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Don’t Buy the Company…Recruit Its Employees Instead

Posted By Dr. John Sullivan On June 23, 2008 @ 4:27 am In Advice and How-Tos,News and Features | 4 Comments

Microsoft has a clever strategy to recruit away Yahoo! employees. For the most part, Microsoft has successfully relied on its strong employment brand and near-boundless opportunities to attract the best and brightest as opposed to seeking them out.

That is, until recently, when Microsoft raised the level of its recruiting aggressiveness to the point where it would have to be rated an “A” on the aggressiveness scale.

The first indication came prior to the initial merger offer to Yahoo, when its central sourcing team directly emailed recruiting messages to Yahoo engineers, playing on their concerns about Yahoo’s future. Just last week, they ran a full-page color ad in the paper announcing in bold type…“Microsoft has search jobs in the valley [1]”.

[2]

There is no secret who the ad was intended for, despite daily defections from Yahoo there is still some top-notch talent inside the company that the competition would love to poach. No subtlety here!

Develop Talent, Hire Talent, or Buy the Competition

In nearly every industry, talent is the primary driver of both a firm’s capability and its capacity to perform. For firms that are growing, either holistically or through industry consolidation/expansion, there are really only three options to ensure access to talent.

Some companies opt to build or develop talent; unfortunately, development is often a “slow” option that provides mediocre results in a fast-changing world.

A second option, growth through mergers and acquisitions, allows the firm to increase its capabilities relatively rapidly as a result of “buying” or merging with a major competitor. It is one of the most common and fundamentally sound business strategies available, and one in constant use around the world. However, M&A is expensive, and often leads to defections of the very key talent you have liked to have retained. Mergers and acquisitions can be hostile or tame, something we have witnessed with Microsoft’s attempt to acquire in recent months.

When M&A doesn’t work, companies have yet another option, one that is less complex, less time-consuming, and much less expensive. This option is to poach away most, if not all, of the talent that provides the competition with its capacity to exist, something Microsoft is obviously doing in a very public way.

The “Neutron Bomb” Recruiting Approach as an Alternative to Mergers

The “Plan B” poaching strategy that firms should consider a feasible alternative to mergers and acquisitions focuses on using strong recruiting approaches to directly “poach away” the target firm’s key employees. This effectively gives you access to all of the capability that produced their intellectual capital without the internal drama that led to the competitor’s chaotic state.

I call this recruiting-based alternative to mergers the “neutron bomb” strategy, because much like the military’s neutron bomb after detonation, “the buildings” are left intact but the people are gone. (Yes it’s the same neutron bomb metaphor that earned Jack Welch the former CEO of GE, his nickname “Neutron Jack.”)

Microsoft not so subtly revealed its new recruiting emphasis by running a full-page color ad last week in the San Jose Mercury News [3] (the key newspaper of the Silicon Valley). While it’s generally true that employed engineers don’t read newspaper career sections when they’re looking for a job, the act of placing a full-page ad garners buzz on the Internet, blogs, and social networks.

In that ad, Microsoft made it clear that it was investing heavily in search technology (the strong-suit of competitor Yahoo) and that it wanted to grow employment in that area. It also noted that it currently has over 2,000 employees in the Silicon Valley, thus indicating to potential Yahoo employees that relocation wouldn’t be necessary.

Advantages of Recruiting Versus M&A

If you have enough courage and a strong recruiting function, there are many advantages associated with implementing a “neutron” recruiting strategy in lieu of buying a competitor:

