Aggressive Recruiting: Acquiring the Talent and Avoiding the Buildings

There is a very interesting article today on ere.net, written by Dr. John Sullivan, regarding aggressive recruiting as an alternative to a merger and acquisition. His point is an excellent one if what you are seeking in the M&A is the talent of the target organization. He calls this the "neutron bomb" approach, where you take all the talent and leave the buildings standing. He cites Microsoft's recruiting campaign for Yahoo employees as an example of this approach. Microsoft could not get Yahoo and its search capabilities by purchasing the company so now they are aggressively trying to woo away Yahoo employees with this background.

In a traditional M&A you get all the "assets" of the organization and also all the liabilities. One of these liabilities is all the poor performing employees the target organization had. Also in a traditional M&A you have all the regulatory stuff you have to deal with, during which time all the talented people you wanted may have jumped ship. So his solution is that if you want the talent go for the talent and skip the rest of it.

One point he mentions that will stand in the way of getting this done is the lack of aggressiveness many HR recruiters have. Historically, to directly poach another company's employees was a no-no. Companies would use third party recruiters, and hence pay a big fee, to have the recruiter go after the talent wanted. Sullivan says that HR needs to get over that roadblock and face business realities about capturing the talent needed. I have seen this before as well. However, I think it may not be exclusive to HR. I have had company managment direct HR to be careful in recruiting because of some relationship between the CEO's.

Obviously this does not apply if the purpose of your M&A is the actual buildings and equipment. In some situations, as in heavily unionized facilities, you take particular pains NOT to acquire the people in the transaction. But even in that situation, there may be talented people in your target that you may want to try and recruit before you go after the company. HOWEVER, one very large roadblock to this PROACTIVE step occurring is that HR usually only gets involved in M&A AFTER the fact and not before. Another reason to have that "place at the table".

Mixing Beer Companies Brews Trouble

The Wall Street Journal did an analysis of the rumored purchase of Anheuser-Busch, by Brazilian/Belgian owned InBev. Some of the analysis dealt with the financial and marketing aspects of the deal, but much of it talked about the Human Resources issues that surround the deal. These include:

• Anheuser is heavily unionized and InBev has been very tough with European unions, facing strikes and protests in Belgium and Newfoundland. In fact in Newfoundland InBev hired a hard-nosed security company to keep the union under control. (Harkens back to the days of the railroads and the Pinkertons.)


• InBev is very harsh on non-performing employees, subjecting them to what as been described as isolated cases of moral harassment.


• InBev has what is called a "high octane" culture, meaning very "rah, rah". Low costs, high incentives. This does not match the much more traditional culture at A-B.


• InBev has a tendency to replace management with Brazlians.

A-B has responded coolly to the interest by InBev and naturally, the unions representing the workers are not happy with the idea at all.

It is well known that many mergers and aquisitions fail, not for financial reasons, but for people reasons. Does this one make financial sense? Absolutely, InBev has an operating margin of 27% while A-B's is 17%. But the people issues maybe difficult to overcome.

Another key to this may be the reaction of the American public. Messing with the clydesdales is downright UN-American. To me it would be like selling the White House. And with the political landscape poised to become the domain of union-friendly Democrats there might be some trouble in Congress and the White House with this one.

But if this occurs this will be one to watch. Will it succeed? Or will it become another Harvard Business School case study of one more M & A sunk do to people reasons?