When did stealing employees from your competitors—a longstanding and honorable tradition about as old as business itself—become a bad thing?
I used to work in the newspaper business way back when a) the newspaper business was still healthy; and, b) there were still cities in this country that actually had honest-to-God competition between daily newspapers. I know that makes me a dinosaur, but I can remember a time when the best part of my job was figuring out how to poach some up-and-coming star away from the other paper in town.
That’s why I am surprised at what’s going on in California’s Silicon Valley, where “the U.S. Justice Department is investigating whether Google, Yahoo, Apple, Genentech and other tech companies conspired to keep others from stealing their top talent,” according to a story in the San Jose Mercury News.
According to the newspaper, “few details have been disclosed so far about the hiring-practice probe, which The Washington Post first reported in a story on its Web site late Tuesday. Citing two unnamed sources, [the Post] said the Justice Department was examining the possibility that the four companies and other unnamed firms may have violated antitrust laws by ‘negotiating the recruiting and hiring of one another’s employees.’ ”
My surprise at this story flows out of my experience working at a San Francisco dot-com during the boom years from 1998 to 2001. Back then, poaching talent from a competitor (and we viewed just about ALL companies battling for technology workers as such) was a mark of both a strong company brand as well as a crackerjack recruiting operation. Luring talent away from someone else was as common as fighting traffic on the Bay Bridge—and, a helluva lot more fun.
So, having some sort of agreement among tech firms to not recruit talent away from one another, if true, would be a huge change in how Silicon Valley tech companies traditionally operate. Plus, it flies in the face of California’s “tough rules barring companies from restricting their employees’ job hunting,” the Mercury News noted.
“Many companies across the country require employees to sign so-called noncompete agreements, in which the worker agrees not to be hired by a competitor within a certain period of time,” the newspaper said. “But California law generally regards such pacts as unenforceable, said Bob Taylor, a Palo Alto attorney who specializes in antitrust law. … As a result, Taylor said, California ‘is one of, if not the most, difficult states for employers to prevent employees from taking jobs with competitors.’ ”
Maybe I just see things differently out here on the Left Coast, but a deal among big tech companies to pull their punches and not recruit talent from one another is akin to thieves agreeing not to steal from each other. What’s the point? And, can you really trust anyone to hold up their end of such an unholy agreement?
I follow the philosophy that all’s fair in business, love and war. Isn’t this what the whole notion of “passive” recruiting—an oxymoron if there ever was one—is all about? I’d love to hear what recruiters have to say about this, because if deals like this to not hire from competitors make sense, we might as well kiss the whole notion of recruiting goodbye.
Hey, Management Guy! I know people really value honest, straight-shooting executives, but how honest is too honest? For example, does it ever make sense for the Big Boss to diss or put downhis or her workforce? This seems like a really counterproductive and shortsighted management strategy to me.
— Sam in San Jose, CA.
Sam:
A couple of years ago, The Management Guy would have told you that it is over-the-top stupid for ANY senior manager to openly diss or talk trash about the company’s workers. Not only does this violate Hall Of Fame football coach Vince Lombardi’s old maxim that a leader should always “praise in public, criticize in private” (a philosophy The Management Guy has tried, with modest success, to emulate), but it also makes the manager in question look like a churlish philistine.
Never mind that this behavior defies all logic or business sense. Guys like Zell do it because, well, the “devil made them do it.” Yes, the same comments would probably get any other employee fired, but sometimes, top executives get to be top executives despite the fact that they are missing a basic impulse-control gene. They succeed in spite of themselves, and that’s why they sometimes end up treating and talking about workers like they are the conquered chattel of Attila the Hun.
Just this week, Bartz appeared at an investment conference in New York where she was questioned about how quickly the changes she was making at Yahoo would begin to pay dividends. That’s a pretty standard question, of course, and Bartz had a pretty standard answer, according to the Associated Press.
“While pointing to some progress,” the AP reported, “Bartz said it probably will take another year or two before Yahoo reaps the gains from her shake-up.”
Most CEOs would have left it at that, but Bartz, for better or worse, isn’t like most CEOs. She couldn’t resist the urge to follow up her straightforward assessment of Yahoo’s progress under her leadership with a gratuitous and unnecessary swipe at her workforce that would make Sam Zell proud. “For everything you can do in three steps,” Bartz added, “it will take Yahoo 22 steps [to get it done].”
