The Andrew Davidson interview: Alan Giles - A manager under fire, HMV Media's chief executive remains an easy-going guy who loves his footie and a pint. Yet at Waterstone's he has imposed rigid marketing measures on the genteel world of bookselling. As th

The Andrew Davidson interview: Alan Giles - A manager under fire, HMV Media's chief executive remains an easy-going guy who loves his footie and a pint. Yet at Waterstone's he has imposed rigid marketing measures on the genteel world of bookselling. As th

by ANDREW DAVIDSON
Last Updated: 31 Aug 2010

Alan Giles, 46, is a quintessentially modern manager. Youthful in demeanour, warm in manner, togged out in chinos and open-necked shirt, he runs a rock 'n' roll store-chain and drives a BMW 7 but, hey, spends a lot of time on his mountain bike.

He cycles with his wife on Saturdays, drinks down his local on Sundays, goes and sees dinosaur music acts from the '70s with his old flatmates, keeps a season ticket at Reading FC, arranges for his daughters to get their pictures taken with Ronan Keating, loves San Francisco, has never been known to lose his temper and is seen as an all-round great guy by many who've worked with him. A team player, an analytical thinker and a switched-on leader.

No, no, I've got that completely wrong. In fact Alan Giles is a weasel who is tearing the heart out of the British book trade.

Sorry?

Well, the truth is, I don't know. Sometimes, in this line of work, you have to hold your hands up and say, it's a mystery. How can the man I met (summary: first paragraph) be the same chief executive of HMV Media who is getting so much stick over his management of Waterstone's, Britain's biggest book retailer? Slumping profits, irate staff, seething investors, scathing stories in Private Eye (which christened Giles 'the Weasel'), loud whispers of financial disaster looming ...

Only in the book trade. Would a chain of butchers hitting difficulties get this much publicity? I don't think so. But whichever way you look at it, Giles is facing a disaster of very public proportions with Waterstone's - and HMV Media isn't even a public company. I don't even know if, by the time you read this, Waterstone's will still be part of HMV Media.

He insists to me, pushing his hands wearily through his tousled hair, that it will not be sold, unless someone offers a ridiculous price for what is clearly an underperforming asset.

Others say the sale is imminent.

Talk about mixed messages. Either Giles, with his lopsided smile and squashed-puppy face, is too smooth, too laid-back for his own good (and for the company's investors) or - if you believe disgruntled Waterstone's managers - too rigid, too obsessed with sales to run a business that should not be just about money, but gut feel and instinct and a passion for literacy.

Even his colleagues admit it's all distinctly odd. How can Giles, a very able manager fast-tracked through Boots and WH Smith, with a year at Stanford business school to boot, have got himself in such a mess?

OK, cards on the table. I was inclined to like him even before we met.

There had been some last-minute umming and aahing over this interview.

The annual results were due, there was too much rancour and conjecture in the papers, his people thought maybe we should put it off. I pleaded no. Then, the day of the interview, my 11-year-old got sick and I had to pull out at the last minute. Giles, I thought, will cancel indefinitely.

To his credit, he didn't, but slotted me in, two working days later, in his lunch hour before a meeting at Waterstone's Brentford HQ. Giles, it seems, regularly does the loop between Brentford, Soho (HMV's base) and Swindon (group head office). If I could just fit myself into his schedule, no problem.

It's a hot day. Giles bustles through the Waterstone's foyer, briefcase in hand, tie off, looking like he's just popped in to drop by an envelope.

We'll borrow an office, he says, or maybe the boardroom. In the end we sneak into the HR director's office, up on the third floor. Short in stature, big in smiles, Giles natters away with me, the staff and anyone we encounter on the route up. Others who have worked for him say that although he is ferociously bright - an Oxford physics graduate, no less - he has learnt to conceal it well behind a casual, demotic exterior. Some find that appealing; others are less sure.

He is in a peculiar predicament. HMV Media was created in 1998 from a management buy-out of HMV and Waterstone's, and is backed by two major shareholders: EMI, the music label, and Advent International, a venture capital firm. The outfit was stapled together by WH Smith, which owned Waterstone's, and EMI, which ran HMV and rival bookstore Dillons. Everyone admits there is little synergy between the music and book side, but HMV and Waterstone's are strong brands, which the group's backers believe have big potential. Anyway, EMI and Advent had hoped for a speedy flotation, getting a good return for their time and money. Perhaps because of that, the new group borrowed heavily (pounds 440 million senior debt, pounds 212 million bonds), pouring funds into expanding shops, getting a tighter grip on the high street and negotiating new online joint ventures. Then Waterstone's went wobbly.

