in urban centers. 'With the urban space, the more it's inhabited, the safer you feel,' Bull says. 'You feel safe if you can feel people there, but you don't want to interact with them.' Headphones create shields for wearers, separating them from other people and their surroundings.

Headphones have their own rules of good manners; they are like wearing a 'Do not disturb' sign. We assume that people wearing them are busy and we should respect their privacy, so now people wear them to appear busy. In fact, it is now becoming quite common for people not to listen to anything at all, but just to wear headphones.

However, as pointed out at the beginning of this piece, although scientists have stated that headphones are bad for productivity, people still wear them at work. It is not just that headphones create privacy out of public areas, but also that music causes people to relax and reflect and pause. The outcome of relaxation, reflection and pausing at work won't be captured in minute-to-minute productivity metrics. What must be considered is that in moments of extreme focus, our attention radiates outward, toward the problem, rather than inward, on how to solve the problem. However, with music, 'When our minds are at ease, we're more likely to direct the spotlight of attention inward,' Jonah Lehrer wrote in his book Imagine: How Creativity Works. 'The answers have been there all along. We just weren't listening.' In a crowded world, real estate is the ultimate scarce resource, and a headphone is a small invisible fence around our minds – making space, creating separation, and helping us listen to ourselves.