Ranked among the largest privately held United States corporations, Carlson Companies Inc. (CCI) is a global leader in the marketing, travel and hospitality industries. Based in Minneapolis, Minnesota, Carlson Companies employs about 190,000 people in more than 140 countries. Carlson Hotels Worldwide, one of the key businesses of Carlson Companies, encompasses five major hotel brands: Regent International Hotels, Radisson Hotels & Resorts, Park Plaza Hotels & Resorts, Country Inns & Suites by Carlson and Park Inn Hotels.
The ChallengeAccording to Jay Witzel, CEO, Carlson Hotels Worldwide (CHW), the “journey of transformation” began for Hotels in 1996, when they restructured the organization to create teams of shared services to support their branded hotels’ operating companies. They termed the transformation they embarked upon at that time “Project Enterprise,” a vision to transport Carlson into the 21st century.
Concurrently the parent company, Carlson Companies, Inc. had adopted a long-term growth plan based on five strategic imperatives/attributes: To be customer focused, global, knowledge-based, strategically-integrated and best in class. The master plan focused on how to change Carlson to manage the distress in the marketplace and set the direction for the future. Their goal: to become the “most respected private company on earth.”
Then, in 2001, Carlson encountered “the perfect storm,” a set of circumstances that changed their world forever. The softening global economy had taken its toll on the travel industry. The travel and marketing businesses were in decline. The events of September 11, 2001 sent the industry into a "free fall.” All of these events conspired to build a business case for accelerated change and motivated the organization to move forward aggressively. In fact, “the circumstances made it necessary and, therefore, easier to make a dramatic change in the way we were doing business,” stated Witzel.
In assessing Hotels’ business model, Witzel realized they had seven competing businesses fighting for human and financial resources and capital—the most limited resources of the company. He determined Hotels needed to completely change the way they were running their business and made the decision to embark upon a comprehensive effort to completely transform the business. Assisted by Trudy Rautio, then President, Carlson Hotels Worldwide, the Americas, and Paul Kirwin, President, Carlson Asia Pacific, Witzel and the entire senior leadership team met every week for over two years to ensure they executed their strategy correctly.
The StrategyAt the heart of the transformation, CHW created a totally new organizational structure. In place of seven competing businesses they created One Hotel company with Five Brands operating in three dominant global theaters—Americas, Asia-Pacific and Europe/Middle East/Africa. They made some very difficult decisions, closing two business units and restructuring three. (The five resulting brands include Regent International Hotels, Radisson Hotels & Resorts, Park Plaza Hotels & Resorts, Country Inns & Suites by Carlson and Park Inn Hotels.) They put human capital where they could do the best job; there were few terminations, yet many changes in position. In fact, as of 2004, 85% of the leadership team are in new positions.
Concurrently, they applied financial capital where it would produce the best return on investment. They increased their back-office efficiencies by consolidating support functions into a matrix organization that revolves around Centers of Excellence—in accounting, human resources, public relations and information technology. They consolidated their marketing efforts as One Carlson and sought development opportunities for all brands. As Witzel puts it, they started “working smarter, not harder.”
They currently have 897 hotels operating in 69 countries.
The ResultsWhat were the direct results of their transformation efforts?
• In 2001, CHW’s overall operating margin was 11%; in quarter 2 of 2004, it was 19.4%.
• In 2001, CHW’s franchised operations margin was 15%; in quarter 2 of 2004, it was 29.6%.
• In 2001, CHW’s managed and franchised operations combined operations margin was 13.7%; in quarter 2 of 2004, it was 28.8%.
Witzel identified the following actions as keys to their success:
• They engaged employees from all levels of the organization
• They clearly painted a case for change
• They used the Balanced Scorecard, supported by Rembrandt, a software tool that delivers scorecard results to every desktop in the company
• They had a strategy map
• They received help from organizational change expert Bill Adams and his company, Full Circle Group
To accomplish these changes, Carlson Hotels used several different resources. GE’s Six Sigma process helped them identify how to conceive and deliver better products and services within their businesses. The Balanced Scorecard provided the focus for their change process, helping them measure their organization from four different perspectives: learning and growth, business process, customers, and financial data.
Additionally, Full Circle Group helped them think through and plan their strategy for execution, leading the executive team through Mission, Vision and Values sessions and helping them identify their intended results, the key behaviors driving results, operational alignment driving behaviors and leadership direction. Full Circle Group's Whole Systems ApproachSM change management model provided the framework for making decisions. CHW created a “road map for change” that served as a communication tool to engage the hearts and minds of all employees and to increase understanding and deal with the natural resistance to change and fear of losing jobs.
In aligning Hotels with the corporate vision of One Carlson, one of the most important concepts was “customer centricity”— thinking first and foremost about the customer and what they are getting out of their experience with Carlson. In fact, at the recent All Carlson Forum, Carlson Companies CEO Marilyn Carlson Nelson emphasized that “customers are shared assets; no one (company or business) owns them.” Carlson’s strategy is to deliver their family of businesses, offering all of the Carlson products, services and experiences to their customers throughout their lifetime. In essence, every Carlson employee’s role in the enterprise is to serve the customer as representatives of their brands as well as representatives of Carlson. Carlson’s Gold Points Rewards Program gives customers the ability to collect and redeem frequency credits across many of the company’s operations.*
Their goal is also to “become the most respected company on earth” as a direct result of their superior relationships—with each other as well as with their customers. Carlson’s leadership understands this is a unique differentiator in the marketplace. They have chosen to differentiate Carlson by the quality of their relationships. And Hotels has embraced and supported this vision throughout their transformation.
Most importantly, they have learned from their mistakes. One of Carlson’s key strategic drivers is “transparency—telling it like it is.” When they fail, they assess what went wrong and take steps to correct it in the future.
Witzel acknowledges, “It’s the people who made the difference. Four of the strongest thought leaders during the transformation moved into key positions in the newly structured organization. The businesses have moved from internally competitive to cooperative. And the new credo of Carlson Hotels Worldwide is ‘Everything starts and ends with the customer’.” Their blueprint for the future at Carlson Hotels Worldwide clearly reflects the corporate vision articulated in their strategy statements:
• The overall Carlson vision is to become the most respected private company on earth through having great relationships, and we’ll get there by building the team, satisfying the customer, delivering our family of businesses and working smarter, not harder. For Carlson Hotels Worldwide, this means our vision is to become the most respected hotel company on the planet, and we’ll get there by focusing on these four areas:
• Innovate (Work Smarter, Not Harder)
• Drive Profitability and Growth (Deliver the Family of Businesses)
• Engage (Build the Team)
• Always Focus on the Customer (Satisfy the Customer)
Witzel acknowledged one final component of their transformation. “We’ve created a culture accustomed to change.” As we increasingly recognize, “continuous change will be the methodology of the day. Longterm success means continuous change.” And Carlson Hotels Worldwide is change-ready.
*In 1938 company founder Curtis L. Carlson launched the Gold Bond Stamp Company, a precursor to today’s Gold Points Reward program.