by Real Business - Thursday, 30th August 2007

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You know you need a suit when…

• You know what you’re doing for the next few weeks, but haven’t got a clue what you’ll be up to in a year. “Entrepreneurs rarely have the management skills to run a large or medium-sized company,” says Paul Wilson of Bain & Co. “They tend not to form long-term strategies.”

• Faced with the dilemma that firing an old friend would add 20 per cent of value to the business, you’d opt to keep your friend. “Founders are usually too emotionally attached to their staff. You can’t afford to be these days – there are too many competitors,” says Wilson.

• The team around you all have similar skills. And you’ve had difficulty bringing new complementary talents into the business. “Entrepreneurs are not very good at amassing broadly skilled personnel,” says Wilson.

• The company is short on researched information, competitor analysis or benchmarking figures. “Entrepreneurs do not amass objective data to help benchmark their company’s performance,” says Wilson.

It’s Friday morning in the Models 1 agency on London’s Kings Road. A group of boys and girls are packing out reception, hoping to be discovered. Beyond, hassled model-bookers hit the phones, preparing for London Fashion Week.

In the back office, John Horner is oblivious of the goings-on out front. Instead, Models 1’s besuited MD is poring over the month’s management accounts. A slight, neat businessman with a dry sense of humour, he admits he’d be no good at figuring out which of the kids out front have potential. With a puzzled look, he points to a photo of a recent talent competition winner: “I couldn’t see what they saw in this girl, I thought there were lots of prettier ones.”

Horner doesn’t need to spot the faces of tomorrow – in fact, he leaves that stuff entirely to his two directors. His job, as managing director, is quite different: to grow the company internationally and nationally (perhaps through mergers with complementary agencies), develop the Models 1 brand, take it successfully online, restructure the organisation and reduce the headcount of models on the books. Phew. And, if that’s not enough, he needs to find an exit for Models 1’s backers, Albermarle Private Equity. “We will do something with this brand. We’re not going to just sit here and mull it over,” he says.

Everything about Horner is untypical of the industry. He’s a level-headed man in a world of huge egos. Unlike his volatile peers, this businessman seldom raises his voice. The strongest emotions he’s felt since he arrived at Models 1 a year ago are annoyance and frustration; few of his staff will have witnessed even this.

Horner arrived at Models 1 just over a year ago. He and his two directors, long-time bookers Kathy Pryer and Karen Diamond, bought out Models 1 from the founder-owners. Horner may have had no experience of modelling, but he was essential to the deal. “John was from the outside world,” says Diamond. “He brought the bigger picture, he knows what’s out there. His vision is to grow the company; Kathy and I are left to run the model side. John’s different from the agents. He’s not a big ego like most of them – he brings a business approach instead. He can look clearly at the company and at what it should be doing because he’s not emotionally involved in the industry.”

Horner’s background is deep blue-chip. Right before Models 1, he’d worked at Blue Logic, a marketing consultancy he had set up for international advertising agency JWT. Before that, he’d been MD of Conzept (the ones who came up with that weird Tango campaign). He is also a non-executive director of an Internet company.

So why get involved with something so, well, frivolous, as a modelling agency? Horner’s answer is pure corporate man. “I was asked to give an overview on the MBO to see if it made sense,” he says. “Then I was invited to join. I was interested because it was successful and profitable. The gross margins were 30 per cent – much higher than the nine per cent you get in ad agencies. It was really a promising business: the owners hadn’t been pro-active and yet it had still been successful.”

No kidding. Models 1 was Europe’s biggest model agency; turnover was £8m; and it had some great names on its books, such as Jerry Hall and Patsy Kensit. Yet there was just a sense that it could have done more. “We never did things like – what do you call it? – forecasting,” says Models 1’s original creator Josè Fonseca (she founded the agency with April Ducksbury 30 years previously). “We never borrowed money, we never spent more than we earned. But when the competition hotted up, we really had to be out there and constantly re-evaluating what we were doing. It got to the point where I felt I didn’t want to do that any more. That wasn’t why I started the business,” says Fonseca.

Tellingly, she’s had no contact with Horner since the deal was signed.

