Issue 12, September 2002
Theo Paphitis has acquired a knack for turning around ailing companies, and repeats it with amazing consistency. Growing Business talks to the man with the Midas touch.
Unless you're a Millwall fan, you probably haven't heard of Theo Paphitis. He's already one of the UK's richest men: 333rd in the UK according to the Sunday Times'latest eponymous list, and expect him to climb that chart fast. He's down to earth, often described as 'colourful', and highly impressive.
His knack for generating wealth is simple - buy failing companies and turn them around. And he's very good at it. Retailing is now the core of what is now a veritable business empire, encompassing household names Ryman and La Senza as well as Contessa and Partners. But, unusually, the knack has also extended beyond retail to football and media.
What's your secret?
There's no magic to business, it's very simple - just apply common sense. Except that common sense has been misnamed, since it's actually very uncommon. In many businesses, the people who work there are nothing like as passionate and committed as they need to be for that business to work well. If you aren't passionate, you won't succeed.
How did you get started?
I hated working at Lloyds of London; I didn't speak the right way or have the right family, so people kept on joining after me and getting promoted because their uncle worked there. I doubled my salary when I left to work for Watches of Switzerland as a sales assistant, and there I learned that I loved retailing and sales. Then I got into commercial mortgage sales, and started to look at all sorts of companies in trouble when the bank had turned them down. I'm a nosy bugger, and really enjoyed looking at these businesses. I wrote reports showing how they could repay their loans, and then approached different banks, who lent the money. After doing this for a while I thought 'why not do it for myself'?
What's your strategy?
I'm only interested if there's a sound business there which is being badly run. You need to make sure the market's there - no matter how much passion you've got you need a market. We like niches and retailing. My strategy is dictated purely by opportunity.
Now that you've built a successful business, is there a temptation to go for something more successful and safe?
No, what's the point, what value could we add there? We work on the basis that 2 2 =5, which is why my maths teacher had such a problem with me at school.
How do you get your staff to care?
All my staff are incentivised, which helps; people can make between 10 and 40% of their salary in bonuses. And we make people responsible; someone needs to be responsible for everything, however small, and only one person. That makes a huge difference. We operate a meritocracy, too, where anyone who's good can get promoted fast. We like to promote from within. We don't care how you speak, what your father did, what colour or religion you are, we only judge you on your performance. When we take over a loss-making company we always inherit a very demoralised workforce. We offer them hope.
Do all staff really have your home and mobile numbers, and do they dare use it?
My mobile phone number is listed in every store, so anyone can call me. It doesn't get used very often, I think the last time was about six months ago. But it was the right thing to do to call me then, and I solved the problem.
How do you manage so many businesses?
I have a great number two, Malcolm Cooke, and a very flat hierarchy. I look at sales for each business every day, and trading results for every company every week. I have loads of direct reports, but it seems to work. Twice a year I hold a 'Theo's moans and your moans' session with area managers to get things off our chests and sort out problems. I still make regular store visits and insist that everyone in authority does the same. It amazes me how many executives at large companies don't sample their own product.