UK: The Davidson Interview - Allan Leighton.
Monday, 01 September 1997
UK: The Davidson Interview - Allan Leighton. - The revival of Asda's fortunes were not just due to the 'Archie Norman' show. Both Norman and Leighton, says Andrew Davidson, are rather fed up of the stereotypes.
The revival of Asda's fortunes were not just due to the 'Archie Norman' show. Both Norman and Leighton, says Andrew Davidson, are rather fed up of the stereotypes.
There's a party going on in the vast open-plan foyer of Asda's head office in Leeds. Wartime singalong songs are blaring from speakers, a giant cardboard bomb dangles jovially from the top of the atrium, a couple of khaki-clad NCOs are barracking executives heading for the central escalator. They are standing by an exhibition of photos under the screaming title, BARCODE BLITZ!
'What do you think?' says Allan Leighton, tall and skinny as a Twiglet with an ear-to-ear grin, gazing down from the balcony that runs above the foyer. 'We've been doing it all day. Just a bit of fun.' The exhibition is of products with hard-to-scan barcodes and includes descriptions of how the company sorted them out. Leighton, about to celebrate his first year as chief executive of Asda, positively beams with pride. He is in his shirtsleeves with a large badge reading 'Allan happy to help' pinned to his chest. 'Do you want a badge?' he asks. Just a visitor's docket will do, I say, I don't want to get too carried away.
And he's off. Through here, he says, loping across the large, open office on the first floor, past the boards with photos of products, past the sales figures, past the glass meeting-room where he holds his early morning sales briefings. 'Wait, come in here, have a look at this,' he shouts, dragging me into the room. It is empty save for a large table on extra-long legs with a top that stands about five feet off the ground. He slaps his hand on the table. 'Fabulous idea,' he says chirpily. 'Makes the meetings go much faster. We all stand round it, boom boom boom.' He waves his hands to show how the discussions go. Fast, by the look of it. Great, I say.
Then he is outside again and striding around the corner. 'I think we'll go over here,' he says. Desks and computers stretch off into the distance.
He heads into another glass meeting-room in the corner. It has a couple of sofas and a coffee table, a hi-fi, a big cactus, a scarf pinned to the wall, a large silver sports cup perched on a speaker and a nice view of the river. It feels a bit like a big boy's bedroom.
'Take your jacket off then,' he says. He settles back, legs up on the table, that big smile still splitting the designer stubble, trying to look relaxed while continually controlling the bubble of energy he seems to live in. Leighton, the man who took over from Archie Norman as boss of the £6.9 billion-turnover supermarket chain last September, is renowned for many things, including long-distance running and Morris dancing. Keeping still is not one of them.
But retailing is a skill that thrives on energy and Leighton has some big boots to fill. Credit for the turnaround of Asda, which six years ago was £1 billion in debt and heading for an early grave, has traditionally been given solely to Norman, the eloquent McKinsey veteran with the impish smile and the media-friendly manner. Clearly a man who likes a challenge, Norman has now moved on to be deputy chairman of the Conservative Party, as well as a two-day-a-week executive chairman of Asda and MP for Tunbridge Wells. Which leaves Leighton, who made his name marketing Mars Bar ice-cream before being wheedled into Asda five years ago, very much in the driving seat. Those who work with both men stress that much of what Norman achieved could not have been done without Leighton's instinctive marketing nous. But being boss is different. The question now is whether the bubbly Leighton, still only 44, can move up a division and replicate the Norman magic over the whole company as the supermarket sector gets increasingly tough.
So far, Leighton has good reason to be bubbly. His first set of figures, reported in June, surprised the City by coming in even higher than expected, with sales up £1 billion and pre-tax profit leaping 16% to £354 million.
Despite being only number three in the supermarket sector behind Tesco and Sainsbury's by turnover, growth in like-for-like sales put Asda ahead of the competition. And, most importantly, in a sector where consumers often have problems differentiating between supermarket chains, Asda's strategy of stressing price and innovation still appears to be working, despite all its rivals leaping on the value bandwagon. Brave moves such as the introduction of ethnic food counters - Asda now has the largest Indian takeaway business in Britain - and its decision to expand strongly into the clothes market, with ranges designed by Next-founder George Davies, appear to be paying off. These points of difference will become increasingly important, argues Leighton. Once there are enough supermarket outlets across the UK for everyone to exercise proper choice - at present, most consumers just choose whatever is closest, he says - then differentiation will be key.
