Dr. Evil and The Art of the “Stay Bonus” at Yahoo…..

Kris Dunn Kris Dunn, Retention, Total Rewards

Been involved in acquisition lately?  Was there knowledge at play? (and really, when is it not?)  The type of knowledge that if it walked out the door when the acquirers walked in, the whole thing would be hosed?

If you answered yes to these questions, then you’ve invariably been involved with discussions regarding stay bonuses – the type designed to lock in key talent at the acquired company for at least as long as it takes to figure out how to unlock the thermostats and get a coffee pot count…

I’m serious – I’ve seen a due diligence checklist with "number of coffee pots" on location checklist… Let’s see…meet with the employees…check….find out who knows what about the product/service we just bought…check…get a count of creamer packages from the kitchen…check. 

Of course, in the show, they worry about bigger matters.  Like keeping the sales price as low as possible because stay bonuses are going to cost a couple of B-B-Billion. 

More on the art of rentention should Microsoft acquire Yahoo from the New York Times:

"Last May, Microsoft bought Tellme Networks, a maker of voice-recognition software used in directory assistance and for searching the Internet through voice commands. Microsoft paid $800 million for Tellme, a private company based in Mountain View, Calif., but it put in another $100 million for employee retention programs, according to two people close to Microsoft. That figure has not been previously disclosed.

Cash payments, stock options and grants to encourage employees to stay after a takeover are fairly standard in Silicon Valley, venture capitalists and industry analysts say. These incentive plans, they add, can extend deep into the engineering ranks, unlike the situation in most other industries where retention packages, or “golden handcuffs,” are typically offered to a handful of top executives.

For Tellme, which has 330 employees, the money set aside amounts to more than $300,000 for each worker.

Yahoo is a much larger company, with more than 14,000 employees worldwide. And if Microsoft acquires Yahoo, any employee retention effort would probably be more tailored and less broad than for Tellme, analysts say. But even a program proportionately much smaller could add another sizable expense, perhaps a couple of billion dollars, to the overall cost of bringing Yahoo into the Microsoft fold, analysts estimate."

Here’s a snippet of how the stay bonus planning session went at Yahoo last week.   You never know until you ask….