Playing for the Winning Team: Talent Recruitment and the Success of Competing Organizations

Résumé

We model the interplay between a team’s performance and the talent pool of those willing to join it. The team’s performance improves if it attracts good recruits, but its fortunes decline if the talent pool is shallow. Better prospects for the team are needed to attract good recruits. This suggests multiple equilibria: a winning team is sustained by good recruits, while pessimistic expectations can stop a losing team from attracting sufficient talent. However, if there is noise in a team’s evolving performance then there is a unique equilibrium in which talented recruits join and the team prospers if and only if the team’s performance exceeds a unique threshold. This threshold responds to the benefits of team membership, the attractiveness of outside options, the recruitment procedure, the heterogeneity of recruit types, and the private preferences of recruits over playing, winning, and losing with different competing teams. We also study the effort choices of active team members under moral hazard. Applications extend beyond business organizations to include the recruitment of good politicians to governments, the relative performance of sports teams, and rivalry between academic departments.