‘Identify where you are making money’
Monday, July 27, 2015
Normally a company boss cuts their teeth heading up a small business, graduating to bigger and bigger firms as they gain more experience before, perhaps one day, working for a multi-site, multinational, corporation.
Not so AJS managing director Andrew Scrimgeour. Instead he worked his way up the corporate ladder, earning a reputation as the go-to guy for turnarounds in packaging and labels along the way, before eventually taking the reins at AGI Media’s circa €225m European operation.
Then in April 2009, after years of yearning to run his own business, he led an MBO at AGI’s smallest operation, the labels business that nearly a decade before he had been drafted in to turn around.
Less than a year later though, after Scrimgeour sprinkled some of his turnaround dust on the loss-making 50-staff, £4.5m Littlehampton label business, it was back in the black and he and his now 75-strong team haven’t looked back since, with profits steadily rising every year and sales now nudging £7.5m.
The only problem is that if things keep going the way they are, then he might be once again running a multi-site, multinational business – not that he minds too much as this time it will be all his.
Darryl Danielli How did you get print in the first place?
Andrew Scrimgeour My first job was as a graduate trainee with [chemical company] BASF. It was a fantastic company. I was incredibly lucky as I had some great management training and it made me realise that every generation of managers needs to be better trained than the last.
Were you in the inks business then?
My degree was actually in agriculture.
Okay, not what I was expecting – how did that come about?
My father worked on farms after he left school at 14 and was a herdsman, and I always liked biology and loved animals, so I studied agriculture. It was there I met my wife Jayne. We then got more involved in tropical agriculture and development and were shocked by the inequality in the world and that so many people were starving. So we specialised in tropical agriculture and went to South America to study the agrarian revolution and [work with] the Inter-national Potato Centre on a project in Cajamarca in Northern Peru.
It still sounds a million miles away from print...
Well, when I came back I was due to work in an agricultural project in Nigeria, but it kept stalling. I knew I still wanted to work in agriculture and wanted to travel, and then I saw an advert in the national press for a trainee technical adviser for BASF, so I joined their agricultural business. But instead of being posted to some exotic location, they had an issue in York and someone noticed that I was from York.
It seems like you were destined to stay in the UK.
I think it’s fair to say that I was a little disappointed that rather than getting to go to deepest Africa I ended up living back at home. But it got me into management; I studied an MBA, got totally engrossed in marketing and found that I loved it. I became a marketing manager and it was in this role that I got involved with packaging and labels. Then I got an offer from Norprint to head up their marketing.
When was that?
1991 by this point. So I joined Norprint, a £50m business in those days, as head of marketing. The first thing I did was a marketing analysis, to find out what the customers thought of the business, what were its strengths, weaknesses, threats...
And the feedback?
At that time, it wasn’t great. Clients said we were big, bureaucratic, slow to respond and had lost our way. This wasn’t helped by the fact that there were all these small label companies growing out of the big three label firms: Harlands, Jarvis Porter and Norprint. These new businesses were quick to respond, very competitive and innovative. So I put a report together that basically said that while we might be doing okay now, whatever profits we were making at that time we wouldn’t be making in the future – based on what customers thought of us.
And what was your plan?
I said that the company was too big, that we should split it and have individual business units, each with a general manager who would respond to the new challenges.
So basically you, the marketing manager, told the managing director that the business model needed to change fundamentally?
Well, yes. There were so many layers of managers. So if the sales rep had an issue, he reported it to the area sales manager, they then reported it to the field sales manager, who reported to the general sales manager and then they raised it with the sales director. The sales director then spoke to the production director, who mentioned it to the factory manager, who talked to the production manager, he talked to the supervisor who had a word with the printer. By this time three weeks would have passed and the new breed of competitors would have completed the order.
To be fair there were probably a lot of firms like that in the early 1990s.
That’s true. But I’m not sure the management team really believed how bad it was at the time. So I suggested they get in some consultants in and, probably a hundred grand later, the consultants came up with a very similar report and we restructured.
But at least your report was vindicated, which must have won you a few brownie points?
Well… they agreed that a management layer should come out, unfortunately it happened to be my layer. The directors became managing directors of the new strategic business units, understandably cherry-picking the units that were making money. That left the loss-making main label business and the machinery division, so they said ‘Okay big man, you know everything that’s wrong, you can have those’ – and I became managing director of those two divisions.
That’s a big step up though, from marketing manager to running two big chunks of the group?
Oh yes, those two businesses were responsible for around £20m, but they were losing more than £2m – so that was my first big turnaround. We turned it around very quickly though and got it back into profit through cutting costs and employee engagement.
How long did that take though, because it must have involved a big culture change?
It was hard. Managing change is hard in any business and the bigger the business the harder it is, but there are golden rules to turnarounds.