And you need more than the fingers of one hand to count the problems Giles faces: not only are his backers anxious that flotation still looks a long way off; a fair number of his own managers are said to be uneasy at the shift in strategy in Waterstone's, being told to concentrate on pushing bestsellers to the detriment of range, a move that - as the latest financial results show - doesn't seem to have been a conspicuous success.

That, in turn, may have implications for the debt payback schedule the company is signed up to and seems to have lost Giles the goodwill of his own chairman, Tim Waterstone, who founded the bookselling chain and is now making noises that he wants to buy it back from HMV Media.

Add to all that the welter of speculative stories swirling round the company, which seem to be coming from all sorts of sources, inside and out. Then throw in the complicating factors facing all retailers - undervalued by the market, facing uncertainty as to the impact of the internet - and it's a wonder that Giles even gets out of bed in the morning. And now he is sitting in front of me smiling.

Reasons to be cheerful? Well, the irony is that the HMV chain is widely admired and performing fine, and that is supposed to be the bit that Giles, who ran Waterstone's for WH Smith, has little experience in. 'I guess,' he says, suddenly looking serious, 'I have never had any difficulty having more empathy for music than for books.' Then he grins a grin that transforms his fleshy features. He is clearly a man who can move his face from stern to glad in a blink.

And those stories? (Tim Waterstone has fallen out with Giles, who has annoyed EMI's Eric Nicoli, who no longer sees eye to eye with Advent ... It's better than Neighbours.)

'Oh,' says Giles, exasperated, 'to be honest, I cannot spend a lot of time worrying about who is putting the rumours around. I would go mad!

It is drip drip drip ... I think one of the things is that we have had approaches to buy Waterstone's and people are miffed we have said no, so there is a campaign to destabilise the situation.'

Giles has been in tight spots before. During an otherwise gilded career at WH Smith, he spent four years at Do-It-All, its DIY chain, as operations director. It was not a success. Squashed by B&Q and Homebase, squeezed by the slump in demand for housing, the chain lost so much money that Giles believed his career would never recover. He is still grateful, he says, that the top brass at WH Smith threw him a lifeline and put him into Waterstone's, which it had bought to merge with its own Sherrat & Hughes chain. He could not have foreseen then that he would end up, all these years on, faced with media meltdown in the same arena.

Why did WH Smith put him in charge of Waterstone's? Because he had a bit of form in the area. On his way up, he had run the books side of WH Smith stores with very visible success. Typically, he had applied a rigorous marketing logic to a field that hitherto had been dominated by gut feel.

New computer systems enabled him to track quickly what was selling and produce Top 10 charts for display in the stores, shifting the emphasis onto sales before range. It had never been done before. His old boss Malcolm Field (now Sir Malcolm, chairman of the Civil Aviation Authority) remembers Giles bringing 'a whole new dimension to bookselling'.

In fact, Giles had just taken a lead from what he saw being done in record shops. Sound familiar? Recalls Giles: 'I think there were parts of the literary establishment that were aghast that these trashy marketing techniques from the record industry could be applied to books. But it worked. A lot of people have a voyeuristic interest in what others are reading and want guidance.'

Field says that this rational approach was always Giles' strength, basing decisions on a mountain of data (yields, sales-space) and informed advice, and pushing them through with steely charm. If he has a weakness, adds Field, it is that Giles is maybe too rational, too 'manufactured', and will never do anything by gut feel. Which surprises many, of course, because it is the opposite of what he appears.

But the data-driven approach works brilliantly in retail sectors such as music, where HMV - which used to be the kind of chain that sold Top 20 records only on sufferance - is now acknowledged as a very sharp commercial retailer. It is already making inroads into foreign markets (Canada, Japan, Germany) and seems, at a time when many thought downloading music from the internet would spell death for music stores, to be juggling a host of e-commerce opportunities.

