Archie Norman Interview, Management Today, 03-Sep-07

The voters didn’t warm to him but he has other claims to fame: helping convert a lame
Woolworths into a secure Kingfisher, turning Asda from a loser into a supermarket
heavyweight, and launching the career of many high achievers in British business. In a
special preview from September's Management Today, we ask: 'where is Archie Norman
now?'

Archie Norman asks his assistant to fetch the list of people he's employed down the
years. She returns with two sides of A4. There are 23 names in total. They include Allan
Leighton, chairman of Royal Mail; Richard Baker, until recently head of Boots; Andy
Hornby of HBOS; Tony DeNunzio, chairman of Vendex; Paul Mason, CEO of Levi
Europe; Justin King of Sainsbury; Ian McLeod of Halfords; Andy Bond of Asda; and
John Pluthero, chief of Cable & Wireless.

Any business school in the country would be inordinately proud of this lot. They have all
sat, if not at the feet of Norman, then in the same room as him, and been tutored by him
in the art of management. And not sat, exactly. Part of the Norman credo is the stand-up
meeting, frequently on the shop floor. Tell me, has anyone made a more lasting
impression on recent British corporate life than Archibald John Norman? Lord Hanson?
You're showing your age. Sir Alan Sugar? Give me a break. Sir Richard Branson? Maybe.
Sir Terry Leahy? Much of what he does is straight out of the Norman ring-binder.

No. No single person has recruited and nurtured such a stream of talent. Institutions have
– Goldman Sachs, McKinsey, Mars, Procter & Gamble, to name four – but they're global
organisations, honed in selection and advancement. This is one man, spotting, teaching,
developing and motivating. Remarkable and unparalleled.

We're meeting in the Mayfair offices of his latest vehicle, Aurigo Management. Together
with hedge fund Och-Ziff, Aurigo has just bought HSS, the tool-hire company, for
£310m. Other deals are planned. In the past 18 months, Norman has had cracks at the
Phones4U chain, Esporta health clubs, Focus DIY, Brakes, the food distributor, and
Coles, Australia’s second-largest retailer. For a variety of reasons – price too high,
consortium breaking down, figures not right – they came to naught.

Still, at last, he has managed to get his hands on something.There’s a buzzy twitchiness
about him. It's as if I’m stopping him from getting on with things. He tells me how he
bets I think HSS is all about shops offering tools for hire to people like me when, in fact,
it has a lucrative and much bigger business supplying other businesses. All the tools for
Network Rail maintenance, for instance, derive from HSS. He’s spending days down at
head office in Mitcham, Surrey and he has been out with the teams, selling, experiencing
for himself what they go through.

As he rattles this off, his eyes sparkle. Yes, as far as I’m concerned, HSS is just another
place to go and get the equipment I rarely need for gardening or decorating. To Norman,
though, it’s a thing of beauty and necessity, playing a vital role and making a healthy
profit in the process.
As I listen to him, I can discern the passion that inspired a galaxy of young managers
when he ran Asda for eight legendary years in the 1990s, and before that at Woolworths,
where he helped Sir Geoff Mulcahy fight off a hostile bid from Dixons and double the
market value by renaming the group Kingfisher.
He looks good for his 53 years – lean, with a full head of hair and a boyish face. He’s got
a piercing stare. He’s also possessed of a dry wit. That, plus an undoubted intellect, gives
him a sharpness that can be unnerving.

He talks simply and directly, his manner easy and confident. His quick intuition hints at
why he has been so successful: he’s the management consultant who doesn’t behave like
one. He’s that rare creature, the successful manager with natural empathy. He probably
got it from his parents. ‘My father was a doctor before the NHS was formed. My mother
was a doctor in the NHS.’ He was the second of five sons.

He went to school at Charterhouse, then to Cambridge, where he read Economics. ‘I had

a good education,’ he says, grateful for his good fortune. There is this aspect to Norman.
He’s as hard-headed as the next business star (he was also a Tory MP, later, to boot). But
he doesn’t conform to the stereotype of such roles. Norman insists, for instance, that he
sees no fun in accumulating. ‘Of course, you should aim to get some money in the bank,
but after that there will always be a bigger yacht, a better villa.’

He will only do something if he thinks he can add value. ‘You’ve got to be true to who
you are. I’m not a mercenary, I’ve got to feel something is worthwhile.’ But don’t assume
he’s a big softie. ‘I believe that a conservative society is one in which people volunteer to
help others and public duty is valued.’

