Ian Campbell’s story is an unusual example for managers and chief executives seeking to transform and build a company.
His hard-nosed management style, where everything is run with total discipline and focus, has delivered results for GUD Holdings, the outfit behind such household brands as Ryco filters, Sunbeam, Davey Pumps and Lock Focus.
Trained as a computer programmer in punch cards (remember them?), Campbell ran industrial conglomerate Pacific Dunlop’s Olex Cables division.
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He then put himself out of a job by managing the break-up and sale of Olex in 1998.
When he became CEO of GUD in October of that year, the company was on the ropes, struggling with a bunch of loss-making businesses it had acquired in the blind pursuit of growth.
With Campbell at the helm, GUD has reported steady profits, year in and year out through the GFC and at a time when so many of Australia’s manufacturers are closing down. Campbell has taken its share price from $2 when he arrived to about $7.40. At one stage, it was around $10.
“I thought I could fix it,’’ he says. “It had been so badly run that there was room for improvement.”
The biggest challenge, he says, was lifting the quality of management in the place.
“It was about bringing in people who could take a business to the next level – people who actually knew how to make money,’’ he says.
“A lot of people in these businesses didn’t know what was possible. They either couldn’t see it, or they were so entrenched in these businesses for so long that they were quite insular.
“I called the old guys enthusiastic amateurs but I needed professional managers who knew what was possible. Plant and equipment is easy, you just go and buy it. But selecting the right people is a value judgement.
“The people thing is the hardest thing. It’s about finding the right people, managing them for results and making sure they have the right people in place. They have to be talking your language. They have to know what I’m talking about.”
If the people challenge is the hardest, how does he recruit? He regards psychometric tests as useless and does not trust reference checks (“the supply of referees is supplied for a good reason”). “It’s intuitive,’’ he says. “There’s no formal way, there’s a lot of gut feel in it. Does this person really have the attributes that I am looking for in this role?”
Campbell got rid of the old managers (“It’s dead simple. It’s a matter of throwing some money at the problem and being as elegant as possible when they are on the way out”) and brought in managers with runs on the board from larger businesses and even other industries and other sectors. They would be reporting to him and signing off on budgets.
“It was a complete change of approach,” he says. “It was about empowering the right people and giving them the objective and then measuring that objective.”
The objective is there is one of the most radical changes he introduced. GUD managers work to a key performance indicator: cash value added. Every GUD business is expected to exceed 10% weighted average cost of capital (the rate that a company is expected to pay, on average, to all its security holders to finance its assets). Businesses are measured on the improvement in the cash value added over the prior year. (CVA is the amount of cash generated by a company through its operations. It is computed by subtracting the ‘operating cash flow demand’ from the ‘operating cash flow’ from the cash flow statement.) Every year, the budget is set for each division and the weighted average cost of capital varies from business to business. If, for example, it is set at 17% and the business comes in at 18%, the managers will get bonuses. There’s no bonus if they come in at 16%.
And what happens if that manager is not tracking well? “We either work out a way where they’re going to track properly or I’ll bring someone else in,’’ he says.
The budget process is everything, he says. “We have one planning process and that’s the budget,’’ he says. “I don’t believe in five-year strategic plans. I think that’s a waste of time and waste of paper because if you get the first assumption wrong, it’s wrong for the next five years. You are allowed to have a strategic mud map that says in a perfect world, this is where we like to have things, but I can’t see past one month.”
Management teams in every business have to be part of that budget process. “Each department has to have absolute input. They all have to sign off that this budget is the agreed budget for the year. They have to take ownership of it, or it will fail.”
Running a kettles-to-farm pumps business requires a special approach to leadership. “You’re managing different markets and different drivers and you’ve got a lot of stuff in your head but you have to treat each of those businesses separately and that does take leadership,’’ he says.
“I look at each business on a silo basis. I don’t look at it as a conglomerate, I look at each business differently and I measure each business differently. I’m not prescriptive about it.”
While managers are empowered, Campbell is totally hands-on. “With the Australian businesses, I am at every business meeting every month,’’ he says. “We go through the results and we talk about what’s happening next month and the month after that.”
He also turns up at the meetings of GUD businesses in New Zealand, Malaysia and China and chairs the company’s Occupational Health and Safety committee. “I want to know we have a co-ordinated approach to occupational health and safety. If I see a key in a forklift and the driver is not there, I want the driver, I want the leading hand and I want to know what the Christ is going on,’’ he says.
If there are any lessons in Campbell’s style, it’s this: every manager there knows exactly what he expects.
As Campbell sees it, real leadership is about making sure everyone is toeing the same line. “To get people aligned with your goals, you have to show leadership. It’s autocratic but I have been here long enough and everyone knows my hot buttons and they know what I expect out of the business and what I expect of their performance. If they can’t do it, I’ll get someone who will.”
In the end, he says, it comes down to one thing. “I think you have to have a fair amount of self-belief. Not self-confidence but the self-belief to have thought through what has to be done.”
This article first appeared on LeadingCompany, Australia’s new daily publication for leaders and managers. Sign up for our free newsletter and receive a free eBook, 101 Great Leadership Insights.