Criticised for being a food service novice when he arrived at Compass in 2005, Ian El-Mokadem has turned around an ailing company, moving it into profit growth. His success has been based on the three Rs: restructure, refocus, research. So what does the future hold for the UK and Ireland arm of the world's biggest contract caterer? Mark Lewis grills the man they call "Elmo"
Two-and-a-half years have passed since Ian El-Mokadem, known universally as Elmo, became group managing director of Compass UK & Ireland. That his appointment made him the fourth person to occupy his seat since his predecessor Don Davenport retired in 2005 was a sign of the gnawing instability at the company he had joined.
By the end of 2005 Compass seemed not to know north from south. Three profit warnings in 12 months, a UN investigation into irregularities surrounding the awarding of a contract in Liberia, and rumours of a possible takeover left analysts likening the task facing incoming top-tier management to turning a supertanker.
Elmo was one of several new brooms brought in to clear the mess. Not for him the potwash-to-boardroom career path recounted by many hospitality chiefs. An early grounding at Andersen Consulting led to senior positions at British Gas operator Centrica, for whom he launched its telecoms business, Onetel, in 2000. Onetel's progression within four years from start-up business to the UK's largest fixed-line service provider hinted at a focus on the consumer that might pay dividends at the world's largest food service provider.
Since joining, Elmo has kept largely under the radar, quietly overseeing a senior management-level restructure, planning brand consolidation, rethinking his supply chain, and updating food offers based on a greater awareness of consumer habits and retail trends. Two-and-a-half years on, progress has clearly been made. Contracts come and go, as is the nature of the business. While Goldman Sachs was a high-profile loss this summer, the retention of Leeds NHS, a decade-long deal to cater at Hever Castle in Kent and a £350m deal to provide services at the Royal School of Military Engineering certainly softened the blow. And if turnover and profit growth remain in line with 2007, it's only as a result of the ongoing work to simplify the UK business structure.
When first we meet, it is to tour the Compass innovation centre in Chertsey, Surrey. As Elmo bounds excitedly from one branded offer showcase to another, punching commands into vending machines and munching happily on the pizzas, baguettes and curries presented to us, it's hard to see why industry watchers worried he was a food service novice when he joined Compass. A few weeks later, we reconvene to reflect on his first two-and-a-half years heading Compass UK.
How have the past two-and-a-half years been for you?
When I joined, people said "What does he know about food?" Compass had obviously lost its way to a degree early in this decade. My job has been to restore confidence in the business and let it shine again. I joined because I felt this was fundamentally a good business, and nothing's happened to convince me I was wrong. Two-and-a-half years on, in every part of the business, I see that refreshed passion for food quality based on good customer understanding with great chefs sitting behind it.
What surprised you most when you arrived?
Anyone coming from another sector would find cost-plus an alien concept. People say it gives clients more control. I think the opposite. The client's in a much stronger position when they've got a supplier on the hook whose profit and loss figures will only flourish if they deliver great customer service. I prefer to take risk based on performance. When you outsource you want an expert to take some of the risk. If we're doing well, we get rewarded if not, we should feel the financial pain. I don't understand why among some consultants there's still a belief that cost-plus gives strength in the relationship to the client.
Has the sway held by consultants come as a surprise?
If you are thinking about outsourcing for the first time and haven't a clue how the industry works, I would call a consultant. Some do add value and work with clients to understand what they need, then engage with suppliers constructively to get the best outcome others go around playing on price arbitrage. It's now about scale, peace of mind in terms of corporate manslaughter and health and safety regulation, and I think there's a role for those that still pop up now and then encouraging a bit of pricing tension - but it's not the be-all and end-all.
You've focused on customer insight, people and brands. Let's start with people.
We talk about our industry being all about brilliant people, but I don't see it in the way contracts get awarded or consultants evaluate bids. Look at the purchasing process. We're all interested in talking price and product, and that's important. It just surprises me that the people who'll be in your building interacting with your employees aren't equally important. They're the service we deliver and should be a more important feature of the way we put ourselves forward and the way people decide how they buy. Look at it the other way. On the few occasions there's a problem with an account, it's invariably about people. I don't often get calls saying, "I thought your health and safety training was a bit poor." It's all about people. If so, why aren't consultants focusing on them?
Last year 50,000 people filled in our employee survey. One area where people wanted us to do more was investing in their careers and potential. We're a big organisation it's a failure every time someone leaves to get promoted, because we should always be able to promote. We've hired a new HR director beefed up our training and development team developed an online induction tool, the One Compass Welcome and got a strong calendar of training at every level.
How have you improved market insight?
Cooking is an art, but there's a role for a more scientific approach. That shift from instinct to instinct-plus-a-bit-of-science is important. When I joined, the industry was very focused on the contract. But once you've got contracts, what determines success or failure is your ability to attract people into an outlet. We were doing customer and client research, but not as well or as much as we should. A big focus has been on understanding that consumer dynamic and building concepts on the back of it. The starting point for new food concepts is "What does the customer want, and how do we know?" When we talk to clients about offers we can say, "We've got X thousand interviews here and run a lot of venues that are similar to this, and our experience and data says this is the right offer to put in here."
An example is our So Deli concept. That was developed from recognition that, in our City of London kind of venues especially, a delicatessen offer that evolves through the day was becoming a big trend. We recognised people eat and buy through the day, and that has led to a greater emphasis on retail-style outlets. So Deli was our response. It wasn't luck, but proper marketing-backed development that sat behind it.
