Build or buy is a classic debate leaders engage fiercely in. It is not an easy decision to take because one has to deal with multiple unknowns and more importantly, it is projecting about the future. As our markets are increasingly global, opportunities to acquire a team come before the Board. They wrestle with the option of acquihire vs source talent from the market one by one. They consider the time involved, the costs and the benefits. Secondly, if one goes for the acquihire route, there has to be a process of integrating the new team with the existing mainstream.
When do you Acquihire?
Companies when look to grow fast, go on a hiring spree. It is not easy to hire new people from the market. There could be shortage of talent, inadequate strength in the power of the employer brand or simply lack of time to complete the hiring process. Sometimes, an opportunity may present itself to pick up a group of talented people en masse along with the assets of the organization and the customer base.
Acquihire is a quick way to lay our hands on a team of people who can solve a pain or harness the existing product or service of the acquirer. However, the cost involved in buying a company is significantly high compared to hiring the talent from the market. If the opportunity cost of time is higher than the cost of acquihire, it is easy to decide.
Estimating the opportunity cost of time is the issue. There have been success stories and at the same time, gigantic failures. (Read story in ET) So, the judgment of buy versus build has to be taken after due diligence of the opportunity in terms of cost synergies, access to new markets, revenue upside and value of tangible as well as intangible assets.
What goes wrong in Acquihire?
Sometimes investors tighten the investments and the founding team go for a distress sale. They are passionate about their idea and care for their colleagues. They do not want to shut shop suddenly impacting jobs and families of their employees. In the hurry of getting the transaction done, they fail to iron out all the wrinkles. These open issues raise their ugly heads after the transaction is done. Miscommunication and distrust develop between the new management team and the older team about compensation, role, reporting relationships, future strategy and so on. These result in stress and anxiety. While the acquired team expects a certain degree of freedom and respect, the new team might just be pre-occupied in making the morphed entity fit and fine generating greater revenues.
How do you handle the transition?
Setting expectations right is easier said than done. The acquirer and the acquired are always in a state of anxiety to get the deal done as quickly as possible. Sometimes they are not sure when to hold certain discussions and to what depth in order to build a shared understanding of the execution ahead. So, it is better to list the issues down and table them together. This process will lend a lot of clarity in the minds of both sides.
Communication is very critical in these transactions. Grapevines and rumor mills in both organizations work overtime to spin many stories. It is important to issue joint communication by the senior people of both organizations to assuage feelings and anxieties amongst the rank and file.
Agile leaders need to be at the helm of the transition process so that the combined organization can be built quickly. The best practices and strengths of both organizations have to be identified, incorporated into the new organization structure; roles and responsibilities have to be remapped; values and business principles have to be revalidated and if need be, revamped. We need the leader to be decisive and quick so that the organizational energy is redirected towards the customers and the market.
Most of the time, the acquiring organization remains in the driving seat. It is important to ward off the urge of directing the acquired team to embrace the culture of the bigger team and fall in line with the way of life at the mothership. In case, it happens so, the acquired team loses interest in the new entity, drops its commitment and starts looking for alternate career paths. This is the worst to happen, especially when the acquihire is in the services industry.
Each acquihire is unique and to be dealt with fairness, transparency and agility.
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