The Virgin Way: Everything I Know About Leadership (19 page)

The only reason we can do this is because even the most disparate of businesses are not just about bricks and mortar, rolling stock or airplanes – sure, those things are important pieces of infrastructure – but it’s the people that breathe the life into them. All of our seeming hodge-podge of businesses has one critical element in common: the service culture that comes with our people – call it the ‘we’ factor if you like – is the pulse that drives everything we do.

As a result of my work with the OceanElders and their on-going efforts to save the fragile ecosystem of the world’s oceans, I have become quite the expert on coral reefs, and it didn’t take a lot of dot connecting to draw an analogy between corporate cultures and coral reefs. They both take a long time to grow and, as many a company has found at their cost, they are a fragile living entity that if abused can be destroyed very easily and very quickly. Most established coral reefs are between 5,000 and 10,000 years old and yet we have managed to kill off ten per cent of them in our lifetimes. While a corporate culture can be developed a whole lot faster than coral, when either one is destroyed the chances are that they’re gone for ever.

CULTURAL DESTRUCTION

David Hoare, the co-founder of Talisman Management, has been a friend and associate of mine for many years during which time he has worked as a chairman, CEO and advisor to a wide range of underperforming companies. Sorry, I take that back – what I intended to say is that he has taken on the challenge of
fixing
a wide range of underperforming companies which is Talisman’s specialty. David comes from an intriguing engineering/private equity background but he is also a genuine disciple of the invaluable ‘people equity’ that a healthy culture brings into play. David explained to me one day his concerns on the way the standard private equity model is supposed to work. This is the one where you take a leading company in a growth market with a strong management team, add some financial leverage and a generous dollop of management incentives, which are of course tied to ambitious financial targets and ‘hey presto’ – value creation! But what happens when the results fall short of expectations? That’s when the new owners stamp their feet, change the CEO and set even more ambitious targets, the assumption being that the next one will do a better job. Sadly this often doesn’t work either and the company’s value continues to be destroyed.

David can reel off a long list of companies where he has seen this storyline playing itself out. Starting in 2006, parcel delivery service CityLink had four CEOs in five years who jointly erased £1 billion of value; at the DX Group, an express mail service, it was five CEOs in four years and £450 million; and waste management company Biffa lost a staggering £1.2 billion under six different CEOs in just five years.

The obvious question is how such disastrous collapses in value can possibly happen in companies that had been leaders in their market areas. As David sees it, in every one of these cases the senior teams were incentivised into marching the company to the drumbeat of totally unrealistic financial targets. Doing the ‘right thing’ in the long-term interests of the business was pushed to one side and as a result a lot more than value was destroyed. One of the key components that had made the business successful in the first place, the corporate culture, was another more tragic victim of the destruction! And while changing CEOs may be easy, restoring a badly damaged culture is never a simple task. As with any trust-based relationship, ‘making up is hard to do’.

For start-ups too, the ability to develop the kind of healthy, people-focused culture that is so critical to a company’s sustainability is seriously impeded if from day one the primary focus is on short-term gains and rapid force-fed growth. I am always alarmed when I hear start-up leaders talking more about fulfilling their investors’ ‘exit strategy’ than about creating a great product around great and happy people. In many such cases the exit may well arrive involuntarily and much sooner than the strategy ever foresaw! Had we failed to recognise in time that Virgin’s short-lived experience as a public company was going to extinguish the culture that had made us what we were, we might not have been around today to talk about it. Thankfully we’ll never know.

I must apologise if I am starting to sound like the proverbial broken record (jamming iPod?) on this but let me quote Herb Kelleher’s successor at Southwest, who could easily have been channelling Herb or myself when he said, ‘
Everything begins and ends with our people. If we keep our employees happy and engaged, they will keep our customers happy who will then reward us with their loyalty. That repeat business helps our bottom line and creates value for our shareholders.’

So too at every Virgin company, none of which could survive without the dedication, energy, wit and wisdom of our incredible family of people. In simple terms, in their blind stampede to deliver superior economic results,
too many business owners and leaders fail to understand enough about the importance of carefully developing a company’s culture.

