It's not unusual for veteran company chairmen to have a tale to tell about the
day they came back from the dead. In most cases, it is a metaphorical story
of business bravado and their ability to pull a company back from the brink.
Not so with Mike Jeffries, VT Group's chairman for the past three years. He
was literally given up for dead when he fell into the River Tyne as a child.
“I fell about 13 feet and the tide was out,” Mr Jeffries said. “They had
pulled the sheet over me and pronounced me dead at the hospital, but a
doctor felt a faint pulse and kept working on me.”
The weeks he spent in hospital recovering from his brain injury put paid to
his schooling. “I didn't get back into the system,” he says. “I failed my
11-plus and then my 13-plus. When I was 15, I left school.”
But Jarrow-born Mr Jeffries's near-fatal accident made him a fighter and his
difficulties with formal education did not set him back. He joined John
Laing at 18 and began studying through night school to be an architect,
qualifying nine years later.
In his early thirties, he joined WS Atkins, then a private civil engineering
practice. His determination to succeed meant that within three years he had
a seat on the board and he went on to become chief executive.
Atkins, as it has been known since 2002, figures large in his life because in
2001, having become chairman, he was forced to make a hasty return to the
chief executive role to undertake emergency corporate resuscitation.
A new IT system and shared services facility had been brought in, all at the
same time. The IT system failed and the company could not bill its clients
or collect the cash owed to it.
The problems were flagged up to investors in a profit warning in 2002 that
sent Atkins's shares plunging 80 per cent. “It was the worst six months of
my life,” Mr Jeffries recalls. “One day, we were 40 minutes from going
bankrupt.”
It was an experience that has given Mr Jeffries an outstanding appreciation of
the difference between a chairman's role and a chief executive's role. “It's
difficult as a non-executive to second guess the management - you tend to
give the management the benefit of the doubt,” he says.
It has also given him first-hand understanding of the rationale behind the
Cadbury code, which means that chief executives are no longer supposed to
step up to the chairman's office. “It's difficult to criticise when you were
recently doing the job,” he says. “If you are too soft on the new chief
executive, it is criticised and if you are too hard on them, you are, too.
You can't win, so you may as well move on.”
As if the problems at Atkins were not enough to keep him on his toes, another
non-executive role was also to prove testing. From 2002 to this year, Mr
Jeffries served as chairman of Wembley National Stadium, overseeing the
rebuilding of the national football stadium, which, at £798 million, was the
world's most expensive.
He is loath to talk about the experience, but he does make two points. When
disputes arose with Multiplex, the contractor involved, the Government was
trying to demonstrate to the world that it could manage construction risk,
as it was bidding for the 2012 Olympics.
That pushed a typical commercial dispute into front-page territory and made it
political. The second thing he says is that the project ended up only 8 per
cent over budget, although it was at least a year late.
While still wearing the Wembley hat, he arrived at VT Group to take the
chairman's role. His recent experiences had taught him some valuable
lessons. “I learnt that if something is bothering you and you don't agree,
you have to stand up and be counted,” he says. “As a non-executive, you have
to say ‘I am not happy and I'm not prepared to support it'. And when you go
to a different company, you can look at things much more objectively. There
are no sacred cows.”
Happily for his relationship with the executive team at VT, there is no
dispute over tactics and strategic shifts. If anything, VT enters a
difficult period for the economy with a stronger position than most
companies.
The areas in which it operates - government services, education and defence
services - are subject to long-term contracts and spending commitments. The
company already knows where 90 per cent of this financial year's revenue is
coming from and 85per cent of next year's. “At VT we are optimistic,” Mr
Jeffries says. “There may be some delays to government spending now, but, if
anything, the Government may be persuaded to outsource more. It's a question
of how you can deliver more for the same money.”
Since the early days of compulsory competitive tendering ushered in by
Margaret Thatcher, Mr Jeffries has built businesses that have thrived on
governments and local authorities giving more work to the private sector.
He is scathing of the public sector unions, which he says fundamentally
misunderstand the work that the private sector can contribute to the NHS and
the education system. “The point about the NHS is that it is free at the
point of delivery,” he says.
“How that service is delivered is entirely different. There is no reason why
public services have to be delivered by state employees.”
“I live close to Tolpuddle,” he says, recalling the beginnings of the union
movement. “Unions were formed to protect workers from bad employers in the
private sector. Now strikes in the private sector barely exist any more.
It's just unions striking against the Government, using their workers to
call a political tune. That can't be right.”
VT is confident that its defensive qualities will help it through the next
period, however difficult it becomes. The recent historic changes to create
a shipbuilding joint-venture company with BAE Systems, the defence and
aerospace group, will create some exciting opportunities for the smaller
company.
The way the deal with BAE was structured means that from July, VT could choose
to sell its stake in the shipbuilding company or, in three years' time, BAE
could make VT sell it.
That means there are decisions to be made next year that could leave VT,
currently ungeared, with considerable cash with which to make a significant
acquisition.
Given that most companies are finding it almost impossible to raise money for
mergers or acquisitions at present because of the credit crunch, VT will
have a distinct advantage over other support services businesses. Equally
there will be no pressure to return cash to shareholders, as there may have
been in recent times.
There is a strong chance that VT Group will continue to make further inroads
into the US market, where it has already made a string of bolt-on
acquisitions.
This next deal, though, could be transformational. Whatever happens, and there
is no fixed timetable, it is likely to mark the next phase of VT's history
and its full transformation from a manufacturer and shipbuilder into a
services company.
These questions will be tackled by the board, under Mr Jeffries's guidance,
during 2009. In the meantime, he has plenty of other interests to occupy his
time and considerable energy. He is chairman of NCP Services, the parking
group, and Wyless, a wireless communications business.
When not working, the 64-year-old finds time to scour antique yards and
auction houses for the raw materials for his hobby, restoring antique
clocks.
It was this absorbing hobby that sustained Mr Jeffries through his many years
as a chief executive. “I would,” he says, “come home and strip the clock
down on a Friday night. I would spend Saturday cleaning the parts and Sunday
putting it back together.”
CV
Born: September 17, 1944, Jarrow
Career: 1963-67, John Laing
1968-73, Deeks Bousell
1973-75, Bradshaw Gas and Hope
1975, ASFA Ltd (WS Atkins), becoming chairman and managing director in 1979
1995-2001, chief executive, WSAtkins
2001-2005, chairman, WS Atkins
2002, chairman, Wembley National Stadium
July 2005, chairman, VT Group
October 2005, chairman, National Car Parks
May 2008, chairman, GVI Grimley
Family: Married, with four children
