Yahoo’s acquisition strategy is actually a talent strategy

July 6

Yahoo has acquired more than 26 start-ups since Marissa Mayer became chief executive in July 2012.

Yet only a handful of those, including Tumblr and PlayerScale, are still functioning as stand-alone business units. What Yahoo is pursuing with its acquisition strategy is not products, but people — the elusive software engineers with the skills needed to beef up its mobile capabilities.

The strategy, known as “acqui-hiring,” has caught on in the high-tech space because many of the most skilled programmers and developers are choosing the start-up route over working at larger corporations.

By necessity, many bigger companies are recruiting by simply buying the smaller companies that employ the talent they need and lock the engineers in to multi-year contracts (Yahoo, for instance, signs “purchased” employees to agreements lasting two to four years).

Buying start-ups for talent is one thing, but integrating the acqui-hires within a research and development organization is an all-together more challenging endeavor. After all, many start-up employees deliberately chose a different path. They are used to a faster product cycles with less structure and more than a touch of chaos.

Is it possible to make the transition beneficial for both parties? And, more importantly, how can the function keep the company’s investment — its new talent — happy and engaged? New research suggests that companies evaluating staff based on their behaviors, rather than technical skills alone, is one approach that may be able to bridge the gap.

Finding out who you’ve acqui-hired

The main reason a company makes this type of acquisition is that the staff possess strengths — in addition to technical skills — that an acquirer’s research and development team sorely needs.

To generate mutually beneficial outcomes, managers need to spend some time scoping out what type of workers the company has just acquired and resist the temptation to rush the new engineers to product development teams until their talent has been assessed. After all, aligning their strengths properly with the rest of your organization was a key reason for making this type of acquisition in the first place.

Managers can evaluate their new acqui-hires by assessing five behavioral markers shown to support innovation. Members of the staff who consistently show these behaviors should be made high-priority retention targets:

Customer empathy. This classic behavior uses the voice of the customer as the compass for all innovation activities.

Idea integration. Draws out the bigger picture from disparate pieces of information.

Risk-taking. Involves quickly deciding on a course of action to take advantage of an opportunity when it presents itself.

Influence. The ability to adapt communication styles to explain complex ideas to others.

Results seeking. Seeing things through to the end with the willingness to go the extra mile to get things done.

Quantifying these behaviors is important because our research has shown that behavior can be more important to a company’s success than simply technical skills. Furthermore, CEB research shows that teams with behavioral diversity (i.e., the presence of all five markers) can potentially improve individual members’ innovativeness. In this way, optimizing a team’s innovation potential among current and acquired staff offers a win-win solution for both the acquiring company and its new acqui-hires.

Once the results are in hand, a research and develop organization can determine how each worker will fit into your company and which projects will play to his or her strengths (you can avoid, for instance, putting a risk taker on an incremental innovation initiative).

The bottom line: While corporate research and development departments don’t have the ultimate deciding power in acquisitions, they can and should help the company earn a return on its investment from the deal. By taking a proactive approach to acqui-hire integration, large companies can offer their newly acquired start-up employees a climate where their talents can thrive.

Steven Williams is a managing director and Madeline Perez is a senior analyst at CEB.

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