When Peter Drucker said, ‘
Culture eats strategy for breakfast
’, he might have added that when there’s too much focus on profits and growth and too little attention to nurturing your people and culturing the culture, there’s a very serious risk that somebody else might soon be eating your lunch.

Beyond definition

I often think how terribly sad it is that so many people – the ‘Thank God it’s Friday’ brigade – are not in the least bit passionate about what they are doing with their lives. I’m talking about the ones for whom life is all about ‘making a living’ as opposed to making every living moment count.

My wife tells people it is my fetish. I have heard that Tony Collins who runs Virgin Trains has often said I am a ‘nutcase’ about it. Maybe. But whatever I have contributed to the success of the Virgin companies, I believe that, above all else, my hard-wired passion – some call it obsession – for consistently giving our customers, both internal and external, a better work environment or service experience than they can find anywhere else is what’s at the very heart of everything that I, and by extension the Virgin brand, stands for. I genuinely believe that if you care passionately enough you can take just about any facet of the human experience and improve upon it. Now while the words passion and virgin (note the small v) may not be something you are accustomed to seeing in the same sentence, Passion (capital P) is unquestionably the secret sauce, aka the brand essence, of every one of Virgin’s scores of highly diverse businesses.

In the same way that you cannot be ‘almost unique’ or ‘partly pregnant’, true passion isn’t something that comes in half measures. You are either a hundred per cent behind the quest for excellence a hundred per cent of the time or you aren’t really a player. As a leader you cannot possibly expect your core brand values to be understood, embraced and become ingrained in the psyche of your people if you yourself are not passionately and uncompromisingly committed to them. I am sorry if this might come across as overly trite or preachy, but if you fail to understand the significance of having and sharing such a palpable passion for what you do, then the chances are that you really do not belong in a leadership role.

PASSION IS INNATE

The first thing that has to be recognised is that one cannot train someone to be passionate – it’s either in their DNA or it’s not. Believe me, I have tried and failed on more than one occasion and it cannot be done so don’t waste your time and energy trying to light a fire under flame-resistant people. If that basic, smouldering fire is not innate then no amount of stoking is ever going to ignite it. The exact same principle applies to positive attitudes in people – you don’t train attitudes, you have to hire them. It always amuses me when I hear people declaring that someone ‘has an attitude’ as this is always said with a negative connotation. The fact is that having an attitude is absolutely fine, just as long as it is consistently positive and upbeat, or put in another way – ‘passionate’.

One of the key elements of what has become known as ‘the Virgin way’ is giving our people the autonomy, freedom, support and a highly flexible (in everything except quality) brand image that gives them the tools to go out and make amazing things happen. It is this passion-fed formula that has allowed the Virgin Group to launch hundreds of new Virgin companies in scores of very diverse businesses and I have no doubt that it will continue to do so for many years to come.

Over the years the Virgin group of companies has been very fortunate in identifying a steady stream of passionate business leaders. Many come from outside the Virgin family but some are ‘homegrown’, like Brett Godfrey who started Virgin Blue in Australia. Brett is an Australian who after about five years with Virgin Atlantic moved over to the finance area at Brussels-based Virgin Express, a relatively short-lived European airline we operated in the mid-nineties. I’d never met Brett but started hearing nothing but good reports of his steadying influence on Virgin Express’s multiple problems. For a ‘numbers guy’ he had the reputation of being a really good people person, which was something we desperately needed to unite the staff, having gone through three CEOs in a little over twelve months. With all the uncertainty and constant changes of direction at Virgin Express, inevitably the spectre of unions had raised its ugly head; something that at the time had never before happened in Virgin. And it was in fact the union leadership that came to me to suggest that ‘the Australian’ was by far and away the best candidate for the vacant CEO job. I was a little concerned as to their motives – did they perhaps want Brett because they thought he’d be a pushover? – but we decided to give him a shot and initially slotted him in as acting CEO.

We knew quickly we had made the right choice. Brett soon managed to get the unions onside and in so doing sidestepped a total meltdown and stabilised the situation. Apart from the fact that I have never been a fan of ‘acting’ roles, it seemed a no-brainer to ask Brett to accept the CEO position on a permanent basis. Normally offering a CEO role is something that generates an excited response but in this instance Brett looked very awkward and almost embarrassed as he responded with, ‘Erm, well, sorry, Richard, but I am going to have to say no as my wife and I have decided it’s time for us to take our two boys back home to Australia.’