  • Opportunity to select the best. Recruiting allows you to “cherry pick” the target firm’s key innovators, game-changers, and top performers in just the critical knowledge areas where you need help. With M&A, unfortunately, you have to acquire every employee, including unnecessary administrative staff and a significant number of slackers. While you can get rid of them post-acquisition, it’s a messy process. Using professional football as an analogy, in lieu of buying the entire team complete with its facilities, you would instead focus on recruiting away the best coaches and top quarterbacks, running backs, pass rushers, and wide receivers. In the end, you would have “cherry picked” a small number of individuals but a significant portion of the team’s capability to win.
  • Avoid merger pains. When you merge two large companies, you must also merge different corporate cultures, business processes, and management structures. This integration is a major effort that can distract your employee’s attention away from the customers and the product. In contrast, when you recruit away a firm’s employees as individuals or in small, intact teams (known as “lift outs”) these new hires don’t carry with them as high a level of hope or expectation that everything will remain the same. Instead, these individuals immediately realize that they are expected to change and adapt to the existing processes and culture.
  • No complicated negotiations or approvals are required. Unfortunately, firms have to get the government’s approval of any large merger, but you don’t have to get anyone’s permission to recruit away a firm’s key employees (this is because employees are not owned and are free to leave at any time. Consequently, there are few legal issues if your recruiting effort focuses on recruiting the individual employees for their capability and not the firm’s proprietary technologies. In fact, your recruiting effort can even be general enough that you don’t have to mention a competitor firm by name. For example, in the case of the current Microsoft recruiting effort, Yahoo’s current search and advertising employees already know that the recent advertising “deal” with Google carries with it the possibility that their job and their impact will be lessened at Yahoo. Merely letting the world know through advertising and word-of-mouth approaches that Microsoft is doing significant hiring and investment in a particular functional area is sufficient on its own to attract at least the interest of most of the targeted employees.
  • Recruiting processes are already in place. Recruiting new employees is an everyday occurrence, so there are processes and staff already in place to handle any upturn in volume. In direct contrast, M&A activities occur infrequently and as a result, they require the firm to put together a new M&A and transition team each time they make a major move. If you have a strong employment brand (as Microsoft does) the odds of reaching your recruiting goals under this strategy are extremely high.
  • No need to lay off. Under the M&A approach, you acquire every employee. Unfortunately, you may get a “surplus” with some weak employees or unnecessary duplicates. If you use the “neutron” recruiting strategy, you won’t need to plan for and execute the massive restructuring and the almost inevitable layoffs that are commonly associated with M&A. As a side benefit, it allows you to avoid the upturn in job-seeking among your most valued employees that research shows happens as a result of even modest downsizing.
  • Recruiting may result in lower turnover. When you recruit new employees, you don’t have to give them the complicated and uniform stock option and severance benefits that are generally associated with employees acquired as a result of a merger or acquisition. Because these new hires were hired as “individuals”, the hiring package doesn’t have to be uniform across the board, as it is with mergers. As a result, you are able to negotiate a tailored package with these “recruited” new hires, which is more likely to directly meet their individual wants and needs (thus limiting the risk of future turnover). In addition, because these individuals were “cherry picked,” they are much more likely to stay with your firm because they have been selected to closely “fit” your corporate culture and your business growth areas.
  • Others will follow. Fortunately, it’s not necessary for your recruiting function to initially target a huge number of employees. The reason behind this is the fact that once you successfully recruit away a company’s key leaders and influencers in a particular functional area, it’s highly likely that many others will choose to follow. Some will come on their own volition, while others will come as a result of referrals from newly hired employees.
  • Leave behind damaged remnants. If you are successful in recruiting away a significant number of the targeted key employees, you leave your former competitor in a confused and often weakened state. This gives your firm an opportunity to move ahead rapidly, while your competitor must take time to regroup. This might seem harsh to some in HR, but remember, the business world is highly competitive and if you frequently use the phrase “war for talent,” it’s only natural that you would use more “war like” approaches when recruiting.

Final Thoughts

Unfortunately, HR and talent management are seldom brought into a merger or acquisition situation until after the deal is already done. Even then, their primary role is just to smooth the transition into a single firm.

However, there is a role for talent management prior to the decision to even begin M&A activity. That role is to offer senior management the option of achieving almost the same results (gaining a large volume of quality, trained talent quickly) without the associated complexity and costs related to mergers and acquisitions.

In my experience, not very many Directors of Talent Management or Chief Talent Officers have had the courage to step forward and intervene before major merger plans are underway. However, because M&A activity is continually increasing, even in our troubled economy, now might be the time to make an exception and to propose the “neutron” recruiting option as Plan B.

Recruiting talent is a business function, and business activities get branded as hostile or aggressive all the time without the negative connotations that are often associated with aggressive or hostile recruiting. As global competition heats up and the balance of global economic power shifts away from the United States, recruiters are going to have to get over their personal objections and embrace business realities.


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URL to article: http://www.ere.net/2008/06/23/don%e2%80%99t-buy-the-company%e2%80%a6recruit-its-employees-instead/

URLs in this post:

[1] Microsoft has search jobs in the valley: http://kara.allthingsd.com/20080618/dear-disgruntled-yahoos-microsoft-is-hiring/

[2] Image: http://www.ere.net/wp-content/uploads/2008/06/msftvalley.jpg

[3] San Jose Mercury News: http://www.mercurynews.com/

[4] Image: http://2014fall.ererecruitingconference.com/speakers/130?utm_campaign=ERE2014RCEF&utm_source=ere&utm_medium=related+content&utm_content=Dr.+John+Sullivan

[5] How One Single Action, Tracking Quality Of Hire, Can Dramatically Improve Your Talent Acquisition Results: http://2014fall.ererecruitingconference.com/agenda/session-descriptions/?utm_campaign=ERE2014RCEF&utm_source=ere&utm_medium=related+content&utm_content=author#session-1127

[6] ERE Recruiting Conference & Expo 2014 Fall: http://2014fall.ererecruitingconference.com?utm_campaign=ERE2014RCEF&utm_source=ere&utm_medium=related+content&utm_content=Dr.+John+Sullivan

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