Asda has had a chequered history. Set up 25 years ago as a string of edge-of-town hypermarkets, selling half food, half non-food, it always was, according to Leighton, a great idea that just became too diluted.
It made bad moves into MFI and Allied Carpets, took its eye off the ball too often and let other supermarkets slip past it. By the time Norman, then the hot-shot former finance director of Kingfisher, arrived, it was on its last legs with a share price hitting 30 pence and falling. Leighton, headhunted by Norman for his marketing nous, took some persuading that it could be rescued. 'When I got the first phone call to come here - and remember I was one of their suppliers so I knew the place - my reaction was, "You've got to be kidding". I loved Mars, I was the youngest director there, I was boss of Pedigree Petfoods. We all knew Asda was going bust.' Three months later, under renewed pressure from Norman, he buckled and agreed to meet. 'The most important thing for me is the people I work with,' says Leighton, 'and what attracted me was Archie. I had never met him before and I got on with him from the start. I gave him my thoughts on what the company should be doing and that was it. I was in.' Norman says that Leighton's most impressive quality is his sheer verve. 'Retailing requires what I call traction, the ability to make things happen fast. That's what Allan has.'
The subsequent Asda turnaround - widely seen as the Archie Norman show - has been well-documented. Less clear has been just how much Leighton and other senior managers contributed to that success. Many of the characteristics of the 'one-team' management style proselytised by Norman (workers are called colleagues, no one uses surnames, everyone works in open-plan offices) are, for instance, ideas that Leighton helped bring into Asda from Mars (where workers are called associates). The very use of the word colleague was a 'jointism' thought up by both Leighton and Norman together. But if Norman alone has won the plaudits in the past, it doesn't bother him. 'When you are the chief executive, you are the figurehead,' Leighton shrugs. 'You take the pain and the gain.' He is not above having a little dig at his chairman, though. When I ask who he voted for at the election he answers solemnly: 'Labour.' Then his face splits into a giggle and he laughs: 'I vote for talent.'
Those who have worked with both men say the key to their relationship is that they are totally complementary. 'Allan is very action-oriented and more of a people person. Archie's strength is intellectual incisiveness.
He is more strategic,' says one. Norman himself says that he rather wearies of the simplification that he was the brains and Leighton the brawn in Asda's revival. For the start, there were more than just the two of them in the management recovery team, and their skills overlapped more than people think. 'I like to think we learnt off each other,' says Norman.
'We are very creative together, more so together than when apart.' Others contend that Leighton is probably better equipped to implement Norman's vision of Asda as a dynamic, fun, highly-motivated, non-hierarchical organisation than Norman himself was. 'Archie was a brilliant communicator and myth-maker, but only with the press and the City, not so much with his own staff,' says another adviser. 'That is what Allan is brilliant at.'
The stories of Leighton's love of making his staff laugh are legion.
Dressing up as Gary Glitter at last year's Asda management conference, making all the managers stand on their seats to swear that their supermarket toilets would be spotless, introducing a competition in which executives caught wearing jackets had points deducted, testing every manager on their checkout skills in a public trial. All done with a purpose, of course, but already managers at Asda are watching to see if Leighton tones down his act now that he has taken on the chief executive role. Yet the style also reflects the company's ambitions, to be brash, loud, staff-oriented and somewhat, as Leighton likes to put it, 'in your face', an image which he thinks fits comfortably with its northern roots and with its target audience: 'the average family' (for which read lower to middle socio-economic brackets). So when you walk into the average Asda store, which is usually twice the size of its competitor's supermarkets at around 50,000 square feet, the first thing you notice is the space (huge, vaulted ceilings), the noise (music and special promotions), the bustle and the rough haphazardness of it all. Intentionally, it feels more like a traditional open market - the design is called 'market hall' - than other supermarkets. There are few yuppie frills - no organic vegetables or exotic fish - just mass-market groceries with clever innovations like the Curry Pot selling cooked meals to take home. It shows a deft common touch.
