Archie Norman had been suffering from a severe case of twitchy fingers. Since the launch of Aurigo, his investment vehicle, 18 months ago, the man who rescued the Asda supermarket group from near-bankruptcy in the 1990s had tried and failed to buy companies including Phones4U, the mobile phones retailer, Esporta, the fitness chain, Focus, the DIY group, and most recently Brakes, the food distributor.
“If, like me, what you’re interested in is management and you don’t have a business to manage, that’s frustrating,” Mr Norman says of the delay in securing Aurigo’s first buy. “I have had 18 months with my fingers twitching.”
His waiting is over, however, because Aurigo – from the Latin for “to drive a chariot” – is starting to bed down its first acquisition. The investment vehicle that he set up to “reorganise and reshape businesses to deliver fantastic value for customers” and Och-Ziff, the hedge fund, have bought HSS, the tool-hire company, for £310 million.
Mr Norman insists that “just one more” deal in the next year would be fine for Aurigo. “We’re very cautious,” he says. “We think it’s the top of the market at the moment, but it’s a long top. As a result, we are very conservative about the way we invest. But I am not going to sit on my backside for the next five years waiting for the top to come off.”
Although the market has got hotter since Aurigo was established, Mr Norman predicts that it will “inevitably” crash at some point. “I don’t think it’s going to last,” he says. “I think there is going to be blood on the streets. We are not going to rush into anything. I bear responsibility for the people backing me to make good use of their money.”
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Mr Norman, the son of doctors and educated at Charterhouse, Cambridge and Harvard Business School, has experienced rapid rises in business and politics. The former Conservative MP for Tunbridge Wells began his career in banking before joining McKinsey, in which he was made the youngest partner at 28. He became finance director of Kingfisher, then Britain’s biggest retailer, at 32 after helping Sir Geoff Mulcahy to defend it against a bid by Dixons. Five years later he became chief executive.
He made his name with the turnaround of Asda, which was broken when he joined it in 1991 and which he sold to WalMart eight years on for £1.6 billion, having made it Britain’s second-biggest supermarket chain.
He went on to orchestrate a revival of Energis from administration, gaining the lion’s share of a bonus pool of £30 million when the telecoms group was sold to Cable & Wireless in 2005.
Although acutely aware of the pitfalls and costs of turnarounds – he cut 5,000 jobs at Asda (a “miserable” experience) and sold some prime stores to cut debt – Mr Norman relishes the challenge of a rescue. “We are very happy to take on situations that are troubled,” he says of his brief in Aurigo. “Nobody likes trouble. It’s much better to buy a Rolls-Royce than a clapped-out old banger and rebuild it. But you often create the greatest value out of taking situations that other investors find toxic.”
Mr Norman entered the Commons in 1997 as a Conservative moderniser and backed his former McKinsey colleague William Hague for the party leadership. He was made vice-chairman with responsibility for the party’s reform, but expertise at restoring languishing businesses did not convert easily to the political arena.
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“I spent eight years in the Conservative Party as an out-and-out reformer trying to convince my colleagues to turn and face the electorate and to set on one side nostrums of the past and recognise that the face of British politics had changed,” Mr Norman says.
“We didn’t make much progress in those eight years and so, to me, David Cameron is a sort of a miracle. I didn’t see him coming. I think he understands what the party needs to do and where it needs to go. He has made more progress in two years than we made in eight years. People underestimate what a hard thing that is to do in the teeth of a culture that was not welcoming of change.”
Politics left its mark on the businessman, who says: “Business and politics are a world apart in culture and attitude – and probably more so today then ever. Politics has become professionalised and there are few avenues for business people to engage in public life. It’s no good as a successful businessman thinking you can swan into politics without learning the arts and crafts of Westminster; it is a different world. There is a huge contribution that business people can make to public life and a huge contribution that political people can make to business life, but because the two have grown apart, they treat each other with a degree of disdain which is very unfortunate. It’s rather a British thing.”
Although he maintains an interest in public policy – he set up C-Change, a think-tank for modernisation, and Policy Exchange, an independent research body – Mr Norman’s attention is focused entirely on Aurigo.
“Our philosophy is: what you buy, you buy for life,” he says. “If we aren’t prepared to own it for ten years or more, then it’s not for us. Real management change needs time and a long-term commitment. One of the problems of the financial community is that it systemically underrates management and the value that great management can deliver for shareholders, and systemically overrates buying low and selling high.”
