Fleet of thought
– Dealing with difficult issues creates an empathy that is invaluable when leading teams. If there is one major lesson that Thrifty WA CEO Richard Simons has learnt during his time in business, it is that all the decisions made in life and business has di
Life is not all beer and skittles. Difficult decisions, issues and commercial judgements must be made that impact profits, people and businesses as whole entities. When Richard Simons joined Arthur Andersen in 1989 he gained firsthand experience in fundamental business issues from the perspective of organisations that were in trouble. These were businesses of all different sizes; from small family owned to large listed companies, Richard dealt with situations and made decisions based on the best way to recover a business or trade out of a situation to maximise returns to creditors.
While each business situation was different, the common denominator was people.
“At a relatively young age I learnt that the decisions I made can have a real and significant impact on the lives of individuals that work in these businesses; people that have invested all of their life into working in a particular company,” Richard says. “I learnt quite quickly to have a degree of compas- sionate empathy for the people who are directly impacted by the decisions that I was making.”
As he stepped into each company with whom he has worked, Richard has taken that empathetic approach.
“For me it’s really about trying to be as approachable and accessible as I can be. I try to walk around the site here and visit our branches around the state regularly, listening to the staff on the front counters and the guys that are working on the tools so that they understand I’m as much a human as they are. We talk about their lives, their families, what they got up to on the weekend and I try and develop a level of empathy with them so that they understand me. It helps when I have to make a tough decision that I’m not completely ignorant or blind to the sort of impact that it might have on them.”
As a non-executive director and treasurer of Cystic Fibrosis WA Richard has seen many families having to cope with the hardship and consequences of an incurable disease and gained a great deal of perspective.
“It’s a reality check and gives you some perspective, particularly in the corporate world,” Richard says. “I spent a lot of time working in public companies. In public companies people can become quite disconnected from the reality of what’s going on. When you’re sitting in your ivory tower on St Georges Terrace or George Street or Collins Street, you can make decisions very quickly and very swiftly that have a real impact on people at a very personal level and that human dimension can get lost. With Cystic Fibrosis WA I get to interact with people who have a whole magnitude of problems that I can’t even begin to appreciate. It’s incredibly challenging for these families and it just gives you perspective. Whatever trivial stuff is going on in my life pales into insignificance when you consider what people with kids suffering cystic fibrosis are dealing with on a daily basis.”
Perspective is a personal thing, but certainly invaluable when running large-scale businesses. Before he joined Thrifty at the beginning of 2013,
Richard spent close to three years at Austal, an international defence prime contractor. Austal is an Australian company that specialises in the design and construction of aluminium vessels. Its main products include passenger and freight ferries, luxury yachts and military vessels. He says his time there was an “incredible learning experience”.
Richard was in charge of the global finance function, with responsibility for all aspects of financial strategy, financial reporting and compliance, capital strategy, M&A and Investor relations and IT.
“When I started there in 2010, Austal was still very heavily focused on the commercial vessel sector and had quite a strong manufacturing base in Australia. It was manufacturing vessels from four locations in Australia and employed close to 1,500 people. Then we won a very large defence contract in our American business and we saw the potential for it to grow very quickly. So what we had to do was really focus on how to set the organisation up so that it could run on a decentralised basis. Historically Austal’s business was centered in Australia and therefore all the systems of control and management were geared around being able to reach out and touch the individuals involved in the decision. As we moved more and more capital into the United States, we had to be ready to make decisions on a completely decentralised basis and really re-invent into a defence company – which is a very different mindset to a commercial operation. A lot of what I did was help the business get its funding structure worked out so that it could take on those projects in the United States.
“Once Austal had won its second large contract in the United States, there was an awful lot that the company had to learn about being a prime contractor for the United States Navy … and the way you work for the United States Navy is unlike the way you work for any other client, the protocols, the contract structures, the security aspects are all very different. So we had to spend a lot of time understanding the different type of relationship that we would have with them. A big part of what I had to do was to communicate that to our stakeholders. We had a West Australian mindset or an Australian mindset around how you do business and we assumed it would be the same working for the United States Navy. It wasn’t. I gained experience in terms of how you have to work within those rig-
One of the really valuable lessons coming out of my experience at Austal was the importance of knowing your workforce and understanding first hand, the challenges that they are dealing with.”
id structures and had to communicate those lessons learned to our investors. The defence industry was something that we thought we knew, but contracting to the United States Navy in the biggest defence market in the world was taking things to a whole new level. I think we underestimated the degree of the challenge.”
For Richard, this position reinforced to him the value of open communication and it was something he took with him to Thrifty WA.
“One of the really valuable lessons coming out of my experience at Austal was the importance of knowing your workforce and understanding first hand, the challenges that they are dealing with.”
Listening to employees, learning from their experiences, sharing information with them about the business and the market so that everyone is clear about what the business needs to do and the roles that individuals have to play was valuable preparation for tackling the tremendous change that Thrifty was undergoing when he took the reins just over one year ago.
Thrifty has an enormous name globally and is one of the world’s largest vehicle rental franchises. However, while still being part of a franchise Thrifty WA is privately owned, which throws up a range of challenges when you are managing a brand, but doing it in a private way. The master franchise is held by Kingmill, which is a subsidiary of the NRMA. The company Richard works for is a family owned business run by owners Keith and Helen Bedell who started the business 35 years ago. The situation in WA as the construction boom transitioned also posed problems for the business and once again Richard had to look at new ways to grow.
