As group chief executive of Compass Group, Richard Cousins manages 400,000 employees and an annual turnover of £15b. As he prepares to deliver this year's Savoy Lecture next month, he tells Mark Lewis how he and his team reversed Compass's ailing fortunes, and what the future holds for the food service giant
You came to hospitality from manufacturing. How have you found it? The DNA is different; it tends to be run by a different kind of creature. This industry is full of people who love creating positive moods, which has to be respected. If I came with a manufacturing background and didn't respect that, I would have been an idiot.
Can you describe the Compass you found in 2006? I found a group that had lost a bit of confidence. We were in 98 countries. Clearly, we'd had performance and governance issues. We had probably made too many acquisitions, gone into too many countries and signed some silly contracts.
The Granada acquisition was clearly difficult. If one ignores that loss of confidence, I found a strong business with a great hospitality and food culture and a can-do approach. While there were problems, they were finite and fixable. The fundamentals of the company were and are positive, in that outsourced catering is an exciting growth industry to be in.
How did you go about stabilising? In the first 18 months we exited 50-odd countries. We sold non-core businesses - we were lucky with our timing and got quite full prices. Our balance sheet was under some distress before that. We got roughly £3b for those disposals so our balance sheet became comfortable.
We scrapped divisions, took out layers of management, cut cost strongly and launched MAP, our framework for driving performance. That phase lasted two-and-a-half years. Just as we were beginning to think "let's move it on", the recession came along.
Did the recession hit Compass hard? We were all a bit scared, weren't we? Like-for-like volumes, particularly in B&I and sports and leisure, were impacted sharply and we went from revenue growth of 5-6% down to zero for a period. I personally derived some confidence from it. Managers here and globally responded brilliantly. We saw strong earnings growth during the recession because we were able to flex our cost base quickly.
Do you view the market more positively now? Phase one was fix the basics; phase two see off the recession. Phase three is growth orientated. The world is still only 45-50% outsourced in catering. I'm disappointed it doesn't go quicker but it's an inevitable trend. Food will remain our core - it is 83% of our business. We've also got great opportunities in support services, and that provides good growth.
What sectors look ripe for growth? Some people say business and industry is mature. I don't think that's always true. There are some countries where B&I is not as well penetrated by outsourcing as it might be and in some countries there is quite good growth.
At the sport and corporate hospitality end, certainly we noticed a downturn. It's getting better but it's not back at the levels of four years ago. People like great sporting events and good food so I'm optimistic. Certainly it's getting better month by month.
Will governments accelerate their outsourcing of healthcare and education? Governments are too cautious in the speed at which they outsource healthcare and education. I feel a tad frustrated. A lot of money can be taken out of systems by outsourcing. It is happening but not fast enough. The obvious conclusion is Compass and our competitors need to shout louder about the great food and service we produce and the benefits of outsourcing.
How does a business of your scale manage the tension between innovation and the need to impose systems and processes? It's all about empowering the right people down the organisation to feel as if it's their business but imposing a few key governance frameworks. Our job at the centre is to create the strategy, philosophies and frameworks. We don't run the business - we can't. You have to keep bureaucracy to a minimum, but make sure what we do is incisive, sharp and finite.
We empower local people to run their business. The local management teams are in power. I'm sure they'd say the key people are our 40,000 unit managers because they are the ones serving consumers.
And how do you ensure consistency of service and product standards? To track every parameter by 40,000 units in Chertsey would be ridiculous. We say to the 50 country MDs: "It's your business. This is the framework, these are the KPIs, and we expect you to track this." At a stroke that takes the job from impossible to merely large. You've got systems, data, KPIs but you've also got human beings and it's all about making them feel involved and important.
Do you want teams to feel they work for Compass or their client? Both. I'm sure there are occasions when we don't get it right but I'd like to think most of the time we do, and we want them to feel really committed to doing a great job for their client but also for Compass.
Did Ian Sarsons's appointment signal a new direction for Compass UK? Ian El-Mokadem did a good job sorting out issues. Ian Sarsons brings a different style. He's from the industry, so he brings that experience in hospitality and food. We're now into stabilisation phase, quietly moving into growth. Great food and great service is what we're now trying to focus on in the UK.
How alarmed are you by food and energy inflation? We're concerned rather than worried. We had a similar trend 3-4 years ago and were able to fight off quite a lot of that inflation by efficiencies, menu planning and so on. You only see these things off by focusing and driving the business. I'm not losing sleep.
Compass has substantial business in Japan. How have the past weeks been? It is clearly a difficult situation but they're on top of it. We've lost none of our employees, which is great. The second issue is to keep our business going and make sure we feed our clients. Some clients have closed. Obviously those in the north-east are most affected, but there are some manufacturers that are closed because the whole supply chain has fallen down.
Do you foresee any changes in your UK competitive set? The UK is a rational, competitive market. We fight as you would expect. You never know, but I don't see massive change.
Any planned forthcoming acquisitions in the UK? We've got a couple of minor ones we're looking at but nothing material at this stage.
Your initial response to the Responsibility Deal? It looks sensible; I think we would be supportive. How could you not be? Whether it can actually get driven in effectively at the right pace I don't know, but I think the objectives of it look sensible - legislation tends to be a less effective way.
How is UK trading? The economy is tough. We saw some difficult revenue trends in the recession, partly because we were seeing through some legacy issues. Now we feel much more positive about the legacy issues and a little more positive on the economy. It's clearly better today than it was 18 months ago, so the UK top line is getting better. It's still not spectacular but it has gone from negative to flattish.
What next for Compass Group? Compass is in quite a strong place. We have a great cash profile, our cash-flow is stunning, balance sheet is strong, that gives us an infinite number of options, but we're going to be disciplined in terms of what we do.
If we continue to grow at 5% a year organically, invest £300m-£500m a year in acquisitions to produce additional turnover, in five years we'll clearly be a bigger company. Our geographical footprint will be similar but the balance will change slightly towards emerging economies. Food will very much be our core but support services will be a slightly bigger proportion of the pie.
We've had quite a good four or five years but we mustn't be complacent. We've got to keep doing a great job for our clients and grow in a disciplined, incremental and intelligent way.
Our strategy is right. We're going to stay focused on that, and go for it.
RICHARD COUSINS'S MANAGEMENT STYLE
â- When you get consumed by process and bureaucracy rather than focusing on customers, you are in trouble.
â- I believe in flat management structure, empowering and respecting people.
â- Management is about how you do things. We're assertive, demanding and pushy, but hopefully we treat people fairly and decently.
â- You can't have seventeen "priority ones".
â- Do a great job in terms of quality of service, food, cost control and client relationships.
â- Stay obsessed by health and safety. We put it at number one on every board agenda.
RICHARD COUSINS TO GIVE THE SAVOY LECTURE
Richard Cousins is speaking at Arena's Savoy Lecture on Tuesday 12 April 2011. In a rare industry address, Richard will talk about the Compass turnaround, the future of global food service, the impact of multi-service on contract catering and market dynamics. The event begins at 6pm on Tuesday 12 April 2011, at the Savoy, London. Tickets cost £220 plus VAT for Arena members and £265 plus VAT for non-members. For further information go to www.arena.org.uk](http://www.arena.org.uk), call Lorraine Wood on 020 3087 2378 or eâ'mail [email@example.com.