In a perfect world, increasing size and scale should lead to operating efficiencies, improved profit margins, a strong growth trajectory (both per unit and in the number of units), career opportunities for employees, and competitive prices and options for customers. Unfortunately, that is not always the case.
Contributed by Mark Sherwin, Strategic Solution Partners, Oakton, Virginia.
Many companies look to grow through mergers/acquisitions for other strategic reasons – vertical integration, entering new markets, or changing a business model and, historically, only 53% of mergers/acquisitions involving public companies actually deliver increased shareholder value. When motivated primarily by size and economy of scale, the success rate is higher, but those that ignore the human capital side of the equation and compatible cultures face many more obstacles.
Examples of cultural incompatibility causing problems after mergers can be found across many different industries (eg. Amazon/Whole Foods, Daimler Benz/Chrysler, Sears/Kmart, AOL/Time Warner, Nextel/Sprint, etc.) and hospitality is not an exception. The good news is, however, that the difficulties hotels face when driving towards operational efficiencies generally fall into only a few categories and can be solved before the culture clash causes unnecessary friction.