All Tye'd Up

From The Publican

Start a new threadBy Hamish Champ , 13-Sep-2008

Related topics: Company & City News

Few executives like to see their best laid plans splashed all over the media within hours of being confidentially announced to members of staff.

 

Nor do they relish seeing their candid warts-and-all assessment of the state of their business being similarly highlighted.

 

Mike Tye, recently installed as managing director of Spirit Group, said two things struck him when he saw ThePublican.com's exclusive revelation concerning his ambitious plans to restructure the company last month.

 

"First, I wondered how you found out about what we were proposing to do," he says. "But then thinking about it, I didn't really care that it was out in the open. This is something that needs to be done."

 

A kick up the backside

 

Indeed it does. By Tye's own admission Spirit is not all it should be operationally; it basically needs a kick up the backside. While some industry watchers still expect the managed arm of Punch Taverns to be sold off at some point - maybe yet to Tim Clarke's Mitchells & Butlers, which bid unsuccessfully for the business earlier this year - Tye has the job of turning round its fortunes.

 

He admits these have been flagging lately. But the former Whitbread man is no stranger to knocking businesses into shape, most recently with David Lloyd Leisure by, as one Tye-watcher puts it, "getting stuck in, going back to basics and sorting out the core business".

 

Things haven't been right at Spirit, which Tye joined in July following the departure of the operator's previous managing director Andrew Knight, for some time. "The company hasn't kept at the forefront of pub retailing for a while," he says, frankly.

 

Echoing what he wrote in a leaked memorandum to Spirit staff, Tye adds: "The numbers suggest like-for-like sales are not as good as our peers, nor are our profits."

 

Budget targets are not being hit. Concepts are tired, staff morale is low. Tye is sanguine about the situation, but not complacent.

 

"The business isn't as good as it could be, and it could be absolutely fantastic," he says. "We've some of the country's best pubs. We just need to make more of them and to make and use them better."

 

The structure and processes existing within Spirit have not helped its fortunes, Tye believes. "We want to get overheads to a sensible level and make decision-making short and sweet," he says.

 

"The changes we are bringing in are designed to get the best people in right across our business and to take us from where we are to where we want to be in terms of products, service standards, environment and communication," he says.

 

Tye's marketing background sees him creating a variety of new positions to drive the group's retail offers and suggests he is more than a hatchet man, though job losses will inevitably feature in some parts of the restructuring he has in mind for Spirit. There has already been one high profile casualty of the changes: Martyn Drake, director of product ranging and planning, has left the business. Others will surely follow.

 

About bloody time…

 

The City reacted to Tye's plans for Spirit much as a damsel under threat from a fire-breathing dragon might note the appearance of a bloke in shining armour riding a white horse. "About bloody time," remarked one observer.

 

Another, Deutsche Bank's veteran pub sector analyst Geof Collyer, describes the 54-year-old Tye's appointment by Punch Taverns chief executive Giles Thorley as "inspired".

 

"Mike is a very calm, measured guy," says Collyer. "He's been around the leisure track, he knows what he has to do, and he'll get on with it. He's just what Spirit needs."

 

Part of Tye's solution for the group revolves around re-jigging its operations along geographical lines, with teams split to cover five new regions: North & Scotland; West; East; London and South.

 

"Regional focus will be key," he says, "with trading to particular markets. But a brand focus will remain. What I want is a business development manager to 'get' all the concepts on his patch."

 

As well as the geographical reshuffle a range of new roles have been created to drive and develop Spirit's existing retail concepts. Changes to the finance team at the group's Burton headquarters will speed up decision-making, something the current set-up doesn't allow for. Jobs will go, although Tye declines to talk numbers involved, only saying the group is consulting with those potentially affected by the proposed changes.

 

At the coalface, Tye admits there is work to do on some of Spirit's retail assets. "They're not broken but they are unpolished," he says, citing as an example Chef & Brewer, "which led the way a number of years ago but which has since seen other offers catching up".

 

"This isn't about doing a 180-degree turn. It's about getting some clear direction and focus," Tye says. "Our frontline team members want to do a great job, and giving them the support to do that isn't an expensive process. Nor is it rocket science."

 

On whose terms?

 

On the subject of Spirit's pub managers, the group is close to finalising its new 'One Team, One Contract' terms of employment. The Publican highlighted recently the fears of a number of managers concerned that their hard-earned benefits were under threat from proposed changes to their working terms and conditions.

 

Spirit's goal of moving to a 'one size fits all' contract is the result of "not properly integrating the various businesses Spirit has bought over the years", says Tye.

 

Predictably he sees Spirit's position on the issue as a fair one and cites a process of consultation that has been both long and even-handed. "There will always be people who feel hard done by, but we feel we are at a position which is extremely fair," he adds.

 

At the same time as established working practices are being challenged, while morale may be low in certain parts of the Spirit business and the loyalty of some members of staff tested, Tye still has to get his teams to generate sales in what is the licensed trade's most turbulent period in years.

 

"The group is facing a fairly strong headwind, trading-wise," he says.

 

"We need to steal market share. We'll do that by being better and yes, by looking at prices in some parts of the country.

 

"But addressing prices isn't a panacea in itself. It has to be a local decision. It can't be the sort of thing that stems from what I call 'ivory tower thinking'."

 

Some pubs in certain areas would be able to actually raise prices, Tye believes, and should be empowered to do so.

 

"Value for money doesn't mean 'cheap'; it means getting a good experience for the amount you are paying for it. Some occasions are more price sensitive than others."

 

Time to turn it around

 

While the task facing Tye is not insignificant, he wouldn't have taken the job if he didn't think he would succeed, Deutsche Bank's Collyer says.

 

"But he can't be expected to be judged on the first year's numbers," he adds. "It'll take at least two years [to turn Spirit around] and it's unrealistic of anyone to expect anything else."

 

The City is also interested to see whether Tye gets an opportunity to talk about Spirit's performance at Punch's forthcoming results presentation on November 4.

 

"It will be fascinating to see how much detail he can give out," says one analyst.

 

"Andrew Knight wasn't allowed to take questions on the performance of Spirit, but Phil Dutton [Punch's 'newish' finance director] was in there from the beginning, perhaps because of his retail experience with Matalan."

 

If Tye is given free rein - as his supporters would like - Spirit could see a change in its fortunes that would have been unthinkable three years ago when Punch bought the business. But he would be the last person to suggest it will be easy…

 

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