Chapter 57: Due Diligence

May 13, 1995, Chicago, Illinois

“My temperature is correct,” Michelle said on Saturday morning. “I need to call Doctor Robertson and go for a treatment.”

“OK,” I said. “Let’s see if the second time is the charm.”

“You didn’t say anything yesterday or last night, but are we staying together when we travel?”

“Yes. We’ll be at the InterContinental in Dallas, but at Hiltons in Reno and Raleigh. Assuming you want to, that is. I can call Barney to change the reservations if not.”

“Do that and your succession plan will be implemented!” Michelle said fiercely.

We laughed. “Birgit might not take that calmly!”

“I’m sure she wouldn’t! I’m going to take advantage of the situation!”

“Let’s get showered so you can call Doctor Robertson. I’ll need to get to breakfast, anyway.”

We got out of bed and took a loving joint shower, and then went downstairs. I met Birgit in the sunroom and we cuddled until it was time for me to leave for breakfast. Jon joined me, and we headed to Bucktown to meet the guys.

“I see you had a busy week,” Kurt laughed when we walked in.

“Sorry I couldn’t give you guys advanced warning.”

“How’d you manage to pull off buying your largest competitor?”

“Good timing,” I replied with a grin. “Let’s sit down and I can tell the story once, rather than a dozen times!”

When all the men had arrived, I explained how I’d heard the rumor that Lone Star was for sale, and called to suggest we could offer better terms, and how things had gone from there. I also let them all know I’d be traveling quite a bit over the next few weeks, but that Guys’ Nights were still on.

When we finished breakfast, Jon and I headed home, and then I walked to karate with my wives and Birgit. I worked with Marcia and explained my situation to her. She was disappointed and concerned, but I reassured her I’d work with her on Saturdays and that Sensei Jim would work with her during the week while I was away. I made sure she knew I was supremely confident in her ability to win the tournament. When we finished, my wives, daughter, and I returned home.

“How did it go?” I asked Michelle after lunch.

“Let’s just say the natural way is a LOT more fun!”

Jessica laughed, “If you didn’t think that, I’d really worry! Although, there are people who do suffer from Munchausen syndrome. But I don’t think you’re mentally ill.”

“I’m living with Steve...” Michelle smirked.

“Well, yes, but then we’re ALL mentally ill!”

“You said it, Babe!” I said piously to squeals of protest from my wives and Michelle.

“Dad?” Jesse said, coming into the ‘Indian’ room. “It’s time to leave for my hockey game.”

“OK. Let me put on my shoes and I’ll meet you and your moms at the car.”

I kissed my wives and Michelle, put on my shoes and walked out the back door and got into Jennifer’s new Lexus GS300. I’d been surprised that Jesse’s goalie gear fit in the trunk, but Jennifer had verified that before she’d purchased the car.

“The Penguins are in deep sneakers, Dad!” Jesse teased as Jennifer backed out of the driveway.

“I don’t see any Ducks in the playoffs! They aren’t so ‘Mighty’, are they?”

“Boys...” Josie sighed.

“Forget it, Jos,” Jennifer laughed. “Those two are worse than Jesse and Birgit when they get going!”

“We are NOT!” Jesse and I both said firmly, smirking at each other in the back seat.

“The Blackhawks play tonight, right?” Jesse asked.

“Yes. They’re in Toronto. The Penguins play tomorrow in Pittsburgh. Who do you think will be champions?”

“Blackhawks or Devils.”

“I think the Red Wings or the Devils,” I said.

“If we win today we get to play at the United Center during intermission next season!”

“That will be totally cool. What would it be? Ten minutes?”

“Yes. Before they run the Zamboni.”

Jesse’s team did win their game, and he came close to getting a shutout, giving up a late goal when the other team pulled their goalie to try to make up a two-goal deficit. That meant that during some Sunday afternoon game in the Fall, Jesse would get to meet the Blackhawks players and skate on the United Center ice.

May 15, 1995, Dallas, Texas

On Monday, Cindi, Dave, Keri, Sam, Kajri, Terry, Michelle, and I were in the Lone Star offices to begin our due diligence review. My first order of business was to sign the sales agreement for the Lone Star software with Manny Nuñez, and then sign a licensing agreement so that Lone Star could continue to use the software during the due diligence period. Once the documents were signed, I contacted Stephanie to make arrangements for PP LLC to transfer the funds which would be segregated and distributed to the shareholders after the ninety day waiting period. With that completed, NIKA’s defenses against any move by Dante were in place.

Once that meeting ended, Dave, Cindi, and I sat down with a printout of staff titles and salaries, and compared them to our pay scales. For the most part, there were no major discrepancies. The major exceptions were developers and, to nobody’s surprise, the receptionist. She’d get a fairly significant raise, and be eligible for a bonus, which was not the case under her Lone Star compensation.

“We’re going to have some serious issues with these developer salaries,” Dave said. “And with titles.”

“I don’t have an issue with adopting their ‘Software Engineer’ title,” I said.