Indeed, you could argue that the determinedly unpretentious Leighton might be a more natural leader for the chain than the Charterhouse-and-Cambridge-educated Norman, who resolutely kept a satellite office in London (which Asda has now closed). Brought up in the Midlands, Leighton read business studies at Oxford Polytechnic and worked first for Lloyds Bank before joining Mars in his early 20s. He was an only child, he says, and had a great childhood, 'Just me and lots of dogs,' he grins. His parents moved around a lot, his dad worked for the Co-op. He doesn't think he picked up any retailing tips from him but he does remember going to visit him at work, and noticing how good he was with people. 'I think that is the way I am too,' he says. 'I am always comfortable with a lot of people.' He did go to boarding school, the grand sounding Magdalen College School in Oxford, but was never academic, being much more interested in sports, at which he excelled. He only chose to do business studies because, he says, he is a 'practical kind of guy'.
Leighton is so likeable that you suspect he must work hard at it. 'Like any good salesman, Allan is always able to position himself 5% lower than the person he is talking to, to make them feel comfortable,' laughs one friend, who adds that, while Leighton is one of the most genuine people you will meet in British business, he is probably still insecure about following Norman and needs reassurance. In particular, Leighton has moved quickly to quell any doubts about whether he can match Norman's intellectual acuity by engaging no less than two Harvard Business School professors to work on different projects with Asda, such as the outsourcing of its IT requirements with IBM. Leighton himself attended Harvard's advanced management programme two years ago, an experience he describes as 'fantastic', and has now established strong links between the business school and Asda. These appear to operate in conjunction with the already close ties between the company and Norman's old alma mater, McKinsey.
Joining Mars was his crucial break in life, says Leighton. He hated Lloyds' bureaucracy, and when he saw an ad for the Mars salesforce in a newspaper, he jumped at the chance. It was the best management training ground he could have found, he says. Immediately he was rubbing shoulders with the highest calibre of people, working with one objective and with a distinct culture of openness and team spirit - that same spirit that they have tried to reproduce at Asda. Others are rather cynical about Asda's team spirit, pointing out that in the past it very successfully made a star out of the boss and never touched anything important like the salary scales.
(Compare the average staff salary of £11,600 in 1996 with Leighton's £447,000 package, and Norman's £548,000.) Yet Leighton is insistent that the ethos is important. Happy staff means happy customers and happy shareholders.
Indeed happy staff also are happy shareholders - Asda claims to have the biggest staff share option scheme in the country with 52,000 colleagues participating. Leighton's only regret about the way Asda is run is that the old head office is still a long way from the stores. If he had his way, he would have a new head office on top of a store. He always holds his board meetings in stores. 'I want everyone to be in the stores,' he says, 'it is the most powerful thing.'
Why? Because that would make communication even easier and communication is the key to motivating staff in the battle with rivals on service. 'There's a buzz here, and one of the big differences between our stores and those of our competitors is that there is this buzz, you can sense it.' Leighton takes his feet of the table and leans forward to emphasise his point.
'Let's be honest, in our kind of business, shopping is boring, so making it more interesting for customers is very important.'
And making it different. Asda's strategy of operating bigger shops is only of use, continues Leighton, if you use the space to do something different. Hence the move into clothes with its George line. Clothes need space, between 6,000 and 10,000 square feet, to be displayed properly - space his rivals don't have. Asda recently bought out George Davies's half-share in its clothes subsidiary and Leighton is now preparing to expand the range across more stores, hoping to establish it as 'Britain's second family clothing brand' (after Marks & Spencer). What he really wants to do, he says, is 're-architect' the market. It was something he achieved at Mars with the Mars Bar ice-cream, an innovation which many thought couldn't work and, if it did, would cannibalise the sales of chocolate Mars Bars. It didn't and went on to become a hugely profitable line, selling at twice the price of normal choc ices. In similar fashion, he wants to turn the accepted model of the clothing market on its head. He gets even bouncier at the thought of it.
'The clothing market is high-street, large number of distribution points, high operating cost, high distribution costs, long-distance sourcing.
My model is slightly different to that: UK-based sourcing or assembly where possible, because the most important thing is turnaround time to market. My space costs are half, my distribution costs are half, my operating costs are half. If I am reasonably competent, it means I should be able to translate that into same-quality garments at a significantly better price. The only thing I need to do that is a better distribution and supply-chain system than we currently have so we are building a state-of-the-art clothing distribution centre in Northampton.'
