Company mergers don't have to mean bidding farewell to employees and their knowledge
The merger of a small and a midsize company almost always proceeds in the same way: the smaller company is shut down and everyone is moved over to headquarters. But with the scarcity of skilled workers these days, companies that try to force their employees to move may well find that their intellectual capital takes flight. And that defeats the whole point of the merger.
Last year Hospitality Solutions International Inc. (HSI), a maker of computer systems for hotels, restaurants, and country clubs, decided to take a radically new approach. In January 1999, HSI, based in Boca Raton, Fla., acquired a smaller company based in Scottsdale, Ariz.: Global Hospitality Solutions, a maker of property-management and central-reservation systems for hotels.
What made the acquisition possible was that the companies decided early on in their negotiations to leave their combined 250 employees just where they were -- at one of two company headquarters, at sales and service outposts, and in home and hotel offices. The decision meant the new company would have to operate virtually -- something neither of the companies had much experience with.
By going virtual, the new company achieved its most important goal: hanging on to its employees and their knowledge. And it transformed two regionally based companies into one with a national scope. In addition to its two hub offices, the new HSI was left with sales groups in Chicago; Dallas; Minneapolis; Portland, Oreg.; and Costa Mesa, Calif.; as well as individuals scattered across the country. Last year it posted revenues of more than $30 million and completed more than 2,600 installations. Its customers include restaurant chains Chart House and California Pizza Kitchen, and the DoubleTree hotel chain. In the next two years HSI plans to add 50 more virtual workers -- trainers and support-service staff who will use their laptops, E-mail, and an online help desk to do their jobs.
HSI, a 1997 and 1998 Inc. 500 company, has always prided itself on innovation. It claims to have offered the first Windows-based point-of-sale system for restaurants. Global Hospitality Solutions was also an early pioneer, with its Windows-based systems for hotels, and in 1997 Global won the Microsoft Retail Application Developers Award for an NT/SQL-based software application for its reservations system. Both companies used direct sales as a selling point at a time when their competitors were still depending on dealers and distributors. And just four months after the merger, the company premiered a Voice-Link product that lets waitpersons speak orders directly into point-of-sale systems.
In such a culture, the decision to go virtual and embrace the tools that accompany such a move was a natural one. HSI had always had remote workers who operated from home and employees who were comfortable using their laptops while traveling. But having more than one headquarters meant that all employees would be working virtually with other parts of the company every day. And that has required a new virtual infrastructure.
Jim Carlson, CEO of HSI while the acquisition was in the works, has identified seven practices that enable HSI to manage a conglomerate of businesses and employees so it can operate as a unified entity:
1. Get the right fit. In a merger and acquisition, the larger or acquiring company typically sends its managers to check out the other company, but Carlson arranged for key managers from Scottsdale to travel to Boca Raton as well. At the initial stage of negotiations, he believes, there's no substitute for face-to-face interaction. What the two sets of managers discovered was a shared culture of openness and flexibility, with a willingness to try new ideas in everything from production to organization. The companies fit together nicely in other ways, too: HSI had a chief financial officer and strong sales and marketing departments, which Global didn't have, and Global brought a more accomplished SQL programming department to the table.
2. Cross-pollinate senior staff. Carlson shuffled the senior management team to incorporate key people from both cities. He appointed Global CEO George Zugmier and COO Doug Royse as president and chief technology officer, respectively. And George Stemper, who had been a manager in Boca Raton, moved to Scottsdale to head the hotel-sales organization. Carlson remained as chairman and CEO until his retirement.
3. Rotate senior staff. Zugmier and Royse continued to maintain offices in both Boca Raton and Scottsdale and spent about two weeks a month at each office, rotating so that one of them was always at one of the locations. HSI keeps corporate apartments in both cities for managers to use. Other senior managers also travel periodically to the "other" hub city as well as to the sales offices. In addition, senior managers worked virtually from home a couple of days a month so that they could better understand the challenges faced by employees who work that way all the time. What they found was that their computer connections were too slow, busy, or prone to cutting out -- something not so apparent when they were only picking up E-mail on the road. HSI has since invested in faster servers and put in a T1 line to replace its ISDN lines.