Allan Leighton: Royal Mail, Asda and Lastminute.com
Pluralist non-executive director and Royal Mail boss Allan Leighton shares his business secrets
As told to Startups.co.uk in 2003Allan Leighton, 49, has come a long way since his days as a Lloyds Bank clerk straight out of North Oxfordshire Poly.
These days, the Hereford boy who sold Asda to the Yanks for £6.7bn is trying to sort out the chaos that is Britain’s Post Office. That’s when he’s not chairing Lastminute.com, Bhs, housebuilder Wilson Connolly and fitness chain Cannons, sitting on the board of Dyson and BSkyB, or sorting out a boardroom brawl at Leeds United (yes, he is a non-exec there too).
Here he tells Growing Business why small is beautiful, how he would like to be fired and how he really feels about leaving former Kingfisher chief exec Sir Geoff Mulcahy at the altar in 1999.
Your image is one of an entrepreneurial businessman and guru for the business-owner-manager. Where do you think this perception comes from, given that you have only ever worked for big businesses?
I don’t know why I’m seen as an entrepreneur. All I am is a businessman and all I try and do, largely because I’m not smart enough to do it any other way, is keep things very simple. That seems to appeal to small businesses.
One of the few things you have not yet done is build up a business from scratch. Could you do it?
I think it’s very hard to start from scratch. I’m involved in two businesses where that happened. I chair Lastminute.com, which really was created in a bedroom on a laptop and I’ve seen what’s needed to go into that. The second one is Dyson, on whose board I sit, and James worked for 20 years before he got anywhere. It would probably not be something I’d be particularly good at, because I don’t have the patience. I don’t think it’s to do with scale: if you can run a business, you can run any business. But I think starting businesses up is a different skill.
What do you think smaller businesses can learn from big business and what do you think smaller businesses do well?
Small businesses are much more focused, much leaner, much more innovative than big businesses. The thing that big businesses can learn from small businesses is to be small. That’s not in terms of size; it’s to do with the way in which you manage the business. An interesting example is [Wm Morrison chairman Sir] Ken Morrison, who runs his supermarket chain as if it were a very small business. Wal-Mart is the biggest retailer in the world, but the way that it thinks is as if it only had one shop. If you look at the very successful big businesses, they act as if they were a small businesses. I think there is much more learnt by big business from small business than the other way round.
What attracted you to corporate basket cases like Lastminute.com or the Royal Mail?
Two things. There is nothing better than being told: “This cannot happen, you’ll never be able to do this, you must be mad.” That’s quite potent for me. The second thing is that you can only turn those basket cases around which are fixable. For them to be fixable they need great brands and a product which is a pretty good idea. We deliver all the bloody mail, so it should be a good idea! Lastminute is the best thought through brand I’ve ever seen come through so quickly, because it does exactly what it says on the can. I love brands where the title tells you what it does. And it makes it very easy for us running the business to know what our bloody product is.
Are the disciplines you bring to each company the same?
Yes. It’s a discipline in the way you think about things, not a discipline in the way you do things. All I try to do in all the businesses is make them think about things in a disciplined way rather than a spray way and I cause havoc in a positive sense because I understand the detail of stuff. I work on the principle that getting the strategy right is the easy bit and it’s the execution that is hard work. It doesn’t matter who you are, if you are on the board of the company, you’d better understand whether the execution’s working or not and the only way to do that is turn up in places and ask people things.
You are very candid about the Royal Mail’s chronic management failure. Is that an approach you have always employed? How do you avoid demotivating staff with that approach?
I’ve always been the same. The people who know what’s going on are the operators and the customers and if you ask them what they thought about the management of Royal Mail they’d say exactly the same thing as me. So there’s no point pretending it’s any different. Half the time, if you want to create change you have to say to people: “We got it bloody wrong.” Even if you’ve been there a few years and you bugger it up. You can’t stop demotivating staff, but what is the point in pretending that something is not what it seems to be? And actually in the case of the Royal Mail, as soon as I started to say the management’s completely buggered it up, the morale of the troops went up because it was the first time they’d actually heard somebody say that.
Do you agree that the skills needed to turn around a failing company are different from those needed to grow a company?
No. Largely the company has failed because it hasn’t put in place the things that work in a growing company. They are exactly the same skills, you just start in a different place. Because if a business is not performing it’s largely because it’s not doing any of them, so you just have to start working your way through them. There are four sets of companies: bad, average, good and great. The art is: if you are a bad company the first place you move to is average. If you are a good company, you try to be great. Most companies are average to good. The test for companies that are growing is: if you are average can you become good, if you are good can you become great? You can stay great if you keep doing the things that made you great.
Wal-Mart’s takeover of Asda in 1999 was one of the most important UK corporate deals of the nineties – how did it feel to be involved?
Fantastic. It was the last chapter in the book. If we could have written the book when [then chief executive] Archie [Norman] and I went into Asda, chapter one would be when we were in £1bn worth of debt, just about to breach all our banking covenants and with a market cap of £400m. Chapter 15 would be when it had been sold to the biggest retailer in the world and the one who we’d, to a degree, copied the business on. And we got £7bn for it and every single person in the company got a share of that.