Nobody had anticipated this response so I was shocked and more than a little disappointed, but admired him for putting his young family in front of his career. It was then that, according to Brett, I uttered the words that were to change his life for ever. All I said was, ‘Okay and if there’s anything you would like to do in Australia be sure and let me know.’ To which with a big smile Brett responded, ‘Well, actually, Richard, I am glad that you asked as there is one thing I’d very much love to discuss with you!’

It was only then that I learned that Brett had been working diligently for five years on a business plan to start an innovative new domestic airline down under. It seemed he’d been seeking investors for several years and without my knowledge had already pitched it to the Virgin executive team who had rejected it. As I would learn, their rejection of the project was based on a mixture of conventional wisdom and standard accounting and, at a glance, seemed like a very rational decision. Of course, my personal brand of ‘wisdom’ has seldom been known for its rationality. So much so that one of many things I’ve been called over the years is ‘The ultimate don’t-confuse-me-with-the-facts man’ – something perhaps spurred by my legendary inability to read complex balance sheets. So when Brett gushed out an excited overview of his Australian airline’s business plan, my immediate take on it was more instinctive than by the book – a book that I have never really read.

More importantly, however, what I detected in Brett that day was something that the executive team had clearly overlooked: a passionate belief in the need for and viability of what he was proposing. It was also outrageously reminiscent of the opportunity we’d seized upon fifteen years earlier with Virgin Atlantic – a plan that my colleagues at Virgin Records had unanimously condemned as utterly outlandish! Brett saw a crying need for a new disruptive airline model in the stagnant Australian market and the passion I saw in his eyes when talking about his vision sold me on taking a serious second look at it. Given the nod, it didn’t take Brett long to successfully reaffirm some of his business plan’s bold projections and we were off to a flyer. Our initial $10 million investment to start what would become Virgin Blue – now rebranded Virgin Australia – turned out to be one of the smartest we have ever made. Putting it differently, I suppose, with tongue firmly in cheek I could say it was a classic case of, ‘Screw It, Let’s Blue It.’ Sorry!

ENVISAGING VISIONARIES

Brett is just one of many true visionaries I have been lucky to know with the passion, drive, focus and skills to turn their often seemingly impossible dreams into game-changing realities. Like a lot of people before him, Elon Musk had a vision to build a commercially viable electric car. This is a space in which all the early movers have focused their attention on the mass market by developing affordable, compact fuel-saving vehicles almost completely devoid of anything in the way of sex appeal. Musk decided instead to come at it from the premium sports car end of the market and over time move into more mainstream vehicles. The luxury/sports sedan market is much smaller in unit sales opportunities but hugely effective in switching the mindset of influential car owners to finally wanting to own an electric car for looks, performance and cool, first adopter cachet, as opposed to just fuel efficiency. And let’s be honest, if you can afford to fork out the price of a luxury vehicle, the cost of fuel is usually the last thing on your mind!

The $70,000 Tesla Model S not only looks like a very cool sports car but behaves like one: it reportedly accelerates from 0 to 60 mph in an incredible 3.7 seconds
and
for those like me who have a conscience about such things, it is almost twice as energy efficient as the homely sector-leading Toyota Prius. And as if all that were not enough, the influential ‘Consumer Reports’ magazine ranked the Tesla as ‘the best we have ever tested’ with a ninety-nine per cent overall rating. Rate this one an A on all counts.

Of course Tesla is not Elon Musk’s first big success at breaking new ground in emerging industries. His vision of creating a new form of payment to accommodate the unique requirements of online retail sales started life as X.com and soon morphed into PayPal. His other current major dream coming true is SpaceX, which, along similar lines to Virgin Galactic, is developing a private sector satellite launch vehicle to take over where NASA left off. There is even talk of Musk merging his PayPal and space ventures with PayPal Galactic to tackle the challenges of ‘off-Earth’ payments – I will have to give some more thought to that one! In any case Elon Musk’s successes at Tesla, PayPal and Space-X only serve to demonstrate the incredible results that can flow from vision and leadership coming together in one inspired individual with the assistance of an army of equally inspired followers.

