AOL publicly announced their acquisition of TechCrunch on September 28th, 2010. Less than a year later, TechCrunch’s top talents have exited with major drama and the investment, valued at between $30 million USD, is widely considered to be a near-total loss. It’s caused significant loss of face for AOL and acting manager Arianna Huffington, while enhancing the reputations of the former TechCrunch leaders who have exited the firm.
While the blogosphere debates how much longer the partnership can limp along before it is ultimately shuttered, what can your organization learn from this failure?
Here are three key points to remember:
Lesson 1: The money doesn’t always matter.
Compensation issues are at the forefront of many employers’ minds, but top employees are generally thinking along very different lines. Money is important, but it is often a distant second to autonomy, respect, and control.
In looking at AOL and TechCrunch, the original announcement emphasized that TechCrunch would maintain its editorial independence. This was an important consideration in the sale for TechCrunch’s founder, Michael Arrington, and key writers such as Paul Carr. However, once the deal was inked, the TechCrunch team quickly tangled with AOL over reporting structures, disclosures in investigative articles, and content management when AOL attempted to impose new standards and norms. The TechCrunch group viewed it as intrusive and a breach of promise from the acquisition, while AOL viewed it as their right as the new owners of the brand.
In the end, the compensation and incentives offered to keep top talent were over-matched by these core conflicts over operational issues. From this, your organization can learn not to rely on the power of golden handcuffs to keep top talent – it often isn’t enough.
Lesson 2: Take employees at their word.
The TechCrunch team was very vocal, with heavy presences in social media and a loyal following on the web. As conflicts and issues emerged, they shared their views online in keeping with their existing habits. AOL choose not to respond, or to respond with posts that denied conflicts existed. Later when top talent walked, the AOL management seemed to be taken off-guard by the departures despite having had months of tweets, blogs, and public conversations signaling that talent was actively looking to leave.
Modern employees are much more vocal than previous generations about their feelings about work, even feelings that perhaps should be kept internal, notes Lisa Barone of OutSpoken Media. The Society for Human Resource Management notes that 82% of Generation Y and Millennial workers see no problem with sharing private thoughts or confidential data at their workplace.
While the AOL team may have thought the TechCrunch group was being strategic in sounding off about leaving as a bargaining point in future contract negotiations, they were really just being honest in line with their own generational norms. Failing to take them at their word resulted in an unhappy ending all around, and from this your firm can learn not to overlook daily gripes and complaints as signs of deeper unhappiness and intentions to leave the organization.
Lesson 3: Make cultural fit a priority.
Last but not least, cultural fit has to be a priority. AOL and TechCrunch represent two very different market personalities that in hindsight were so obviously not a good fit for each other its surprising there was an initial deal, notes industry analyst Danny Sullivan. By not considering the possible consequences of their opposing cultures, both companies have damaged their brands and raised questions about AOL’s long-term viability, notes the Wall Street Journal.
It is very easy to simply look at bottom line numbers when analysing deals. Yet the personalities involved hold the true responsibility for those numbers, making alignment at a cultural level imperative for successful long-term partnerships, states Sullivan. AOL’s management team has been left looking like out-of-touch dictators in this failure, while departing TechCrunch staff are being viewed as taking the noble path out of a destructive relationship. Whatever the numbers end up being for profits and loss, this is a reputational flash point that will remain in the public consciousness for years, and from this your firm can learn not underestimate the value of cultural fit in choosing business partners or properties to acquire.
Failures hold secrets for companies who want to be successful. In looking at AOL and TechCrunch, the insignificance of the financial rewards, need to take employees at their word, and value of cultural alignment provide clear take-aways for firms looking to thrive. It’s not just about what looks good on paper – to avoid your own dramatic mistake in the marketplace, you have to consider the deeper issues.