His first job was in the City at Citigroup, but he soon left to study for an MBA at
Harvard.
He didn’t return to finance but instead joined McKinsey. At 28, he became the
consultancy’s youngest partner. He was at home there. ‘McKinsey had a very strong
professional culture which always put clients first and went way beyond personal gain.
McKinsey behaves more like a not-for-profit company.’ Although, he adds as an aside, ‘I
can assure you, it’s not!’

It was, he says, like ‘joining a club in St James’s. But it was a club where everyone wore
the same clothes – white shirts – and worked hard. There were people in their sixties and
younger people. They were outstanding, full of integrity. Everything was deliberately
low-key and not remotely egocentric.’ Part of McKinsey has remained with him. ‘People
get a sense of an institution that does not leave them. McKinsey was pretty special.’

He quit to join Mulcahy at Woolworths – a classic case in need of the McKinsey

treatment. He was its finance director – ‘the youngest in the FTSE 100’. One of his first
tasks, at just 33, was to help Mulcahy beat off a hostile bid from Dixons. Norman was
part of the tight team around Mulcahy that transformed Woolworths from sleepy down-
market chain into the largest specialist retailer in the UK, bolting on B&Q and Comet and
rebranding the group as Kingfisher.
‘We doubled the share price in five years,’ he says. ‘We were led by Geoff, who was a
remarkable character – a super businessman and a very thoughtful manager. We had a
great time.’

But Mulcahy wasn’t going anywhere in a hurry and Norman grew tired of waiting for the
top seat. In 1991, he left for Asda. Based in Leeds, the old Associated Dairies
supermarket firm was in disarray, close to bankruptcy – a ‘shipwreck’, in Norman’s word.
Nevertheless, ‘turning up on a rainy day in Leeds to join a completely broken business,
with no real understanding that the only reason I got the job was that there were no other
applicants’ was, he says, the most important event in his working life.

By the time he sold it to Wal-Mart in 1999, the firm was worth £1.6bn, and Britain’s
second-biggest supermarket chain. ‘I’d never even been to Leeds before. I walked in the
door of a bankrupt organisation that employed 60,000 people. They were all waiting for a
new chief executive and it was me – and that was one of those traumatic moments, when
every tiny step is disproportionately important.

‘Those early years were good because we were very much a team and we had a common
mission: to survive. They were tough but we didn’t know anything else.’ For seven
successive years, Asda out-performed most of its rivals, rising from fourth place to
second. ‘We never realised what a good business we had,’ he adds, shaking his head.
‘That’s a profound point. The pace of success meant we never sat back and looked at how
far we’d come or what we’d achieved.’

He recruited Leighton, a brilliant communicator and people manager. They swept aside
all the old structures and ways of doing things. Offices were made open-plan, meetings
really were held standing up, staff were encouraged to have their say, surnames and titles
were abolished. Bin-liners were handed out to get rid of unwanted waste paper and to
inspire clear thought.
Some of it now sounds awful – managers were given baseball caps to wear to denote they
were thinking and not to be disturbed – but it worked. Despite the touchy-feely aspect,
some hard decisions were taken. Norman cut 5,000 jobs – an experience he describes as
‘miserable’ – and sold stores to bring down the debts.

He replaced 190 of the top 200 employees in his first three years in charge and took
enormous care over who he appointed. He was forced to go young, selecting people who
weren’t already in established posts elsewhere in the industry. ‘They had to be up for the
challenge. The stars of retailing didn’t want to join Asda, we were forced to create our
own stars – and, of course, many of them did very well. I feel like a grandad, looking at
all the people who worked for me and went on to great things. In a series of situations,
I’ve had to recruit entirely new teams.’
There was certainly something about the nature of those he hired. Leighton is a maverick
with a permanent glint in his eye; the others, too, were blessed with enormous spirit and
self-
belief. ‘They were all the sort who didn’t mind an impossible task – who jumped to it
rather than ran away from it.’ That approach has since stood them in good stead in their
later posts.

He was also able to do something all too rare. With two exceptions, the entire board also
left. ‘I recruited new non-executives, which was a great thing to do. To recruit the right
board is a rare opportunity. I ended up with a board that was very close to the business.’