PASSION KNOWS PASSION

Another great advantage to having truly passionate leaders is their inherent ability to recognise raw passion in others when they see it. If Tony Collins thinks that I am the one who’s a nutcase about customer service, then I am happy to report that he is right there with me every step of the way.

Tony joined Virgin Trains in 1999 from the company that was building our rolling stock, and has been head honcho there since 2004. He is a pragmatic, straight-talking, call a spade a ‘bloody shovel’ kind of a guy, and his impassioned take no prisoners approach to making our rail service the very best in the business has been a joy to behold. He was fast to paraphrase my favourite phrase when he said to me one day, ‘This is a case of “screw it, let’s undo it then do it again”.’

If you will please excuse another punishing pun, Tony is ‘the rail deal’ – he totally embraces the belief that your front-line people who deliver the service
are
the business. He supports them to the hilt, puts his trust in them, listens to their observations (good and bad) and in return expects them to bleed Virgin red in the same way that he does. Turning around the crumbling ruin of a business that was the British Rail system for generations was no mean feat for anyone.

The kind of a calamity of an organisation we inherited from British Rail is illustrated by the story of how their train drivers once threatened to go on strike over management demands that they improve their abysmal on-time performance – and maybe even have a train leave on time once in a while! The union representing the drivers argued there was nothing in their collective bargaining agreement that specified their members had to own watches and so inferred that as a result they could not be held responsible for on-time departures. I think it was Timex that was the beneficiary of a very large order for ‘Property of BR’ inscribed watches. Hard to believe, I know, but that was the prevalent kind of employee ‘no can do’ attitude that we inherited. So with or without a brand like Virgin behind it, the kind of transformation that Tony and his people have achieved with our ‘train set’ has been nothing short of miraculous.

Tony is one of those people who always has a ready supply of wonderful stories, but the one that really stuck with me was a tale he told me over dinner one night about a cleaner he spotted one day on one of our trains. Tony was doing one of his routine but ad hoc check rides when he spotted a uniformed employee who was doing a quite exceptional job with our passengers. She didn’t know Tony was watching as she helped an elderly couple to their seats, passed out newspapers and so forth, all with a wonderfully cheery disposition. What made it so interesting was that she didn’t actually work for Virgin Trains – she was an on-board cleaner employed by Alstom, the company we contract to clean our trains. Impressed, Tony introduced himself and complimented the woman on the outstanding ‘above and beyond’ job she was doing, before asking if she’d ever considered working for us as opposed to cleaning. He was stunned by her answer: she’d tried a couple of times but, as she put it, ‘I wasn’t good enough to pass the entrance test.’

Stung by this, Tony got on the phone to our HR team and asked that they conduct an immediate review of the hiring criteria as, based on what he’d just been told, they were clearly filtering out exactly the kind of people we desperately wanted to filter in. They did, and within a couple of weeks the lady was hired as an on-board service assistant. She didn’t last long in that job, though – over the next four years she steadily made her way up through the ranks and is now one of our regional station managers looking after several of our train stations. Ever since that day’s chance observation, Virgin Trains has been very clear in its recruiting priorities – we now hire for attitude and not paper qualifications.

CHEERS

The way Tony identified someone with the prerequisite attitude and passion has probably been repeated a thousand times in different ways around Virgin over the years. After all, when one is in the business of customer service and you stumble upon someone who is a natural at it then you have to do your best to scoop them up.

I remember David Tait telling a very similar tale to Tony’s. Around the corner from Virgin Atlantic’s first home in New York City’s Greenwich Village was a popular local bar that David, various staff members and I (when in town) used to visit on a regular basis. One particular bartender there by the name of Phil never failed to impress David with the way he looked after his patrons. No matter how busy it was, or how rude and demanding some customers became, he always got the correct drinks out quickly, kept multiple conversations going at the same time and settled altercations with a smile. He was clearly an accomplished professional at what he did and, as Tony had done on the train, David recognised the kind of intuitive flair for great customer service that we are always looking for. He thought Phil would be every bit as good at an airport counter as he was behind a bar.