You would be right to point out that it is foolish, shortsighted, and does nothing at all, but then again, you aren’t a big-time CEO like Sam Zell or Carol Bartz.
Now, Carol Bartz is not Sam Zell, but she does have a lot of the same qualities, including a wonderfully colorful vocabulary. It remains to be seen whether trash-talking her workforce in public will help in her revival of Yahoo, but The Management Guy remains unconvinced.
He’d rather put his faith in Vince Lombardi’s Super Bowl-winning advice than in the approach of Zell or Bartz, but then again, Lombardi was also known to swear like a trooper, too. The difference is, he never publicly dissed his workforce. Like all good coaches, he knew you don’t get very far by trash-talking the very players you count on for your ultimate success.
I’ve been in the workforce a long time, and one of my basic “rules” is that whenever I hear someone trying to make a case for a merger or deal predicated on all the wonderful “synergies” it will bring, well, that just tells me to run and get as far away from it as quickly as possible.
Sound extreme? Maybe, but in my experience, deals that are predicated on the great synergies they bring are almost always doomed to fail. That’s because the benefits of the synergies are wildly exaggerated and overstated (especially the so-called cost savings) in order to sell the deal, then grossly under-realized later after the dust from the actual merger has settled.
Here’s an example of what I’m talking about: the just-unwound merger between Time Warner and AOL. Not only was it terrible financially— “valued at $166 billion when the self-styled ‘deal of the century’ between America Online and Time Warner was announced on January 10, 2000, an AOL-containing Time Warner today commands a market capitalization of $28 billion … an 83 percent loss in market value,” according to TheDeal.com—but it was also a horrible cultural fit, bringing together an overhyped and overvalued new-media company with a solid and sober old-media giant.
How did it work out? Well, the overhyped new-media company tried to cram its culture and coolness down the throat of the stodgy old-media giant, and the results were predictably bad.
“Although the partnership between Time Warner and AOL was once pitched as a way to advantageously meld old media with new,” The Washington Post notes, “the deal has been regarded in recent years as one of the largest blunders in corporate history. None of the supposed synergies of the expensive union between the two ever paid off, and in recent years AOL’s flagging fortunes have increasingly cut into its parent company’s profit.”
Time Warner brought a ton of great brands to this deal—Warner Bros. Entertainment (including Warner Bros. Pictures), Turner Broadcasting (which includes CNN, TBS, TNT and Turner Classic Movies), HBO and magazine publisher Time Inc. (Time, People, Fortune, In Style, and Sports Illustrated magazines).
American Online brought its Internet service provider business that claimed as many as 34 million subscribers at its peak, according to PC World, “but it lacked the infrastructure and management savvy to transition from dial up to broadband, and its ISP business remained stuck in the ’90s. … While AOL remains a major Internet service provider with about 6.3 million subscribers, it has been letting that business waste away for years. … Today it’s [primary] income source is its declining online advertising generated by its eclectic mix of content sites, including the AOL.com portal, gossip site TMZ.com, and MapQuest. There’s a business model there, certainly, but AOL is small potatoes compared to competitors Google, Yahoo and Microsoft—not the Internet behemoth Time Warner wants it to be.”
In fact, the cool new-media company ended up being a gigantic albatross around the neck of Time Warner, pulling down the value of the combined company. And those great synergies that everyone touted when the merger was announced back in January 2000? Well, they ended up being as overhyped as AOL’s pre-merger stock price.
The New York Times points out: “The [Time Warner-AOL] merger was fed by heady ideas that did not quite pan out—that big online audiences would necessarily yield big profits, and that there were profound synergies to be had by owning different media.”
Synergies in business always sound great, but they should simply be regarded as a nice bonus if they actually work out and not the main reason for making the deal in the first place. In other words, the concept of synergy is more myth than anything else. In fact, if you are basing your deal on the synergies you’ll see, well, my guess is that you don’t have much of a deal to begin with. Just ask Time Warner.
I get a lot of questions here at the Business of Management, and many of them have broad appeal to managers at just about every level. So, I’ve started a new Business of Management blog feature: Hey Management Guy! If you have a question about a workforce management practice (stupid or otherwise), just post it at the bottom of this blog item or e-mail it here to me at jhollon@workforce.com. I’ll pick out the best queries and answer them here each month.