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He says that what drives him is the belief that “work is an important part of people’s lives” and that creating the right environment will produce a “stunning” management team and a great work environment, allowing a business to create value, year after year. “I think people come to work to shine and it is our job to make them shine,” he says. “And that’s not just some happy-clappy philosophy. That is what I think is at the core of value-creation in service industries.”
Part of Mr Norman’s management strength is his ability to spot and build strong leaders. Former Asda colleagues include Allan Leighton, now Royal Mail chairman, Richard Baker, chief executive of Alliance Boots, and Andy Hornby, head of HBOS. Justin King, head of Sainsbury’s, and Andy Bond, who now runs Asda, are further examples.
“It makes me feel a bit like granddad,” Mr Norman says, beaming at the success of his prot?g?s. “We didn’t go out and hire superstars. We hired people no one had ever heard of, but they were smart people and they liked working our way. They fit in with our attitude and culture and took that to other companies.” On private equity, Mr Norman believes that the sector’s rise to owning a big slice of British business is creating a need for it to behave “like public equity”.
Although reluctant to predict when the market will come off the top, he cites hubris as a factor in a build-up of systemic risk that will amplify the impact of a crash: “People tend to believe they are great investors because they made a great return in a rising market. Many of this generation of financiers have not experienced a crisis, a recession, for many, many years and so they are not prepared.” If a crash comes, Mr Norman will be ready, fingers twitching, to pick up the pieces.
The leader questioned
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If you could change one thing in the financial and commercial environment, what would it be?
It sounds very earnest, but it’s an appreciation that business and investment value is created by good management. And understand that good management is extremely difficult to cultivate and develop. Britain has become a very transactional place. The immense success of the financial services industry, private equity, hedge funds etc means that smart young people feel that’s the place to work. The culture has become about transactions and about financial engineering, when underlying it all is the real mission to find real people. The long-term value you create depends on them, so how you manage them is what we, as a country, should be worrying about.
What does leadership mean to you?
Leadership is about unleashing the potential of the people who work for you and to make them feel that, ultimately, they did it.
Which businessman or woman do you most admire?
That’s a silly question.
Who is or was your mentor?
It’s a fashionable thing to have. People write management books on mentors, so you are supposed to have one, but it doesn’t really work like that in practice. I have worked with lots of super people. At McKinsey, Geoff Mulcahy is a wonderful guy, a super, super businessman. I learnt a great deal from the people who worked in my team at Asda; Allan Leighton was a terrific manager. John Pluthero, whom I hired as chief executive at Energis, is a great manager. Part of it is that, as you grow more experienced at business, it’s a struggle to figure out every day that you still have as much to learn as when you started. That’s got to be your attitude. Otherwise you become, as we all recognise, a sort of crusty chairman who thinks he has seen it all and has axioms of management. Its dangerous to have axioms as there is no dogma in management and every company is different.
Which is more important: what you know or who you know?
I am not an establishment sort of networker, but there are plenty roles – headhunting, for instance – where it’s probably extremely important to know a lot of people and be able to pull in favours. Knowing people is not enough; you have to have their respect. You get respect for what you do, and what you do is what you know. I don’t mind what people think of me, but I mind very much that I have their respect and they understand what I’m trying to do.
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Does money motivate you?
No. By today’s popular standards I am not immensely wealthy, although I have made some money and I am very glad of that. But if I never earn any money that doesn’t worry me, I can go and cut down trees somewhere. I am really interested in creating organisations that are doing something good for the people working for them and their customers. If you do that, and if you have the right economic model, you will generate value. And if you generate value, people will pay you money, but it has got to be that way round. Those who set out first and foremost to make money and then worry about how they are going to do it are putting the cart before the horse.
What is the most important business event, good or bad, to happen in your working life?
I think turning up on a rainy day in December 1991 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.
What gadget must you have?
I am happy to be gadget-free, but I’m not a technophobe. I have an iPod and a mobile phone, I use my laptop, I’m on e-mail and have a BlackBerry. But if you took it all away it wouldn’t worry me. In Scotland we have no television. We have no central heating, either, but that’s another story.
How do you relax?
When things are going well at work I find that quite relaxing. We have horses, the dogs, I have my farm in Scotland and I am happy to be away from people.
C.V.
Born: May 1, 1954, Surrey
Education: Charterhouse; University of Minnesota; Emmanuel College, Cambridge (MA Economics); Harvard Business School (MBA)
Career:
1975: Citigroup.
1979-86: McKinsey & Co.
1986: finance director, Kingfisher.
1991: CEO and later chairman, Asda.
1997: Tory MP for Tunbridge Wells, standing down in 2005.
2002: chairman, Energis
Personal: Married with one daughter