Yet at Waterstone's, a retailer whose store managers pride themselves on their independence, Giles' inflexibility seems to have caused serious problems. Bookselling was reinvented when Waterstone's attractive and welcoming stores opened up in the 1980s. Reading became cool again. But, in the face of sharp competition - sales down 3.7% in the last year - is the brand losing its charm?

Of course, it doesn't help that Giles admits, disarmingly, that he doesn't like books much anyway. But then, he never expected to be a manager, either.

Brought up in Blandford, the Dorset army town, the eldest son of a farm labourer, he was a prodigiously academic child who was expected to become a scientist. The first in his family to go to university, the first at his comprehensive to get into Oxford, he was shocked to discover when he reached university that he wasn't always going to be the brightest boy in the class.

It was that - plus the fact he was a gregarious bloke who liked his footie and his gigs and his beer - that persuaded him to forgo science after graduation and pursue a career in business. Accountancy would have been an easy option, but he couldn't bear the thought of more exams, so he plumped for marketing. Funnily enough, he points out, he is not the first physicist to join the discipline - Nicoli at EMI is another.

So he joined Boots, which, he says, was great. 'They didn't pay their middle managers very much and hence didn't retain them, so if you were a reasonable, thinking, warm body you rose up pretty quickly.' He ran curling tongs and hair dryers and lady-shavers and fell in love with retailing.

Those who worked with him then remember Giles as likable but 'immensely ambitious'. He leapt into WH Smith at the age of 28, as soon as headhunters called. Field says that Giles bowled everyone over with his ability and enthusiasm, first in the queue for career appraisals and always wanting to know how he could do things better. Most believed he was heading for the top, especially when the board agreed to send him to Stanford for a year.

Ironically, Giles nearly didn't come back. He loved it there, revelling in the go-go atmosphere of San Francisco's Bay Area and enrapt by the entrepreneurship strand on the course. He was dragged home by his wife, who hadn't planned on turning the stint into full-time emigration. Then WH Smith put him into Do-It-All.

Those were not happy years but Giles never allowed his misery to show, nor did his driving ambition ever make him unpopular. John Hancock, now chief executive of MFI, worked with him at Do-It-All and says that 'with Alan, what you see is what you get': strong work ethic, great brain, very approachable, prepared to share success.

In WH Smith, he also earned a lot of respect for sticking at DIY when other golden boys would have slipped out.

Then came Waterstone's and - after WH Smith chief executive Bill Cockburn left - an attempt to become boss of the lot.

'I felt I was ready to run a listed company,' shrugs Giles. Others felt he still lacked something. So he was rebuffed, and joined the HMV Media buyout as joint chief executive, a position he shared with HMV boss Stuart McAllister, who later stood down because of ill-health. Tim Waterstone, the founder of the Waterstone's chain, was brought in as chairman of the new group.

Any regrets? No, says Giles firmly. 'I think that, two years on, there are some things that have gone right and some that have gone wrong. HMV has gone from strength to strength, outperforming the challenging targets we set it. Why? Because it is an incredibly well run business and the guys we have are the best - very professional, very focused.'

And Waterstone's? 'Well, it's had a very disappointing year, but there are a number of things about the market. And I can remember this happening in DIY. Retailers have very short memories.

When the going is good you open tons of new shops and add a massive amount of floor space. When the market dips ...'

Waterstone's accounted for a third of the 300,000 square feet of extra space for bookselling opened in the UK last year, including its magnificent conversion of the Simpsons department store in Piccadilly. 'So it's no surprise that, in a market that's flat, sales and profits are under pressure.'

But why, with his experience, did they get it so wrong? He runs through the reasons: the rapid rise of internet sales (5% of the market, but often the more specialist books that Waterstone's is strong in), problems with the computer systems after merging with Dillons, in-fighting between the stores. 'We are now going into a year where there won't be the same degree of change as last year. We can get back to running great bookshops.'

Fine, but will he sort out what seems to be a clear rift between himself and his own chairman? How can they run a company at daggers drawn? Not true, says Giles, they get on well. Waterstone, when I phone him, is clipped and doesn't want to say much at all, beyond stating that Giles is 'very bright, very articulate and very persuasive'. The two, of course, have little in common, but maybe that's why it was thought they would make a great team. Sighs one who has worked with both men: 'Tim wants to fill his shops with stacks of unexpected books about Oman cooking or whatever; Alan balances it incredibly well. And remember, he is a good listener, people like working for him.'

