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Wates in a world where the customer is king

PROFILE - Wates chief executive Paul Drechsler is keen to focus on the customer, as he explains to Alasdair Reisner

NOBODY could accuse Paul Drechsler of failing to be customer-focused. In fact you could almost say he uses the 'c' word every minute of the day.

Really. During the course of a half-hour interview the Wates chief executive refers to his customers no fewer than 30 times.

Mr Drechsler's passion for his clients stems from the fact that he has spent a large part of his time since taking over at the family-owned contractor developing a 'customer is king' philosophy.

He was hired in August 2004 to replace former chief exec St ruan Rober tson. As only the second nonWates family member to take the top job at the firm in its 107 year history he was charged with freshening up the firm's approach to work. The drive behind this revitalisation almost certainly related to its last annual results, which saw profits tumble from £13.3 million in the previous year to just £2.8 million.

Mr Drechsler's first move was to find out what his new business was doing right, and more importantly what it was doing wrong.

Nearly 200 customers were questioned and the answers helped the reshaping of the company.

'Fundamentally I saw a good company with good owners at a stage in its development where it had some choices to make, ' he says.

Mr Drechsler pushed his executive team to pore over the books, evaluat ing each market sector the firm was operating in. The team also sized up its rivals in each market and whether Wates had the upper hand over them. Mr Drechsler wanted to make sure the firm would no longer just be a make-weight in any of its sectors.

'We identified eight different market sectors for further evaluation: affordable housing, government and public sector, education, retail, office interiors, commercial, inner city residential and health, ' he says.

For each sector Mr Drechsler then assembled a strike team with a mission to decide which areas Wates would concentrate its resources and which would fall by the wayside.

'Each team did a very thorough analysis of their markets, looking at what they could do with each business over the next five years th rough to 2010, ' he says.

The teams were then taken away for a twoday trip. This was no beano. The teams had to justify why their sector should take precedence.

'We looked at them in terms of the posit ion of the business, viability of their plans, their flexibility and their opportunities to achieve an advantage over their competition, ' says Mr Drechsler.

Judging how attractive each market was and how competitive Wates was in those markets, Mr Drechsler and his team decided to concentrate the firm's firepower in four key businesses: retail, interiors, affordable housing and a coverall construction business.

On the face of it all of these choices make sense.

Wates' retail offering is strong with Marks & Spencer, Woolworths, Boots and Waitrose among its customer base, while its interiors business is succeeding in what has until recently been a tough market with some high profile casualties. Its affordable housing business has surfed a wave of new government spending to grow turnover from just £100,000 in 2000 to £150 million, while the construction business can pick up on opportunities that don't fit into any of these sectors.

One thing Wates will be steering clear of its one-off tendered projects.

'On almost every performance measure we were better with long-term clients than we were with oneoff clients. Looking at data from the past 14 years our big loss makers were with one-off customers. Ou r average profitability was also lower on these jobs.' By 2010 Mr Drechsler wants to hit a turnover of £1 billion with 90 per cent of this business in long-term frameworks or strategic partnerships.

'In terms of an industry that is not that advanced in terms of its focus on customers I think that is the strongest platform for us to build the business.

When we get to 2010 and you ask me why Wates has been successful it will be because we were superior in the way we served customers, ' he says.

Wates remains one of the largest private companies in the contracting industry. After joining the firm from listed indust r ial giant ICI, how does it feel to be working for a family-owned firm?

'It's different, ' he says. 'With a family-owned company you have shareholders that are 100 per cent committed. They are at least as demanding as public company shareholders. I don't feel any less demand in terms of value creation or performance improvement.' He says there is an advantage to being able to get all the firm's shareholders in a room to communicate his plans for the future of the business. So might this one day include the possibility of floating the company? It is something Wates has always fought shy of but Mr Drechsler's answer opens the slightest of possibilities that it may one day happen.

'The family is unambiguous about its commitment to the industry and I don't think there is any way they would not be clearly active in it in the long term.

However, if you were to ask me over the very long term does that mean we won't look at the public world as a way to build and grow the business, well, we might do. If it will ensu re that we have a long term sustainable company, there is nothing good or bad about being public. But for the moment the family wants to own the company, ' he says.

It appears that for the time being the only shareholders Mr Drechsler wants to deal with have names ending in Wates. He'd much rather spend his time dealing with his customers.