Acquiring strategic talent and strong companies in tough economic times
The economic crash diet of the past 18 months has had at least one positive result: companies are lean. The fat is gone, and what’s left is all muscle and bone. As a result, profits are up and cash reserves are building as companies are beginning to experience a return in demand in existing markets.
The discipline of austerity has also prevented companies from entering non-strategic markets, focusing on the wrong things, or building unnecessary bureaucracy. Easy growth can enable bad strategic decisions. Ironically, contracting markets brutally punish bad decisions. What survives is likely to be strategically sound.
Now is the time to be thinking about adding capabilities to support new growth. However, it needs to be strategic growth. More muscle, not more fat. The two obvious areas in which to acquire growth capabilities are executive talent and strategic acquisitions.
Acquiring talent: there are a lot of talented people on the street right now. An obvious argument is that now is the time to gather some of that talent at below market rates and before competitors snatch them up during a recovery. I would like to offer a different view. While arguably, many good people have been laid off for reasons having nothing to do with their particular talent, what is beyond argument is those that have held onto their positions are the most valuable. They are the people that have kept the ship afloat during turbulent economic times. They are also the ones that have been burning the midnight oil and covering the responsibilities of laid off employees. Frankly, they are the best of the best.
Here is the key. Many of them are also burned out. Overworked and underpaid for the past 18 months, they may be open for a refreshing change of scenery. While some good talent may be on the street; some better talent may be working for your competitors and ready for a new opportunity. As the saying goes, if you don’t always hire people smarter than you, the average quality of executives goes down with every new hire. Hire the best. Acquire muscle.
The same is true of strategic acquisitions. While acquisitions of weak or poorly managed companies are sometimes justified as a way to reduce costs or consolidate an industry, the ones that create the most value are those that accelerate revenue growth. In many cases, these may be companies that are performing well.
Further, given that many companies have cut costs to the bone, finding a poor performing company and acquiring it well under market value and then re-engineering it to profitability may be possible in this environment but it is highly unlikely. It is my suggestion that now is the time to look for high performing companies that can help accelerate revenue growth. Target companies should be those that open up new market channels or provide great products for your existing markets, or have technologies that your firm can help to commercialize. Don’t look for soft targets; purchase solid bone structure that can support your strategic growth as markets recover.
Muscle and bone. Time to bulk up.
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