And they are?
The first thing you have to do is have a realisation by the majority of employees that there needs to be change: if people don’t think they need to change then it’s very hard to make them. You either have to engineer a situation to make them realise, or it’s far better to use a real situation – we had a very real situation, because we were a £20m business losing £2.4m a year.
How had things got so bad?
Because the group as a whole was still profitable and was one big company, we just didn’t really know exactly where we were losing the money. So we had to identify that – it sounds obvious, but you’d be surprised – we certainly wouldn’t have been alone in that respect in the 1990s. You need to look at customers, businesses, factories and machines, and then get your team on board with the vision and strategy to make a change.
I guess the same is probably true of a lot of smaller companies today to be fair: if the company is profitable then you wouldn’t necessarily feel the need to work out which customers or presses were profitable.
Especially as everyone is so time poor. But you have to make it a priority. When I look at possible acquisitions now, I’m amazed how many businesses don’t know where exactly they make or lose their money.
Fair point. So back to the golden rules of a turnaround...
Oh yes. So the first is communicating the need for change. Then you need to get a realisation from everyone in the business that there is a need for change. After that you have to create a vision and objectives and get everyone to buy into it, but before that you need a strategy as a vision is no good without a strategy to deliver it and the means to make it a reality. Then finally you have to make it happen, and set milestones and reinforce the vision and strategy. I’m sure there are loads of management books that explain it better, but that is what I was taught 30 years ago and it still holds true.
Do you enjoy change management?
I do at work, but not at home. I’m all for changing everything in every business I’ve worked in. I’m always looking for better ways to do things. But by the time I get home I’m all for stability and no change, ask Jayne.
Perhaps there’s a logic to that – some people need stability in one area to allow them to affect change in another?
That’s true; there are probably some people who need stability at work, because there’s none at home – you have to be aware of that. One of the principles I’ve learned over time is the power of simplicity. While I always like change, I will always go for the simplest rather than the most complex to ensure people buy in to it.
Even if the potential rewards of the complex solution were higher?
Well, it has to be balanced against the rewards, but generally I’m quite cynical that if something sounds too good to be true then if you halve the potential benefits and double the amount of time and money it will take to implement then you’re probably not going to be far wrong.
I guess it also depends on the size of the organisation you’re trying to change?
True. Here we can make things happen very quickly, but in the big corporate world it’s so much harder because there are too many people influencing it, too much bureaucracy, too much interference. Despite generally having better-trained managers, change management often doesn’t work in large organisations.
Because they have a much shorter-term approach to business, owing to their ownership structure, so need faster results despite the challenges being bigger?
That’s a problem with big corporates, and the City and the government. They’re not in it long enough to take a long-term view. Also you can have head or tail winds that you can’t influence, you can be the best manager in the world – and I’m not suggesting I am by the way – and everything’s going well and suddenly the wind changes direction.
How do you mean?
Well, using us as an example: in 2013 we opened a new factory in the North primarily to support one large customer. They wanted us to open in October 2013 to hit their initial order deadline. So we had to get the factory, get it rewired and refurbished, get the machines in, get the staff in and get them trained.
And were you ready?
We were and we did it within budget, but the customer’s new site fell behind schedule. We’re expecting the first orders from that factory soon, two years after we opened ours.
Did that cause problems?
Well I wouldn’t have chosen for it to work out that way. But we managed it and the customer’s work should come on stream soon.
So now the only problem is that no doubt you’ve filled the plant with other work...
Well, yes. So it will require some more investment to ramp up capacity – but that’s a nice problem to have. But it was very exciting opening the new business; perhaps a little more challenging than we initially hoped admittedly, but we’re growing some great people up there and we want it to really work for the customer as their facility will be the most advanced manufacturing plant of its type in Europe at what they do. Once that site is proven, the model may be rolled out globally, and if that happens I would like to hope that we could be their partner globally. We’ve already had a lot of success building inplants for customers within their factories.
But couldn’t that turn into your worst nightmare where you are again the head of a global empire?
True, but it would be my global empire [laughs].
What are you ambitions for the business?
We probably had more ambitions five years ago to grow through acquisitions. But it could still happen. With everyone we have looked at, though, there have been challenges. We’ve got close to some, but for the amount of money we were going to spend on M&A, at those times we decided to put the money into our business. I think there are still opportunities internationally, especially where we are following customers.
And further afield.
Do you think there will be much more consolidation in the label sector?
I do. The big boys want to get bigger and some of the biggest clients want standardisation around the globe – but there’s still a part of me that almost thinks of labels as a cottage industry in terms of required scale. Of all the businesses I’ve run, this is the most complex in terms of product and that’s why I try to keep things simple from a business perspective.
