Insights

Recruiting top talent is a common challenge that every organization faces, and in industries like law, finance, and technology, the competition for the “best and brightest” is fierce. Lateral hiring—bringing in employees from competitors—is a popular strategy for firms aiming to boost their workforce’s capabilities and competitive edge. However, recent research suggests that hiring stars is not always as effective as it seems. In fact, it can sometimes backfire, leading to underperformance, internal friction, and a negative impact on the company’s culture.

The Tempting Allure of Lateral Hiring

Organizations, especially in knowledge-intensive industries, often pursue the strategy of recruiting top talent from rival firms. This lateral hiring is considered a shortcut to gaining immediate expertise and boosting performance. In fact, many corporate law firms, for instance, hire hundreds of lateral partners each year. Despite its popularity, research has shown that this approach is not always successful and can often have unexpected results.

A study focused on UK law firms followed 2,700 top-performing lawyers over 17 years (2000–2017), observing how their transition to new firms affected performance. The results indicated that, on average, practice areas that hired star lawyers saw a 10% decrease in performance in the year following the hire. This is a surprising outcome given the time, cost, and effort involved in recruiting top talent.

Why Hiring Stars Can Hurt Your Organization

There are several reasons why the hiring of stars can sometimes be detrimental to an organization’s overall success. One major factor is the portability of individual performance. When top performers move to a new firm, they often struggle to replicate their previous success. The systems, cultures, and teams that helped them thrive at their old firm do not simply transfer with them. In fact, a star may face difficulties adjusting to their new workplace’s routines and expectations.

Moreover, the reactions of incumbent employees can play a significant role. Often, existing employees—especially those who see themselves as future stars—may feel threatened by the new arrival. They may resent the attention and resources given to the newcomer, which can lead to resentment, decreased morale, and even sabotage of the new hire’s efforts to integrate. Internal competition for recognition, promotions, and resources can prevent the firm from fully leveraging the new hire’s expertise.

When Does Hiring Stars Actually Work?

Despite these risks, there are certain situations where lateral hiring can be beneficial. Our study highlighted two key scenarios where lateral hiring had a positive impact:

When the star joins an existing group of stars: If the new hire joins a team that is already full of high performers, they are more likely to fit in, cooperate, and add value. The high-performing environment encourages collaboration rather than competition, enabling the new hire to contribute to a team effort rather than struggle to adapt alone.

When the practice area is one of the strongest in the firm: If a top lawyer joins a well-established and high-performing practice, the hiring can result in a 162% improvement in performance, according to the research. High-performing teams are better equipped to handle the disruption caused by bringing in a new star.

In both scenarios, the new hire is more likely to be accepted and supported by their peers, which helps them integrate more easily and contribute meaningfully to the firm’s goals.

When Should You Avoid Hiring Stars?

The study also identifies situations where hiring stars is likely to do more harm than good. These include:

When the star joins a weaker practice area: If the practice area the star is joining is already underperforming, the new hire may struggle to turn things around. In fact, the research found that the performance of these areas typically declined further after the star joined.

When the practice area is in decline: If a department is already on a downward trajectory, bringing in an outside star won’t reverse its fortunes. Instead, the disruptions caused by the star’s entry can make things worse, as existing employees may resist the change, and the systems may not be capable of absorbing the disruption.

The Key Takeaway: Focus on What Works

The research suggests that lateral hiring is a high-risk, high-reward strategy. While it can work in certain conditions, it is important to understand when it’s appropriate to pursue it and when it might be better to focus on internal development. For firms that are considering lateral hires, it’s crucial to ensure that they are bringing stars into a strong and supportive environment that can absorb and nurture their talents.

What’s the Best Approach?

Rather than relying solely on lateral hiring to boost performance, firms may want to focus on developing existing talent. Investing in internal development, training, and mentorship programs can foster the next generation of leaders within the company. Creating an environment that supports collaboration and continuous improvement is often more beneficial in the long term than simply adding stars from outside.

In conclusion, lateral hiring of stars may not always deliver the expected benefits and could harm your organization’s performance. However, with the right strategy and conditions in place, it can also help your company flourish. Understanding the specific circumstances under which hiring stars is likely to work—and when it’s better to focus on internal talent—can help you make smarter hiring decisions and foster long-term success.