Lunchtime Links: The dangers of hiring too many star bankers

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Star culture is as much a part of the financial sector as it is the sports world. Fund managers harvest more money from investors if they have a star name on their books, while City grandees do no harm to an investment banks’ reputation when competing for a potential mandate.

But are they really that necessary? The FT runs an interesting piece debating the merits of hiring too many stars. The dressing room of Manchester City shows that it can have a great effect in the sports arena, but it’s not such a clear-cut argument in the financial sector.

A study by Harvard Business School’s Boris Groysberg on sell-side equity analysts found that the performance of research teams faded if the proportion of ‘stars’ went above a certain level – where they focus too much on pay, selfishness and status to actually carry on performing well.

Continued performance is the main crux of the argument; if you coast on a past reputation, or take your foot of the accelerator, you should expect a hard fall from grace.

“People are willing to put up with prima donnas, provided they get a return on [the stars’] performance,” said Mark de Rond of Cambridge Business School.


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