Hey Management Guy! My company has a problem with employees who don’t know how to keep their mouths shut. Management is constantly hearing about internal information that has been passed along to competitors, vendors and, worst of all, the media. How can we get workers to understand that what happens inside should stay inside?
—Cathy from Cupertino, California
Cathy:
This is a new question about a very old problem that just about every organization struggles with. In fact, The Management Guy remembers working at a newspaper where the bald baboon of an editor was driven absolutely bonkers by internal information getting leaked to the competition. So he sent a nasty and threatening memo to the staff warning of dire consequences for anyone caught doing so. Of course, his nasty memo got faxed to the competition no more than 10 minutes after he sent it out—from the fax machine right outside his office, no less.
This illustrates a critical point: For better or worse, workers respond to the tone set by the managers above them. No organization likes internal information getting leaked, but if you want it to stop, you need the top managers to treat everyone like adults and give them a business case for why they need to stop.
In fact, there is another Cupertino company that is struggling with this very problem: Yahoo. New CEO Carol Bartz recently sent out a memo venting about a lot of things, but specifically griping about someone “forwarding her first company-wide email to some blogs,” according to The Wall Street Journal. She wrote that the person who did that should step forward and resign, but failing that, “maybe we should have a weekly bounty on such people. I will throw in the first thousand dollars.”
I know Carol Bartz has a lot to deal with at Yahoo given the mess she was left by founder Jerry Yang (a people-challenged executive if there ever was one), but putting a bounty on the heads of workers who leak internal information is really old school and reminiscent of Nixon’s attempt to plug leaks in the White House by forming the “plumbers” unit. We all know how well that turned out.
I’d advise your executives—and other execs, like Carol Bartz—to resist the urge to punish or offer a bounty on the heads of blabbermouths. Instead, spend a little time educating the workforce on the dangers of leaking internal business information. Talk to them about company secrets and why they need to remain secret. And most of all, ask for their help in knowing the information boundaries. I guarantee that if you do this instead of playing “Wanted: Dead or Alive,” you’ll have a lot fewer leaks and a lot more employees willing to help you make it happen.
What can you say about a top manager who is so blinded by the past that he can’t see the future?
That pretty much sums up Yahoo CEO Jerry Yang. He finally decided to step down late Monday, “ending a brief, turbulent tenure,” according to the San Francisco Chronicle, “that was marked by a slumping business and a failed takeover bid by Microsoft Corp.”
That pretty much covers Yang’s 17-month tenure as CEO, but it fails to fully capture just how badly he did leading the company he founded, and how inconsistently he managed his most important resource—his human capital. Here are a few highlights:
• Yang single-handedly blocked an offer from Microsoft to buy Yahoo at $33 per share, or more than three times what the stock traded at Monday. A key component of his push to block the deal was his unprecedented decision to offer a lucrative severance package to every single Yahoo employee in an attempt to make the deal too expensive for Microsoft to pursue. My take at the time: If Yang and Yahoo had applied that kind of creativity to its ongoing business, maybe it would never have had to defend itself against Microsoft in the first place.
• He brought in highly paid consultants to handle what every person with half a brain who was watching the company knew—that Yahoo needed to cut its workforce. My take at the time: Yang doesn’t have the managerial huevos to do the tough stuff that comes with a management role.
As CNBC’s Jim Goldman put it, “Clouded by self-interest, [Yang] lost his way, sacrificed tens of billions of dollars in shareholder equity, abandoned reason, and surrounded himself with people who slapped him on the back, or gave each other high fives when Microsoft pushed back from the table, depending upon who you believe, for a job well done. … The stunner is that it took this long to get him out. The stunner is that the board gave him such an amazing amount of latitude to leaf-blow his way through so much shareholder value.”
Yang will now go back to his job as “Chief Yahoo, a nebulous position that will allow him to keep his fingers in a number of projects but has no day-to-day management responsibilities. He will also remain on the company’s board,” according to the San Francisco Chronicle.
That’s probably an appropriate place for a guy who founded the company, but if I were the Yahoo board, I’d keep Yang away from anything resembling a management duty. He’s shown time and time again that despite his technical expertise, he doesn’t have a managerial bone in his body. Getting rid of him now falls into the category of “better late than never,” but it remains to be seen if Yahoo, and its beaten-down workforce, can rebound from bad managerial mojo its overmatched chief yahoo left at the company’s doorstep.
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