As the war for attracting, developing and retaining talent is becoming intense, large organizations are looking at new, innovative and rare recruiting strategies like Acqui-hiring. It is a one of its kind corporate practice where established firm hires another company (mostly start-ups) not for their products, financial contribution or even its customers but mainly to capture their talented pool of employees (mostly engineers, designers and other technical experts). This strategy has been successfully followed by big firms like Yahoo, Facebook whereas Google is recognized as the king of acqui-hires.
Acqui-hiring is in direct contrast to traditional corporate hiring, as attracting innovators would be difficult with a traditional strategy because they enjoy the flexibility and freedom of working in start-ups. Thus acquiring the start-ups help these large technical firm to use the talent given the fact that people are an organizations’ primary asset and the competition for talented employees is getting stiffer by the day. Therefore these talented employees, if handled with due care, could provide a sustainable competitive advantage to the organization. Majority of these acquisitions are seen in the Internet, mobile and telecommunication sectors.
Acqui-hires on an average are pegged at $1-1.5 million per employee joining the acquirer. The actual amount is generally given in two parts- one as stock options and cash bonus to the acquired employee and the other where the start-ups gets cash to pay off debts to their investors and other liabilities. For start-ups that are not very successful acquihiring provides a soft landing. It is a win-win situation for all parties. Investors who were in the danger of losing due to poor performance of the startup get a return on their money, employees of the acquired firm on the verge of losing their job due to the startup failing get a new cash bonus as well as a new job and finally the acquirer gets the desired talented pool of employees who are expected to stay with the company for a minimum period of 2-3 years and in case they leave early the whole team loses money. Hence, this is an affordable way of hiring an entire team of talented technicians.
The are many benefits of acquihiring strategy as this is the most effective way to hire “purple squirrels” or innovators. These are people who are highly valuable as they constantly thinking out of the box, are game changers and come up with innovations like mobile applications. These people would otherwise be apprehensive to apply to large organizations given the nature of their work that involves constant backing in terms of investment as well as encouragement to take risk from senior management. In addition to this, they need freedom and flexibility of work in terms of their working hours and decision making autonomy and so they would have person-organization fit issues; hence no amount of branding would be able to woo them and acquihiring is the only feasible strategy to capture these talented employees. The other benefits are that the acquirer gets an intact team who have been working together and have developed a sense of collaboration, have good dynamics and know how to work with each other. People who are currently working on inventing something as well as who are capable of coming up with new ideas can be acquired. As few employees working in a startup know that it is a possibility that they might be acquired by a larger firm there is low initial resistance on their part when the acquisition takes place.
Acquired employees are already trained and have worked for long hours with low budget and resources, thus help in reducing cost. Another important factor in this strategy is that it an important tool for succession planning. The firm can get the CEO and others working in the top management of the startup and apart from getting their leadership ideas and ability to lead innovation driven teams, they can also be used to fill up higher positions in the future. The leaders in turn get a platform as they have an opportunity to use the company brand and resources to spread their ideas and create an image for themselves.
The strategy has to be undertaken with due care. The acquired employees may have problems in adapting the new working environment and the culture. Efforts must be taken to ensure that the company is not imposing themselves on the acquired employees but instead they are ensuring that the employees understand the mission, vision, strategy of the company and are culturally aligned with it. For this communication lines must be kept open in terms of deal with these new employees. Caring about the incoming talent’s skills, dreams, understanding the kind of opportunities they require along with managing and valuing their creative ideas is very important for the acquirer.
The trend off late has changed with companies who do not look at strictly talent while acquihiring. There has to be a product fit on part of the acquired employees. Companies start by trying to understand what the employee or the team was set out to build, what their passion and skills relate to, whether they will be able to solve the companies problems, determine what will be the result at the back end and then decide whether to hire them based on their existing products.
The biggest problem the acquirers face is integrating the new talent. It is important for the recruitment leaders to show that they are strategic so that they are involved in the recruitment process. Where executives are unsure, recruitment leaders must demonstrate the return on investment how value added as a result of acquisition, exceeds cost. This strategy also helps reduce the time delay in acquiring the employees through traditional means. Even though this method of getting talent is at least 10 times more expensive than the traditional method recruiters, companies still feel it is a necessity. Hence, taking due care in letting the acquired employee to be creative and express themselves, helping them to get aligned to the new culture along with being strategic and risk taking in recruitment is what is important for acquihiring. If implemented properly, this could help the company achieve sustainable competitive advantage.
Sources:
https://www.cbinsights.com/blog/tech-acquihire-report/
http://www.quora.com/What-is-a-typical-deal-structure-of-an-acquihire
http://www.forbes.com/sites/roberthof/2013/12/04/attention-startups-heres-how-to-get-acqui-hired-by-google-yahoo-or-twitter/
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