Many onlookers interpreted your role as taking Kingfisher to the wire only to break the deal at the last minute in favour of Wal-Mart. This has since been credited as the deal which broke former Kingfisher chairman Sir Geoff Mulcahy.Obviously, you were bound to serve shareholders’ interests, but how did it feel on a personal level to effectively stab Kingfisher (and Mulcahy) in the back?
It’s always difficult on a personal level, because you build a personal relationship up. But in the end, you’re paid to get shareholder value and that’s what happened.
Have you ever felt bad about it, either at the time or since? Are you on speaking terms? How can you feel bad about it? Asda has gone on to become the greatest success. The absolute test of what you do has to be: is it good for customers and is it good for your people? How it is for others and how it is for you should be down the pecking order. That was a transaction that has transformed the whole market. I would absolutely speak to Geoff if I saw him. Life’s too short. Geoff’s been around.
How important is it to separate the personal and emotional from shareholder value in business? Is there anything you wouldn’t do in the name of shareholder value?
You can’t be led by emotion. You have to do the right thing. You know what’s right and what’s not. When you run these businesses you’ve got a huge responsibility, whether it’s a one-person business or a quarter of a million people. In the tough stuff, you have to be quite ruthless, but that doesn’t mean you don’t do it with respect. If I was ever fired, how would I want to be fired? I’d want someone to sit me down, say: “It hasn’t worked out, these are the reasons why and therefore we think it’s time to move on. Now, whatever we can do to help you, we are quite prepared to do.” These things can never be personal. When they are personal, you’ve got a bloody problem. Sometimes you have to get rid of people who you actually like and often you end up working with people you don’t like, but it doesn’t matter how you feel about the individual, it’s how the individual performs. In the Royal Mail, we made 30,000 people redundant, which probably goes down as one of the worst decisions I’ve had to take in my life. We had to do it because it was right for everybody else who remained in the company and it was right for our customers.
You went to Harvard Business School during your time at Asda. Many GB readers, who are self-made owner-managers, scoff at the idea of business school. What did it teach you that you couldn’t have learnt on the job before or since?
I was very fortunate: I went to business school when I was 40, which is slightly different from going when you are 14! Therefore I went having been in businesses for 18-odd years. There’s a great advantage to being at business school when a lot of the stuff isn’t going over your head and it’s all very practical so everything that’s being talked about makes you think: “I can use that, I can use that, oh no I don’t agree with that.” And I was there with 40 people who had also been in business for 18 years, so it was very potent. You are prepared to accept the learning, you are not under the same degree of pressure (ie: you don’t have to get an exam at the end of it) and actually everything isn’t theoretical. You can argue with the professors and say: “That’s complete bullshit; it doesn’t work like that!”
Is there a ‘British’ attitude to business? If so, what is it and what is good and bad about it?
I don’t think there is a British attitude to business but I think that ways of doing business in Britain are different to ways of doing business in America, which are different to ways of doing business in France. That’s why running a global business is so difficult.
Are you happy with what you achieved at Asda after its takeover? Did you leave anything unfinished?
Yes I am happy: I left a really huge business with very good people and a lot of growth in it, where everybody really did have a say in what happened. There were lots of things which were unfinished which they are doing now. We thought we were good at the non-food business outside clothing, but that’s what they’ve learnt from Wal-Mart, and they’ve developed the own-brand much better. So that’s why it’s still growing.
Many of the mag’s readers think serial non-execs are overpaid and more interested in the next lucrative directorship than the companies they serve. How do you differentiate your own ‘plural’ approach from this view?
The word “serial” is only used in two phrases: serial director and serial killer! So it’s a negative word. Try and run the Royal Mail on 20,000 and see how you get on! I don’t think there’s a gravy train of people wanting to be the chairman of the Royal Mail! The test for me is: if anybody didn’t want me to be on their board, all they have to do is say and I will quite willingly stand down. But at the moment, touch wood…
What tips can you give our readers on picking paid advisers for their businesses?
If you really want to go and look stuff up and talk to people, there’s quite a lot you can learn without going for paid advice. And then there are things on which you must seek advice. When you go and get paid advice, half of the time you don’t understand it. If you understand things, then it doesn’t half make a difference – particularly when it’s your own business.
You could retire comfortably tomorrow if you wanted to. What motivates you to keep working?
My wife doesn’t want me to retire! No, seriously, I’m not quite decrepit yet, and I like work! If I did want to take some time out, I would.
What else do you want to achieve before you retire? I’d like all the businesses to be doing well, to be run by good people and to have good growth prospects. I’ll probably not retire for a long time and the interesting thing will be what other things develop. There’s always something every year that comes up on my radar and I think: “Oh yeah, I think I’ll have a go at that!”
Allan Leighton’s Ten Golden Rules of Business
1) Keep it simple.
2) Focus on execution.
3) Listen to your operators.
4) Think small. Small is big.
5) Less often is more.
6) Your people come first.
7) Think like a customer.
8) If in doubt, do the right thing….
9) ….but then do things right.
10) Remember, EGO stands for “edging God out”.
The word “serial” is only used in two phrases: serial director and serial killer! So it’s a negative word.