Computer Business Review

GLASNOST, STAFF OWNERSHIP AT COMPUTER MANAGEMENT GROUP MAKES DOUG GORMAN A HAPPY MAN

by CBR Staff Writer| 11 June 1990

Full disclosure of everyone's salary - from computer operators to the managing director, and employee ownership of over 85% of company shares may not be the most conventional way to run a company, but for CMG Ltd, it's proved to be a very successful philosophy. From its humble beginnings in Doug Gorman's basement, Computer Management Group is now one of the largest suppliers of computer services and systems in Europe, with a 1989 turnover of almost UKP90m and pre-tax profits of UKP38.5m. With the flotation of national companies such as British Gas, mass ownership of shares is now an accepted feature of company ownership. In 1968 when Gorman and co-founders Bryan Mills and Bob Fawcett decided that employees would work better if they directly owned some of the company, it was less common. But even at CMG, the concept was applied somewhat tokenistically, until 1982 when Bryan Mills retired. Up to then the three founders had held 75% of the shares between them, but when Mills went, the founders' interest dropped to 47% and for the first time staff had the majority share. Mills' holding was sold for UKP1.2m. Doug Gorman describes the decision not to go public in 1982, but to sell only to the staff instead, as the single most important decision he has made at CMG. He views the stock exchange with mistrust, saying it is too short-term and concerned with quick profits. And he believes staff ownership, along with an open atmosphere, has been a major contributor to the company's success. Denzel Sequeria, international director and in charge of internal communications admits that there can be some tension when, for example, younger and newer members of staff are openly paid more than more established people. But he says that these tensions occur in companies anyway, and having open personnel files diffuses a lot more trouble than it creates. To ensure equity of ownership, no employee is allowed to hold more than a 5% interest, including Gorman himself, the only remaining founder, who is currently reducing his 17% stake to comply with the rules. Shares are independently valued every June, when there is a special in-house trading day. The current share value is UKP4.60, compared with UKP3.20 last year. Dividends of half of the company profits are also paid anually. The company is split into three main market areas, providing consultancy and data processing systems and support across each. Business services includes the payroll systems developed, implemented and supported by CMG, such as Payfact 2000, manufacturing and distribution and financial and government which includes the Fact2000 financial accounting software.

Consultancy

Financial and accounting provides slightly more revenue than the other two which are about even. Because of falling prices for both software and microcomputers, Gorman says the future for CMG will probably increasingly lie in consultancy, although the group has just acquired three payroll companies as part of its aim to lead Europe in these systems. Advice packages such as Clovis, a methodology for accessing spatially related information from databases and integrating them into other company databases will become increasingly important to revenue. As for further geographical penetration, the company intends to confine itself to Western Europe for the time being. At the moment 95% of sales are made in the UK and the Netherlands, where Gorman is based in Amsterdam. Germany accounts for the other 5% and Gorman says that when the German operation has doubled in size he will consider fresh ground, probably France; there are no plans for Eastern Europe yet. The target for the 1990s is to become a UKP1,000m business by the end of the decade, through organic growth and aquisition. Asked if with hindsight, he would have done anything with CMG differently, Gorman replied, with my hand on my heart, I can honestly say that I'm perfectly happy with the way the company has gone. - Sonya McGilchrist

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