So-called acqui-hires—buying a startup for the purpose of hiring its talented people—have become common among the likes of Apple (AAPL), Google (GOOGL), Microsoft (MSFT), and Facebook (FB). The result is an expensive buy-and-sell market in top tech talent. Excellent engineers can cost $1 million to $2 million just to get on board, and then you have to pay them. Google director of corporate development Dave Sobota told a conference on this topic, “Talent deals are a horribly expensive way to get talent—10 to 100 times as much as we’d pay a recruiter. But it’s a necessity.”
The larger phenomenon is that it’s now possible to know the market worth of talent, and not just in Silicon Valley. Employees can monitor their general value through social media and career sites. The stock market sometimes puts a giant number on top employees. When Kasper Rorsted stepped down as CEO of the German packaged-goods company Henkel in January to become CEO of Adidas (ADDYY), Henkel immediately lost $2 billion of market capitalization, and Adidas gained $1 billion. Markets can also deem an individual a debit: When Viacom (VIAB) announced that executive chairman Sumner Redstone was stepping down, it gained $1.1 billion of value in 30 minutes.
Such dramatic swings suggest that human capital really has become the most important asset—and that many managers are ignorant of just how beneficial (or not) specific employees are. One solution is to create an internal market for talent. These have grown in popularity and are used by such major employers as Intel (INTC), Cisco (CSCO), and W.L. Gore. The notion is that bosses don’t “own” employees. Job openings are posted to all workers, who can apply confidentially.
Other companies take a less formal approach. Alcoa (AA) CEO Klaus Kleinfeld says he brings “the whole executive team into a room for two days to discuss succession planning and the talent that should be developed. We call it Talent Marketplace. In reality it’s a fight for great talent.” The team discusses the best employees and candidates for key positions and works out who will go where. “It’s not rare that you say, ‘Well, that person is ready to develop,’ and people are scribbling it down,” says Kleinfeld. “You can bet that when you’re not looking, they’re already sending notes to the person: ‘Hey, we need to talk.’ ”
The danger is managers will end up bidding against their own colleagues, raising costs. In formal systems that risk may be averted through preset policies; less formally, the issue is hashed out with a higher executive’s help. Bottom line, says Kleinfeld, facing and resolving such conflicts is “great because you want this vibrancy inside your company so talent knows that if you are great, you have an opportunity.”
A version of this article appears in the March 1, 2016 issue of Coins2Day with the headline “Developing an Internal Market for Talent.”