It’s an interesting situation – and it’s far from rare. More and more entrepreneurs are discovering that they can take their business only so far. Then they reach the threshold of their abilities. At that point, professional management skills are needed – to raise funds, invest in the organisation’s infrastructure, remove under-performing staff etc. But often the people with those skills – hard-nosed corporate managers – seem incompatible with the entrepreneurial spirit of the company. “They tend be dispassionate and far more structured than an entrepreneur,” says Paul Meechan, a director at recruitment agency Star Executives. “They go into a place and can figure out pretty quickly what needs to be done. They are very profit-oriented, whereas an entrepreneur is more likely to look at something in a more paternalistic way.” With a suit on board, one question soon raises its ugly head: who’s indispensable?

Enter trouble. Founders will have personally hired many of their people and will have strong emotional ties to them.

Ronnie Wilson led a thorough shake-up when he arrived at computer software company Macro 4. He took over from the founding entrepreneur’s right-hand man who’d been with the company since the sixties.

Wilson was steeped in the corporate world. He had held senior positions at Unisys and Sequent Computer, where he’d had up to 3,000 staff at his disposal, and where he’d learnt about corporate processes: positioning, marketing and data analysis. But the company’s problems ran deeper than a lack of systems. “When I walked into the company on my first day, I felt there was an awful lack of energy,” he says. “It was low-key, low-profile, and it had lost its way,” says Wilson, a 45-year-old, tall, straight-talking Scot. “On the first day, I brought the staff together and I got a pretty positive reception. I explained that I wanted to grow the company. Considering they didn’t know me, they were incredibly supportive.”

The management team was the first to feel the axe. “I started with the board,” says Wilson. “I brought in two new board members and dispensed with two others. I changed some of the non-executive directors, too.” He then worked his way down, clearing out many in the sales team who didn’t have the right skills to take the company forward. There were too many technical experts and not enough up-to-date sales and marketing qualifications. “The sales team were appropriate for the company as it had been, but not as I wanted it to be. So I changed all the senior sales management almost to a man,” he says.

“It was a hard task. It’s not a nice thing to do.” And he could have lost the support of the staff who remained. But he managed to keep them on side by ensuring they knew he was doing it for the good of the company and that it was vital for its survival.

“The management team is now very strong,” he says. “I’ve managed to sell a vision to like-minded people who have brought in some senior experience. They’re hungry and energetic.”

He’s produced new models for sales, support and marketing, set up a human resources department (it didn’t have one before) and given the whole customer approach a rethink. Initially, he had to double the cost base. “It just needed a broader, more thoughtful approach. The guys who’d been here didn’t have the breadth of experience. They’d grown up with the company.”

Macro 4 now has 350 staff; it had 200 when he arrived. New investment and a broad, forward-looking strategy has paid off. Static £24m turnover rose to sales of £17.1m for the second-half of 1999. Ronnie Wilson’s “Strategy for growth” has been painful but, so far, it’s working.

Of course, you don’t always have to have been a graduate in Unilever to qualify as a suit. Some suits are entrepreneurs who have been around the block. Take Angus Cater, who has seen business failure and has subsequently reinvented himself as a professional manager.

Cater took over as MD of life-assurance business SFS in September 1995, backed by his father-in-law, the former European president of Quaker Oats. “SFS was a great idea but it hadn’t been fully exploited,” he says. He’s since done all the cold-blooded corporate surgery: cut overheads, investment in business products and IT, swopped suppliers.

But how did he jump from entrepreneur to professional manager (Cater now has an MA in strategic financial management from Kingston)? And what are the differences between the two types?

Discipline is all, says Cater. “So many entrepreneurs have a good idea and set up a business,” he says. “Then they have a good idea a day and try and implement each of them. That soaks up a lot of resources in a business. But you have to be ruthless about applying brainwaves.”

A major problem, he says, is that entrepreneurs rarely surround themselves with people who question their decisions. “I have recruited some very good people who don’t take everything I say at face value. They will always ask what the upside is for an idea.”

And tough decisions can be anathema to entrepreneurs. “Don’t be afraid of making a few people redundant if it’s for the good of the company,” says Cater. “You have to be ruthless and focused. Everyone who works with you in a crisis situation has to realise that it’s not a question of choosing that someone should leave. If the business won’t support them, it won’t survive unless they go. If you’re not single-minded and tough in these instances, your entrepreneurial activity is pretty meaningless.”

Contacts:
Gill South is a business journalist whose freelance career includes commentating at London Fashion Week shows for Sky television and profiling the country’s top entrepreneurs.

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