“What about using ‘Associate’, and ‘Senior’ instead of ‘I’ and ‘III’?” he asked.

“I’m fine with that as well. The problem, obviously, is three ‘Principal’ Software Engineers. Sam is our only Principal Engineer and I don’t want to change that. Technically, I have that title as well, and I’ll revert to it in a few years when I’m finally able to get out of the big chair. And honestly, I’m OK coming up with some other title for me, too.”

“We’re probably going to want to distinguish you in some way,” Dave said. “I think Apple uses ‘Fellow’ for their highest level.”

“I’m not sure I like that term,” I said. “It kind of implies that one has accomplished a Fellowship. Maybe it’s just knowing that Jess will be Fellow of the American College of Surgeons and that Doctor Jon is a Fellow of the Royal College of Surgeons. It makes me a bit uncomfortable.”

“Then we’ll worry about it when the time comes,” Dave said. “We have three or four years to figure that out. What do we do about the three individuals? And their salaries?”

“If you look at the total compensation packages, it works out to about the same as our top people with the longest experience. I think we can manage it that way - that their base would be reduced but their bonus potential would increase. It’s similar to what we’re going to do to try to head off the problem with the female engineer, Skye Gaston, who is terribly underpaid. As you can see, she makes less than some of the regular Software Engineers, and she’s a ‘Senior’.

“I think part of the problem is trying to map four levels onto three,” Cindi said. “But unless we come up with some other title for Sam, there isn’t really anything we can do, unless we just go with numbers.”

“We could do ‘Associate’ for new hires,” Dave said. “And then have Software Engineer I and Software Engineer II before Senior Software Engineer.”

“That still doesn’t solve the problem,” I said. “To be blunt, we all know that we’re going to, one way or the other, get rid of Lone Star’s code. Based on what Julia said, I think my idea of creating new front end screens is going to be the most effective way forward. We then upgrade each Lone Star customer. Yes, we have to maintain two interfaces, but we can, over time, create a unified interface.”

“‘Boiling the frog’, so to speak?” Cindi asked.

“Yes. In effect, we convert Lone Star’s customers to NIKA’s software without them realizing it. And then we move towards a unified GUI.”

“That’s a lot of work,” Dave said.

“Worse than retraining all of the Lone Star customers?” Cindi posed. “And dealing with the massive pushback?”

“I hadn’t considered that, obviously,” Dave said, stroking his chin.

“I still say you need a beard to do that!” I chuckled.

“Fuck you, Boss!” Dave laughed. “But the idea does have merit. I’ll need to sit down with Sam and Kajri and get their take on it. What does that buy us?”

“We keep all the engineers on staff until we get the August 1st release out the door and it’s stable. They’re in their final beta now. I’d say sometime around Halloween we’d be in a position to decide what to do about the engineering team. We’d absolutely have to keep enough to do bug fixes, plus work on the revised GUI. We might even be able to reuse some of their code. That’s what you’ll need to figure out, Dave.”

“So of the eleven developers they have, we’d keep at least three?”

“Unless you tell me otherwise, that sounds about right,” I said. “Obviously, if you have other open positions, you could move some of those other eight into new roles. Well, assuming that’s the number we come up with.”

“Would you cut their salaries, knowing they wouldn’t be getting bonuses next year?”

“Let’s at least get a cursory code review done, and talk to the staff before I decide that. You know some of them are probably already thinking of leaving.”

And possibly all of them, depending on what Dante’s next move would be. My goal was to ensure we kept at least two of the current developers, something that might or might not be possible. We had, effectively, one shot to make our sales pitch and hope that we could keep them. If they left before August 1st, we might have to delay, or even cancel, the release.

Dave nodded, “Because no matter what we say, they’ll think Lone Star is being closed down. Which it is.”

“In a sense, yes, but we’re going to keep as many people as we’re able to, as opposed to only hiring three from BLS. Well, four if you count ‘K’ asking for a job. Maybe we have enough work for all of them. Maybe not. You need to figure that out.”

“So what are you going to do about Skye?”

“That’s a tricky situation and the goal is to ensure she doesn’t sue Lone Star, Dallas Capital Partners, or NIKA. Leave that one to me. Cindi, do you see any issues with compensation on the sales or support team?”

“No. We pay better for support roles. Would you be OK with changing titles to Customer Service Engineer and Senior Customer Service Engineer?”

I chuckled, “So now everyone is an engineer?”

“That does seem to be the trend. We’ve seen it at SPSS, FFM, and several other customers we do consulting or on-site support for.”

“OK. I’ll leave that to you. Let’s go talk to the new troops. We’ll meet at 4:00pm with our entire team to get reports.”

I spent the rest of the morning talking to the Dallas-based staff, spending ten to fifteen minutes with each person, ending right before lunch with Skye Gaston. I hadn’t detected any hints of Dante having offered them positions, or even having talked to any of them, which didn’t really surprise me. I hadn’t been able to talk to Nathan, the VP of Development, because he’d decided to use some of his accrued vacation time. I suspected, strongly, he was in Atlanta, but had no reasonable way to prove that.

