The basketball team Miami Heat doesn't have a dilemma. They
have the star player LeBron James with multiple Most Valuable Player awards and
a big press presence, which is important for earning television and other revenues
in a sport where keeping a team competitive is much, much more expensive than
what one can earn by selling tickets. He was also ranked as the most efficient player in the NBA league by the end of the 2012-1023 regular season. Although
finals opponent San Antonio Spurs were able to extend the series to seven
games, it is not a big shock that Miami won the championship.
What if you own or manage an NBA team, and you can't get
LeBron James to play for your team? He is expensive, and besides, there is only
one of him, currently playing for Miami. Well, from then on it gets
complicated. There are less efficient player, and players with lower status, to
choose from. Put enough of them on a team with an inspired coach, and you can
still be competitive because basketball is played with 5 players on the court
and a bench of substitutes. But the real dilemma is that the relation between
stardom and efficiency is actually murkier than the LeBron James example
suggests. Some players will give you one but not (much of) the other. Which do
you choose?
The problem is related to how leaders make staffing
decisions. Some people are strong contributors, and make a team perform better.
Or even an entire organization. Others only have star status, but that is also
useful because stardom can bring in more resources, for example by making others
more likely to collaborate with the team. In a recent article in the Academy of Management Journal, Gokhan
Ertug and Fabrizio Castellucci look at how NBA teams made these decisions.
Their results are very interesting. Teams hire in ways that suggest they are
well aware of the tradeoffs: they go for stardom when their revenues are down, and
they go for efficiency when they don’t play well enough. Moreover, they put
money behind these hiring patterns. A player earns more when he goes to a team
that has less of what he provides. So if a gifted but underappreciated player
wants to win a championship, he should go to a strong team – but he will have
to take a pay cut. If he wants to cash in on his skills, he should go to a weak
team.
So they are doing the right thing, and this is a problem
that managers generally solve correctly, right? Wrong. Basketball players are
among the most closely analyzed human beings on earth. Regular fans have a good
understanding of efficiency. They also have a feeling for stardom, and they know
that they love some players who aren’t that efficient (sports fans understand the
heart versus brain tradeoff). Coaches know performance even better, and any
biases they might have are kept in check by the use of statistics.
Whenever performance is not so well understood, it is all
too easy to assume that the star is also the high performer. Leaders making that
assumption will be prone to picking based on past success, and will be
overlooking individuals who might make their teams even better. And they will
certainly miss the option of picking stardom or performance depending on the
needs.