“Thrifty WA had been almost exclusively focused on vehicle rental to the resources construction industry and during the mining boom in Western Australia, it grew extremely quickly. The vast majority of income was coming from the Pilbara and most of that was from long-term rentals on the various construction projects that were underway. As you no doubt know the resources construction boom in Western Australia has well and truly ended and it ended very, very quickly. So what was apparent was that we needed to re-invent our business model, cut costs to meet the new market conditions and we needed to do it quickly.”
It was about September 2012 when the first shudders in the iron ore price occurred and that was when companies like Fortescue were immediately impacted and they started laying off people. Then Rio Tinto announced it was going to cut $5 billion dollars out of its budget.
“That meant we had an immediate drop off in revenues and ended up with a significant number of excess vehicles. During the boom you couldn’t get a rental vehicle for love nor money. Externally we’d seen tsunamis, earthquakes and other international disasters that had affected vehicle production and so the supply of commercial vehicles was under immense pressure. The only organisations other than the major miners who could still access new commercial vehicles in significant numbers were the rental companies and that was because the rental companies were forward ordering large volumes with the manufacturers. Our business alone was buying 1,500-2,000
vehicles a year and beacause of that sort of committed volume our supplies were assured. In hindsight it was a bubble that had allowed the industry and along with it, this business to grow very quickly across the state. All that immediately came to an abrupt halt when the iron ore price crashed.”
Shortly after Richard joined Thrifty, on a trip through the Pilbara with the company’s owner, they saw close to 4,000 vehicles belonging to rental companies, construction companies and contractors parked up and left to rust. Richard’s concerns for what was happening were well founded. The organisation had begun to cut its fleet back, but in Richard’s view not quickly enough. He took the board through a comprehensive review of the macro factors: what was going on in China in terms of steel production and demand for Chinese steel and how that flowed on to the demand for iron ore and therefore iron ore pricing and what that meant for the future of construction in Western Australia. The question was how does Thrifty WA sustain its footprint as the largest rental company in Western Australia in terms of fleet size and locations around the state. The fleet would have to reduce, but the company didn’t want to shrink the geographical footprint.
“When I looked at the business the thing that was obvious to me was that there was a massive amount of internal capability; there’s a lot more involved in renting a vehicle than simply just handing over the keys at the airport. Over the years the company had built up a tremendous internal capability in terms of procuring its vehicles, equipping them for harsh operating environments, getting them out into the field then supporting them while they’re in the field. The company had built up a strong competency in terms of the skill sets of its people; it had developed exceptionally good facilities right across the state and had the supply chain in place to support all of those vehicles. What was apparent was that we had this capability to support large numbers of vehicles in very remote locations and many of our corporate customers also had big fleets of their own and we saw an opportunity to effectively help them support their fleets. We have invested in the footprint, we have the infrastructure, the people, the supply chain and we are doing it for ourselves anyway. There was the opportunity to start doing it for our clients.”
They rebranded the business as Aus Fleet Solutions and now operate five
separate but still common brands into the marketplace. Thrifty WA remains the principal masthead as the preeminent vehicle rental business in Western Australia and they now provide mechanical services to external customers at several locations across the state, utilising the Thrifty WA infrastructure, under the name of Aus Mechanical Services.
Aus Fleet Solutions also includes a large commercial vehicle panel repair business, Aus Smash Repair, a commercial vehicle sales business, Aus Vehicle Sales and a vehicle leasing business, Aus Vehicle Leasing.
This new diversification strategy has allowed the business to unlock hidden value from within its own internal capabilities and it has now opened up a much larger range of market opportunities beyond just vehicle rental – all of which however ultimately support demand for Thrifty WA.
The change was a step-by-step process and again Richard was very mindful of who would be impacted.
“You have to bring people along on the journey with you and so those points that we were making before about communication and empathy are really important in establishing credibility,” Richard says.
“I took the view that these are all intelligent people; everyone has their strengths, everyone has their own capabilities and I just talk to them very plainly and very factually about what is going on. I gave them some context around why things were happening and how their workload was being influenced by what was going on in the macro environment. So when I talked to them about the opportunity that I could see in terms of applying their skills and capabilities to a different type of customer and a different type of client they said ‘yeah ok, that makes sense, we can see the logic in doing that’. Once they understood, things changed quickly. No change is easy and we are still working through a lot of it, but they understand the direction that we’re heading in and why we need to do it. We have really re-invented ourselves now from being simply a provider of rental vehicles to being a fleet services group where if you have a large fleet of vehicles there’s a multitude of things we can do to help you support those vehicles in the field.”
The extra services certainly set Thrifty WA and Aus Fleet Solutions apart from other rental companies and Richard’s first year in the job has been a challenging one. However business models need to evolve and staff members and stakeholders need to understand that change is not made for the sake of it. The best way to get this message across is to be empathetic and understanding and properly communicate the need for change. Richard’s core values are integrity, mutual respect and loyalty and he has managed to bring these to each organisation, through periods of change, because of strong communication.
“I’d like to think that the breadth of experience I’ve had has helped us re-shape Thrifty in Western Australia and given us a strong position going forward,” Richard says.