But maybe Waterstone is right and the WH Smith approach to bookselling - blockbuster novels and Jamie Oliver stacked high - would be long-term death for Waterstone's. Its loyal customers would disappear; margins would spiral ever downwards in a price war. As one of its (sacked) store managers put it, any fool can sell the fourth Harry Potter; selling the first one is the tricky bit.

Yet the fact remains that Giles is the only man who has ever made Waterstone's really profitable (profits of close to pounds 30 million after the HMV Media buyout). So why hasn't he sorted out his disagreements with Tim Waterstone?

Is it because, as some say, Giles is too nice for his own good? He is certainly rather more open (and hence vulnerable) than many bosses would be in his position. Both advisers and journalists are surprised at the ease with which he can be reached, anytime, anywhere.

And some clearly can't make him out at all: one minute the dry, research-oriented strategist, the next the ever-approachable nice guy. 'I always err on the side of telling people too much rather than too little,' shrugs Giles. 'I am a great believer in being open and honest. That way you don't have to remember what lie you told.'

Others say that the problems at HMV Media are just whipped up by the press. Steven Tadler, managing director of Advent, says Waterstone and Giles get on fine. 'I have never heard Tim say anything negative about Alan, and you can quote me on that.' The problem, continues Tadler, is the British press, which has a habit of running speculative stories even when they have been refuted. Both Advent and EMI, he says, stand four-square behind Giles.

'Alan is a very experienced retail manager, and that experience matters a great deal both in online and bricks-and-mortar. He is a great leader, very likable, very good at motivating people but also very detailed, a guy who loves working with a spreadsheet. It's an unusual combination.

The only thing you could accuse him of is not being aggressive enough in facing down these stories. He just hasn't worried about them that much.'

Perhaps, to be a good weasel, a little more deviousness would be required on Giles' part. And that, say those who have worked with him, is not in his character. He's an ambitious, driven but not particularly complicated bloke. After all, what's the high point of his week? His Sunday night drink down the local with his mates in the village of Shiplake near his home outside Henley? 'It's a ritual, a whole group of us go from all walks of life. Two hours of serious drinking and conversation. I love it.'

And he loves taking his teenage daughters to concerts, and sitting in his seat in the upper west stand at Reading FC and going to watch King Crimson ('I know, I know,' he says, 'that's probably blown any credibility I have left').

Does he ever think he'll head a listed company? He shrugs. The IPO will have to wait, he says, till retailers are better valued. And what of his stake in the management buyout? 'I have got enough money tied up for it to feel uncomfortable, which is how venture capitalists like it,' he says.

Well, pounds 150,000 to be exact, which is not so much for a man who got a pounds 600,000 payoff on leaving Smith's.

If HMV Media floated would he make a lot? Maybe, he says. Seven figures, probably, in a best-case scenario. He looks slightly embarrassed. There is a pause in our conversation, and I can read his thoughts - flotation day, safe to say that is still a fair way off.

(I had noticed he's also a non-executive director of supermarket chain Somerfield, another struggling retailer ...)

He looks at his watch, smiles and says: 'No time, I'm already late for that meeting'. The smile widens to a grin - he knows he's avoided a sticky subject - as he strides off, briefcase in hand, shouting 'bye!', then a good-natured 'hullo!' at someone else down the other end of the corridor.

So I'm left with the conundrum: how can a man who appears one thing be completely another in his management style? Like Tadler says, it's certainly unusual, but that's not to say it won't work. The jury on Waterstone's, though, is still out.

GILES IN A MINUTE

1954 Born 4 June. Educated Blandford School, Dorset, Merton College Oxford and Stanford University

1975 Joined Boots as buyer

1978 Promoted to promotions manager at Boots, then assistant merchandise controller

1982 Joined WH Smith as development manager, later being promoted to merchandise controller

1988 Moved to Do-It-All subsidiary as operations and development director

1993 Moved to head WH Smith's Waterstone's subsidiary

1998 Appointed joint chief executive of HMV Media group, backed by EMI and Advent

Giles is also a non-executive director of Somerfield.

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