How do you mean?
Well, the intricacies of labels, if you compare it to, say, commercial print, we have lots of different papers, lots of PEs, lots of PPs, lots of polyester, lots of vinyl. In the middle we have a wide choice of adhesives, removable, semi-removable, permanent, some that have to stick to an oil drum, underwater for 45 years. Then there’s all the different print processes: flexo, UV flexo, rotary silk screen, cold foil, hot foil, embossing, letterpress all on one machine. Then you can go from reel-to-reel, reel-to-sheet, peel-and-read... it’s complicated. Then you might have a customer who wants 14 colours on one label in pinpoint register. Then, of course, you have to cut the label out, just the top layer though – not the bottom. And if you have the tiniest nick in one label at that stage, the whole order might be rejected or worse, you get a significant fine if you have a tear in the glassine, say, that causes a break and stops the customer’s production line.
You’re right, it sounds like a nightmare. So why get back into the labels business then?
Good question [laughs], you’re not the first to ask that.
I actually love the complexity and besides, it’s what I know. After I turned Norprint’s labels operations around I was headhunted by Jarvis Porter [Europe’s largest label manufacturer at the time] to be chief executive Richard Brewster’s right-hand man. But soon afterwards, my former colleagues led an MBO at Norprint. And that reminded me that I had two objectives when I was a young man: one was to go and work overseas in agriculture and help people and the other was to have my own business. So when Jarvis Porter got into a little bit of difficulty on the beverage, wet glue side and the new chief executive came in saying that he was going to look at everything including MBOs, I saw my chance, but CCL came along and managed to buy it.
That must have been frustrating.
It was, but then Lee Newbon approached me.
Of Tinsley Robor?
Yes. Lee called and said they had a problem with their labels business.
You mean the business you now own?
Exactly. But at the time, around 2000, it was a much smaller job than the one I had at Jarvis Porter and I also told him that I wanted to own my own business. So it went quiet, but then he got back in touch and said the business was being acquired by Westvaco, so he couldn’t sell anything off, but that if I joined as managing director I could have an option to buy the business within two years on an agreed price formula. So I came down.
What shape was it in at the time?
It was losing £750,000. But we started to turn it around and got it back into profit.
But didn’t that mean that the purchase price would go up?
I know, I was getting well paid to do it though and I was on a good bonus and it was still a discounted price. But I was probably still a bit naive.
But it never came off?
No, it didn’t. The truth is they didn’t want me to buy it.
It was just to get you in the business?
Every year they made me an incredible offer to stay and in the end I probably made more money from staying than I ever would if I had bought it back then. And within a short period of time Westvaco acquired us and they were a very professional outfit. They renamed it AGI, which was a group of varied businesses in the UK: James Upton in Birmingham and Swindon, TM, a design graphics business in London, we had a factory in Slough, and the labels businesses. They decided that they had too many businesses in the UK to report to the group director. So they asked me if I would like to apply for the job [as UK managing director], but I was running the smallest business in the group and said I didn’t because I still wanted to run my own business. But they got some headhunters involved to look at candidates.
By which time you wanted it?
I did. I got the job and we were incredibly successful – beat all of our budgets and the role expanded until I ultimately became the managing director of Europe, which was basically all of the international business as well as sites in Australia and Los Angeles.
Was it interesting though?
It really was. I’ve been blessed really that in every day of my life I’ve looked forward to going to work. I’ve had some great mentors, I’ve worked with some great leaders and I think it helped that I’ve always been outspoken and challenged bureaucracy.
But how did that work in a corporate environment?
I think the Americans found it refreshing, besides if you’re doing well you can get away with a lot. I was lucky as well, of course. In my time music sales were falling 20%, but DVD packaging was still growing, telephone packaging was growing, games were still growing. But even then I could see that what was impacting CD sales, downloading, would hit DVDs at some point – and that’s why I advocated for them to sell the business before I left.
You say you were lucky…
What I mean is some people are in the right markets at the right time and they just can’t do wrong, because the market is growing. I don’t think you could say that about print generally nowadays, though – it’s a tough market.
You say that, but you can have two companies in the exact same market – one doing well and the other not.
Of course, that’s when it’s great to do the benchmarking – when you compare your business to one that’s doing well, or perhaps not so well – so you can try to identify where you’re going wrong or reinforce what you’re doing right. Often it’s down to the people in the business, the leadership, the motivation and the ‘1% rule’.
The 1% rule?