Lessons from Kingfisher were learned. He went for those who knew about retail and
were strong people managers. ‘I didn’t want anyone who believed in hierarchy. The old
Asda was riddled with hierarchy, where people were afraid to come forward to talk about
problems in the business. We employed 60,000 people, many of whom knew where the
problems were and wanted it to come right and were frustrated with the management and
the history.’ Asda did not enjoy what Norman calls a technical advantage. ‘Yet we had to
deliver better service and value. The only way was through our people. We had to make
them believe in their work.’

He and his senior colleagues strove to obtain value from the group’s supply lines, and
‘meanwhile created a special workplace community. Don’t forget,’ he says, ‘that we were
under no illusion. A lot of the people we employed were part-time and had the option of
going to work for Tesco. We had to make Asda their choice and that meant creating a
great workplace community, treating them with respect and valuing what they did. Our
attitude was that every task required a special skill and that skill was a craft skill to be
learnt and appreciated. Plus, if there was anything wrong, they could write to me.’

In the first three and a half years, says Norman, he received 40,000 letters from Asda
staff. ‘We set out to create a people organisation that worked. It can be done. To do it
you’ve got to have single status – so that everyone in Asda was treated with the same
level of respect. The checkout, cleaner, baker – they were all valued and treated the same.
We said to them: “Your skill is valued and your thoughts on the business are valued.” The
first rule is listen and understand. Whatever you implement has to be right for the
business.’

In full flow, Norman is evangelical. It’s hard not to nod along as he says, ‘reserved
parking spaces, offices where two-thirds of the people are confined to working in inner
darkness while the managers sit on the outside with windows, name badges with titles –
they are all things that don’t half get people’s backs up. And they have nothing to do with
what the business is doing.’

There’s no stopping him… ‘The megaphone boss not talking to people in their language,
the chairman’s chauffeur, the limo parked outside the front door, the store visit where the
chairman turns up, marches around and everyone is intimidated, so he learns nothing...’
He tails off. I’ve got the message.

Eight years after turning up in Leeds in the rain, he sold Asda to Wal-Mart. ‘It was right
for the business and it was good for the shareholders. They made a 1,000% return. They
couldn’t complain.’ He resigned and has not been back. ‘I’ve never been into an Asda
since I left. I couldn’t, because it would take me one and a half hours to get round. I’d
want to examine everything and talk to everyone.’

However, the conundrum of Norman is that he didn’t go on to replicate Asda. At the

behest of William Hague, a fellow McKinseyite, he’d entered politics in 1997 as the Tory
MP for
Tunbridge Wells. He didn’t make the difference others thought he was capable of – and
that he believed he would. Partly, it was his timing. He shrugs. ‘I joined just as the
Conservative party was heading for eight years in the wilderness.’

Partly, as well, it was the immovable objects that lay in front of him. ‘People are right to
say I was exasperated by the protocol and the lack of focus on achievement. That’s true.
People like me can’t help that, and in the political world it’s a disadvantage. I get up in
the morning and ask myself: “What am I going to do today to improve my organisation?”
You know, improve the lot of mankind. The answer in Parliament is “nothing”.’

He did orchestrate change. He produced a new constitution for the Tories, created a more
democratic structure and reformed Central Office. He also rose to shadowing the deputy
prime minister and became the opposition spokesman on Europe. He was chief executive
of the party. ‘When I took over at Central Office there was just one computer linked to
the internet. I persuaded someone to pay to replace the phone system, and some of the
staff volunteered to come in on the weekend to paint the place.’

Some Asda techniques were applied. ‘I made it all open-plan – I took the researchers out
of their funny cubby-holes. I introduced a smoking ban – until then, people had been free
to do as they liked.’ It’s wrong to suppose that his period in politics was wasted. ‘I
thought: it’s not glamorous but it’s a good thing to do – and I did a lot.’

He believed the Tories would lose an election but then regroup and reorganise quickly, to
be in a position to win the next one, and then he’d be in government. ‘Perhaps naively, I
didn’t realise reforming the party would take as long as it has.’

He nailed his colours to Michael Portillo for leader and when he ‘crashed and burnt’,
progress, he says, stalled for two years. Now, the party is back on its feet. Too late: he’s
gone. ‘It’s a great thrill for me that the things I banged on about for eight years are being
implemented.’
He decided to quit. ‘It was great fun, but it’s true: I did not play the role I’d liked to have
played. If I thought we were destined for 10 years in power, I’d still be there now. In
2005, I was faced with a choice – leave or commit my career to politics, at a time when I
thought we were unlikely to win the election under Michael Howard. I’d had eight years
in public life, which was pretty good.’