“Where did you work before you came to Lone Star?” I asked Skye, who I estimated was twenty-eight.

“A contract programming shop in San Francisco. You can probably tell from my name that my parents were Hippies. I was born in Haight-Ashbury.”

“My friend Melanie, who’s an attorney, was born in a commune in Berkeley. Her parents became boring middle-class adults.”

Skye laughed, “Mine, too.”

“How’d you end up here?”

“My ex-boyfriend. We met at Berkeley, and he came to work for Sunbelt Savings when he graduated in 1989. We did the long distance thing for two years. I got the job with Lone Star and moved here just in time for Sunbelt to collapse and be taken over by the federal government. He left Sunbelt and went to Michigan to work for a bank there. I decided not to go because I discovered I like working here more than I liked him.”

“Do you still like working here?”

“Yes, but, well, I’m not quite sure how to broach this.”

“You can say anything you want, freely, with no recriminations and no negative repercussions. I value honesty and forthrightness. Feel free to ask Kajri or Sam if you like. Sam is our Principal Engineer - the most senior technical person at the company who is not in management.”

Skye was quiet for a moment, then nodded, “I guess it seems like there’s an ‘Old Boys’ network here. What really drove that home was your visit last Thursday and then again today. All your senior managers, except one, are female. And you only brought female software engineers with you. Let’s just say I don’t think anyone here would ever consider something like that. Heck, there are only four women in technical or sales positions. Women are mostly administrative staff.”

I smiled, “I doubt anyone has mentioned it, but our receptionist is a guy - Lucas North. And, our Board Chairman is female, and so is the PhD computer scientist who sits on our Board.”

“Why?”

“Because they’re smart, competent, and I trust them implicitly. Last I checked, it doesn’t require a Y chromosome to do a good job in any position, except for being a dad.”

“How did a Chicagoan become so enlightened? Midwesterners aren’t usually known for being progressive.”

I laughed, “I’m anything BUT progressive. I’m a fairly radical libertarian. And an extreme capitalist. I think it’s in my best interest to hire the best people, without regard to sex or race, properly reward all of my employees for the firm’s success, and recognize talent wherever I find it.”

“Interesting. I’d have expected an extreme capitalist to try to keep all of his money.”

I shook my head, “Money is simply one tool among many, and it’s not the thing that makes me happy. I believe I’m entitled to keep what I earn, and share it however I wish. I think it’s in my best interest to share it the way I do.”

“May I ask what might be a totally inappropriate question at this point?”

“Sure.”

“I got a look at your salary schedule. Is that really what we’ll be paid once the merger is complete?”

“It is. Do you have a concern?”

“Let’s just say that circumstantial evidence suggests I’m not paid what the boys are.”

“I can’t comment on that, obviously, but what I can say is that NIKA is completely transparent in that regard. You will know exactly what each of your colleagues earns in salary, to the penny. Commissions and bonuses are paid according to specific guidelines, which are also published. So, if you looked at the salary schedule, found your level and years of service, then yes, that is what you’ll be paid. We’re also offering retention bonuses to certain key staff, and you would be eligible for a significant bonus if you agree to stay at least two years.”

“You’ve barely spoken to me!”

“You’ll discover that I can get a pretty good feel for people in the first few minutes. I also took a moment to look at your personnel file before I came to talk to you. You’ve had excellent reviews since you started here. Out of curiosity, and without making any promises, would you be willing to move to Chicago if we had a different role for you with more responsibility?”

“I’m not tied to Texas beyond my apartment lease and some friends. But now I’m curious about your long-term plans for this office.”

“I’d say the odds heavily favor keeping a presence in Dallas. Long term, as I said last Thursday, we have to determine what the Lone Star and NIKA customers need. Once we do that, we can make a determination about where we have our development and support teams. I will say this - we do have a developer working in Colorado Springs at the moment. She’s a maintenance engineer, doing bug fixes, and moved there earlier in the year. Please don’t draw any conclusions from my question other than the fact we hope you’ll have a long, successful career with NIKA.”

“This is totally not what I expected when I first heard the rumors about Lone Star being for sale. We all expected to pretty much lose our jobs immediately. I sent out résumés as soon as the rumors started flying, and I’m sure many of the other developers did the same.”

I nodded, “That would be a normal reaction. I honestly don’t think you’ll find a firm with better benefits and a better culture. In fact, if you haven’t looked around recently, go ahead. I think we’ll measure up against any other place you might consider. We recognize and reward talent and we want you to stay.”

“I feel a lot better now than I did when I came to work this morning.”

“Good. I’ll be here until tomorrow evening, when I’m heading to Raleigh and then Reno. Let me give you my mobile phone number. If you think of ANY questions, or have any concerns, call me.”

“Thanks,” she said with a smile.

“You’re welcome!”

Cindi, Dave, and I joined Manny and Brad for lunch at a local steakhouse, then headed back to the office for an afternoon of reviewing company policies, contracts, leases, and other documentation. We assembled at 4:00pm as planned for a debriefing. I called on each person in turn for their reports.