And for the same reason - that desire for market advantage - Asda has been very cautious about following its rivals' diversifications. No loyalty cards? 'We have had them on trial for two years in 20 stores,' shrugs Leighton. 'They don't work. What is important to the customer is, "Can I get there? Is the price fantastic? Is the service very good?" Not loyalty cards. You can't buy loyalty. Tesco was only successful because of first-mover advantage.'
No bank? 'No, simplicity is divinity,' he shouts. 'The businesses we are trying to run are pretty complex already. I have got massive food ranges, massive non-food ranges, I am the third biggest music and video-retailer in the UK, the fastest-growing clothing business in the UK.
Do I really want to be a bank? No, not really. I have got this lot to manage. That is not to say that you don't look at these things but I think you have to keep the business pretty monofocused on what you want to achieve.' Monofocus, of course, didn't stop Asda bidding £400 million for Granada's Welcome Break chain of motorway service stations in January, a move which surprised many in the City (the chain eventually went to Investcorp for £474 million). The aim, apparently, was to rebrand the chain with the Asda logo and build on its strong relationship with consumers. The problem with banks, says one adviser, is that they have to say 'no' occasionally, which dents your customer relations, something which Leighton is acutely conscious of.
Because if Leighton has learnt anything from Norman, it is that you have to carry everyone with you: the press, the City, staff, customers. Insiders remember Budget days at Asda when everything would stop so Norman could be available to the press, making sure he got his quotes in the papers.
Likewise, the big campaigns which Asda backs - against the Net Book Agreement, against pharmaceutical prices, against VAT on sanitary protection products - have been, according to at least one adviser, very shrewd public relations jobs. 'Archie even got the pharmaceuticals story onto the front page of the Wall Street Journal,' remembers one. 'And what the hell's it got to do with them?'
Keeping that profile up, as much as fighting Asda's corner in an ever-maturing retail market, will be Leighton's toughest task - and following an act like Norman, whose media presence swings pendulously over his old number two like a lead weight on a thin string. The feeling you get when you hear Leighton talk about strategy, using trite Harvardisms like 'monofocus', is that maybe he is trying too hard. But that is Leighton's style, argues one old friend, he always does everything at 110mph and bounds around like an over-eager wolfhound, desperate for approval. It is the same with Leighton's love of sport: he just cannot stop himself. Most evenings he is out doing his seven-mile run round the streets of Boston Spa, where he lives with his wife and three children.
He also plays football every week and when we met was still suffering from his appearance in a charity rugby league match. Rugby League? Doesn't he ever slow down?
No, says Leighton, still grinning as he virtually jogs me out of the building. Perhaps he is embarking on some myth-making of his own now, casting himself as the ultimate Action Man boss - retail does, after all, demand a little theatre. But I wonder if it's in his character to push it all the way. As we stand in the foyer again, I ask him why he isn't in Who's Who. Pah, he says quickly, he hates all that sort of stuff. They sent him a form but he refused to fill it in. 'How's it going to help running this?' he asks, gesturing at the hubbub behind him. He waves goodbye, spins on his heel and bounces back inside.
1953: Born 12 April Educated Magdalen College School, Oxford and North Oxford Polytechnic
1973: Trainee, Lloyds Bank
1974-1991: Various posts at Mars, including inmarket sales director, Pedigree Petfoods
1992: Group marketing director, Asda
1994: Retail director, Asda
1995: Deputy chief executive, Asda; also appointed non-executive director of Wilson (Connolly) Holdings 1996 Chief executive, Asda
WHAT PEOPLE SAY
'The real difficulty of being chief executive is that you are not the star centre forward any more, you are the team manager. It is your job to make others shine. And Allan is now in the process of doing that in his own way.' Archie Norman, chairman of Asda
'Allan is an example of a man who always enjoys what he is doing. He can mix fun in with the serious aspects of business. Some people see that as a distraction from making money but it isn't.' Feargal Quinn, managing director of independent retailer SuperQuinn, and Senator in the Irish Parliament
'Allan is an instinctive marketer, extremely willing to learn, a good listener and an incredibly impressive man motivator. His problem is that he has taken over from one of the toughest acts to follow in the City, and nobody believes there is another Archie Norman.' Rick Bendel, chief executive, Publicis
'The most difficult problem Allan faces is that Asda has been performing strongly in a very mature industry, and he has to balance the need for short-term performance, which requires a very intensive style of management, with the need to think about the longer term.' Michael Mire, McKinsey & Co.