Norman bemoans the fact that more people of his ilk don’t go into politics. ‘I was the first
FTSE-100 chairman to sit in the House of Commons and I will almost certainly be the
last.’ Westminster has become too professional, he says, so that men and women of talent
don’t feel encouraged to enter politics.

He wasn’t a big hit at Westminster – ‘Too honest about the party’s weaknesses to be
popular with his colleagues’, says Howard Davies, who has known him since their
McKinsey days.
His sometimes abrasive delivery rubbed up his fellow MPs and party workers the wrong
way. He was seen as arrogant, a clever-clogs. ‘In business, if you don’t like things, you
change them,’ says Norman. ‘You change the product, change the team, even change the
market you’re in. But in politics, you’re swept along on a big tide and you’re a small cork
bobbing up and down in a big sea. When the tide goes out, you go with it.’

But he keeps abreast of political developments and is happy to provide advice if asked.
He’s not in close touch with David Cameron, though. ‘The party has undergone a
generational change, which is right.’

When he left politics, he’d already been chairman of Energis, one of the UK’s biggest
telecoms operators, for three years. Energis was in an even more desperate state than
Asda. Once a stock market hotshot, it had virtually collapsed, going into administration
and being taken over by the banks. Norman was drafted in. He sold its smart central
London offices, cut the staff by 1,000 and brought order to the chaos. Soon after he stood
down as an MP, in 2005, he was able to sell Energis to Cable & Wireless for £594m. A
large slice of the £30m bonus pool went to Norman.

Since then, he’s been looking at new ventures. That’s not a new experience. In 1999, he’d
galvanised the City by forming, with tycoons Nigel Wray, Nick Leslau and Julian Richer,
a quoted corporate vehicle called Knutsford specifically to make acquisitions. Such was
Norman’s hero status that the shares rose 1,000 times in just one day’s trading. But
Knutsford failed to deliver.

The City has been watching and waiting for Norman to come up with the Big One.
Twice, he says, he’s turned down the chairmanship of Marks & Spencer. For a period,
speculation was rife that together with Leighton, he was lining up for a tilt at Sainsbury.

But he has formed Aurigo and, after looking at plenty of possible buys, settled on HSS.
‘I’ve had the option of being chairman of numerous major companies but I wanted an
ownership stake.’ HSS is not high-profile, ‘but it’s the leading tool and equipment hire
firm in the UK’. It has 292 shops, is enjoying double-digit growth and is in a ‘good
market where there’s lots of scope. It’s got good people and a great CEO, and its
operations are real. I love equipment, love the trade.’

He has been on sales calls to see at first hand how the company works. ‘If you own a
business you’ve got to behave like an owner. It doesn’t mean I won’t let the executive
team run it, but there needs to be a grapevine so people all over the company can talk to
me.’
The trouble with much of private equity –which is where Aurigo lies – is that investing is
very different from managing. ‘Am I an investor or a manager? I’m a manager. I can
understand investment but my interest is in leadership. It’s hard for great investors to be
great managers.
‘Many people say private equity is about investing and adding value. I don’t think they
do add value. If anything, they make things worse. PE is really just another form of
ownership and as such [these funds] must behave like owners.’

His aim is to add four or five businesses to construct a broad portfolio. The suspicion has
to be, though, that if the right big play came along he would seize it. He’s only, even now,
in his early fifties and he has got time on his side. That’s certainly what the City thinks.
They want another Asda. Is he frustrated it hasn’t happened? ‘Yes, I’m an impatient man,’
he replies instantly.
He knows what they’re hoping. Asked where was he happiest, he pauses and smiles.
‘Hopefully, the best is yet to come.’

Four challenges facing Norman

1 To grow HSS
2 To seek out, via Aurigo, other purchases
3 To find a major job commensurate with his ability and reputation
4 To avoid becoming frustrated in the process

Norman in a minute
1954 Born 1 May. Educated at Charterhouse School and Cambridge
1975 Joins Citigroup as graduate trainee
1977 Studies for MBA at Harvard BS
1979 Management consultant, McKinsey
1986 Leaves McKinsey as partner to be finance director of Kingfisher
1991 Chief executive of Asda, later chairman
1997 Tory MP for Tunbridge Wells
2002 Chairman of Energis
2005 Stands down as MP
2006 Founds Aurigo investment vehicle
2007 Buys HSS tool-hire business