Should Firms Buy Talent – Like In Pro-sports?
Most of you who follow professional team sports like football will be familiar with the concept of buying and selling sports star talent. Here, talent is a commodity that can be bought and sold, possessing a monetary value that can go up or down according to risk and opportunity.
It’s a bit different in the corporate world; there’s simply no mechanism for you to walk up to a company to expediently purchase talent in return for a huge sum of money, as employees don’t operate as business entities and legally sign themselves over to an agent to represent their interests.
But, in truth there has been no desire to. Companies say that talent is their greatest asset, but it’s lip service isn’t it? Few actually believe talent is an asset. As far as I am aware, accountants don’t routinely assign talent a tangible “book value” like an asset or contract. Human capital is not really treated like capital in a pure financial sense of the world; it’s not recognized as something that can be bought or sold.
This is why during the typical merger and acquisition process, talent is simply given away for free. Suitors come in and buy a company but most of the due diligence is based on products, services, assets, revenue and not people. In fact, as part of the deal, key staff members are sometimes required to step down. The talent that has been acquired or lost as part of a M&A deal has traditionally been just a byproduct and not a reason for the deal to take place.
But, as talent becomes a scarcer and more precious commodity, things are beginning to change and a new trend of acqui-hiring has emerged (outlined here on the buildnetwork), where companies buy small/micro firms mainly for their talent and not their products and customers. They highlighted how the majority of Facebook’s acquisitions have been done exactly for this purpose, that is, to acquire talent, and perhaps a fully operational team that they might not have been able to put together as quickly or to the same quality level on the open market. It’s the same M&A concept of buying a product versus developing it yourself.
This has mainly been a Silicon Valley trend but it’s also happening more and more in Canada, suggests this piece in the financialpost.com. They chart several acqui-hiring success stories and the benefits of an acqui-hiring strategy are very clear, even if it’s probably out of reach of cash-poor companies. It’s a way to find scarce talent or inject a company with entrepreneurial zeal or a new personality. For the moment, it seems to be a trend most associated with the hi-tech sector with companies such as Hootsuite, Shopify and Facebook getting in on the act.
So in conclusion, it seems that talent is having its value realized as an asset with entire M&A deals being struck based on the value of the talent primarily, with a secondary emphasis on the value of customers and products. Admittedly, this is a very ‘specialist weapon’ available to an elite and innovative group of employers, but acqui-hiring is clearly a very powerful and disruptive mechanism to fight the talent war. And, so yes, companies should be thinking about strategic purchasing of talent, (using acqui-hiring), just like in the professional sports world.