I always use that in any business I’m involved in, it’s a simple arithmetic formula. If you try to get people to be too ambitious, it can frighten them, but a 1% improvement, that’s nothing. So if you ask your sales team if they can increase sales by 1%, so the 100% then goes to 101% and costs remain the same – then you can actually increase the profit by a factor of 10. Then if you ask if they can increase prices by 1%, then you’re up to 102%, so you’ve got a 20% increase in profits. If you then look to get a 1% saving from your suppliers, perhaps an early payment discount or rebate, there’s another saving. Could your team makeready 1% faster, or cut waste by 1%? Before you know it you’ve got a 30% swing in profits.
Is that the turnaround secret?
It’s not a secret, really; it’s just common sense. In any company I’ve been involved in I’ve found out where we were making money, where we were losing it, encouraged people to get more of the jobs where we made money or try and improve the efficiency on the ones where we were losing it. And if we couldn’t, then we would put the price up or exit that work. Then after that the 1% rule everywhere. That’s exactly what we did here at AJS.
Didn’t you return to profit in the first year after your MBO in 2009?
We did. We turned a £354,000 loss into a profitable business. Some people think it must have been because we bought some big new efficient machine, but in that first year we didn’t have the confidence or the money to invest, so that was just by every person in the team putting in a 1% improvement.
But how did the MBO eventually come about?
Well, I still wanted to run my own business, so I just asked if there were any non-core businesses in the group that AGI might want to sell. They talked about some businesses, and then settled on labels as they knew I had been interested in that before. Besides it was five miles from my house and was a business I knew well. So we acquired the main label business here in Littlehampton, the logistics inplant in the North, the Little Books business in Holland, which we moved here, the Tinsley Robor Security Business, which we moved here from London. And we’ve never looked back.
Buying in 2009, though, in the depths of recession, must have been a little daunting?
It was scary, not just because of the economy, but you also start to think that just because you’ve turned businesses around before, you can’t take it for granted you will do it again. Every turnaround is different. But the day we took charge was one of the most exciting days of my life.
Is there anything you would do differently though?
I just wish we had done it earlier; running your own business is such an amazing experience. The pleasure we get, not just from the business doing well, but the people doing well too, watching them grow as the business grows. I’ve always believed in giving people the opportunity to achieve their full potential. That’s one thing I’ve noticed in turnarounds – in terms of people, the cream always rises to the top.
How important are the people to achieving a turnaround?
Incredibly important, without their support you have absolutely no chance of success. It’s about being part of the team, and that comes from the people. As the business leader you can help shape the business and create the right environment for success, but it’s the people that drive it and make it happen and have to make sure it keeps happening.
What were the key things you’ve learned from running large businesses, though?
The amount of waste, in terms of physical waste but also time, although I’ve learned that more from being out of it and looking back if that makes sense. I think it would probably be a useful experience for any chief executive of a large business to step back and run a small one for a while, the amount of corporate bureaucracy they would cut through when they returned. I think their decision-making would improve too, because in large organisations too many decisions are made in the boardroom in the absence of the facts about what’s really going on.
You must have some interesting stories of corporate madness?
[Laughs]. Well one time at AGI we were all called to an emergency meeting at a lovely beach resort in Florida by a new president keen to improve profits. At the end of it we had come up with a 100 new initiatives. I did question the wisdom of rolling out 100 new initiatives when the business was struggling to achieve the 20 it already had.
And they rolled them out?
They did, and low and behold rather than double profits they were halved the next year – except for little old me, because I was lucky and had some momentum...
And because you ignored the 100 new initiatives too?
Well, there was that too [laughs]. It reminds me of the 80/20 rule, the Pareto principle and that really does work in business, and life: it’s about prioritising and concentrating on the 20% that is going to impact 80% of your results. I know one business that uses that as its guiding principle and it works. Don’t give someone 20 objectives, give them a few key objectives that are really going to impact the business and then ruthlessly prioritise them.
Do you follow any business methodologies?
I’m a fan of management theory, but if you distil all of the different theories then it’s about people – engaging with your people and engaging with your customers, maintaining focus and applying common sense. I’ve met some great business people in my career and even they have got into trouble by not prioritising or by taking on too much.
Final question, who’s had a big impact on your career?
After Jayne, BASF as a whole had a big impact on me. In terms of individuals, Ted Goold, group managing director at Norprint was a great a man, his boss at Norcross Robert Alcock too. Richard Brewster and Paul Jarvis at Jarvis Porter. Geoff Martin at CCL is someone I very much look up to. Lee Newbon at Tinsley Robor was a larger-than-life character. Tony Garnish too, we had a great relationship. I’ve enjoyed working with everyone; I took different things from all of them. All the way through, I’ve always been very positive throughout my career, so I’ve probably hero-worshipped all my bosses at some level.
So the trick to being successful is to idolise your bosses?
That’s probably a good lesson for everyone, idolise your bosses – because you can get something good out of everyone you work for. It would certainly be a good lesson for everyone here at AJS [laughs].