How have you addressed brand duplication?
The first was Restaurant Associates. RA was originally three businesses, which made no sense. We had three brands doing the same thing, and we needed to find out which brand clients felt was strongest and run with it. RA has been successful in creating a clear brand that stands for commitment to sourcing, CSR and high food standards.
Our most recent change is Eurest Services, our new B&I branding, which reflects the fact that clients in that sector want more than food from us. We've spent two years understanding the new reality in business and industry, and this project sums up - I hate the words New Compass, it sounds like New Labour - the well-researched new offer we want to take to market. There's a trend towards a smaller number of partners delivering bundled services. Having two bits of Compass, one doing food, one doing non-food, wasn't client-focused, so we've responded. Food is at the heart of the offer, but it's also about offering support services. Around 10% (£200m) of our UK and Ireland turnover is already in non-food turnover. Eurest Services has given us the opportunity to put an integrated offer together that reflects the fact that the client tends to be the same person for food and non-food.
Hard facilities management is not our strength. The strength we have is instinctively thinking about customers first. You don't go back to a hotel because the heating worked, but might go back if the person on reception was fantastic or the food brilliant. You're not going to do business with an investment bank because their air con worked, but it might affect your decision if you have lunch there and the food is fantastic.
After the economic downturn, how will the food service landscape look?
It'll lead to consolidation. There'll always be big and small. I think the direction is more towards big, to those better fitted to provide for increasingly complicated client and customer needs and compete with the sophisticated retail competition. This is a scale game. If you look at managing inflation, recruiting and developing people, the obligations on whosoever a client chooses to outsource to are extraordinary. Players like us, with scale, are in better shape to invest to manage those kinds of issues. People say this is an industry with low barriers to entry. To a degree that's true, but I think it's changing. Lots of clients we talk to are interested in how we use our scale to manage inflationary costs in access to capital and our ability to invest often in joint ventures with them to create brilliant facilities to look after their customers.
Look at schools: understanding nutritional guidelines, working with suppliers to come up with products that kids want to buy is difficult. For a small player or an in-house operation I don't know where they would begin. Should headmasters be trying to understand the School Food Trust nutritional guidelines? I'd rather they were teaching kids. That's where people like us come into our element. Scale is a distinct advantage. A lot of what we've done over the last two years is make sure that scale works for us, not against us.
And you've achieved that by rethinking the supply chain?
We've taken our purchasing guys from being a little detached from the business to being at its heart. They work closely with chefs through the life cycle of appointing a food supplier and getting it into the units. This year they've been brilliant in helping manage inflationary pressures, so we've been able to say to clients "We aren't magicians. We can't make inflation go away, but we can give you a much more competitive price than a small player with no scale."
Over the past year we've started working with our suppliers to grow volumes. We've worked hard to get our promotional calendar right so we now tie up with producers and manufacturers and say, "You're launching a product, we'd like to be your partner. We can get it placed in X thousand units. What we need from you is support in terms of competitive cost price and marketing support." We run a regular calendar of food programmes - Best of British, Wild Greens. Behind each is a well-described set of menus, researched and developed by our chefs and often developed with the suppliers. We say, "You're going to be part of the Compass core catering programme. Help us with development and we should be able to guarantee you good volume."
Does trading in 2009 worry you?
RA has clients in the City. They've got a fairly broad range: hotels, investment banks, law firms, accounting firms. When you boil it all down, it's about 4% of total UK turnover that's exposed to that end of financial services. Clearly a concern, but not that material.
There are as many opportunities as issues. We owe it to clients to think that way. Of course they are looking at their subsidies whether they can afford investment in refurbishing whether they can keep restaurants open at night for shift workers. Our role is to provide solutions, whether that's adjusting our food programmes to reflect the fact that customers have less money whether it's things like Steamplicity vending whether it's saying, "We've got capital to invest in your restaurant, give us a longer contract and we'll build it for you." Our clients should rely on us to use our financial strength in terms of scale to help them through difficult moments.
Was Goldman Sachs a big loss?
I wish whoever's won it the very best.
What of opportunities in the hotel sector?
I've spoken to a few hotel chains and they are struggling with food costs. They don't necessarily have massive scale in terms of food buying. We do. Why are Arora and others outsourcing hotel catering? Because it's our strength. They're great at running hotels, and we're great at managing a supply chain and providing great chefs who cook great food. We think there's a growing move there, and the climate does encourage people to challenge things that previously they haven't needed to.
Major UK employers are announcing big job cuts. Might Compass follow?
We constantly encourage managers to look at efficiencies, so at any point in time there may be some restructuring going on. Is there some big Compass restructure planned sitting in my drawer in Uxbridge? No, there isn't. We did quite a lot of restructuring two years ago, because the structure of our sectors just wasn't right and we didn't have the right skills in our senior team.
How do you view the skills and training landscape today?
My view is that it's far too complicated, and I know this is a view shared widely in the industry. We play a very active role. Sir Roy [Compass Group chairman Sir Roy Gardner] chairs the Apprenticeship Ambassadors Network. I sit on that as well. We've just announced a big increase in apprenticeship numbers for the coming year. Trying to influence it from every angle, including People 1st, feels like the right thing to do. But I'm still sitting here frustrated, feeling it's all rather too complicated and there are too many people getting paid to administer all of this stuff across these various agencies - and not enough people receiving the training.