Gallagher Group: Don’t fence them in
As veteran chief executive Sir William Gallagher moves up — not out — the tech exporter has expanded a long way beyond the farm,
‘I’m just going upstairs a bit and getting out of Kahl’s way.” It’s not your usual chief executive exit line, but when you’ve been in the job nearly 50 years you can probably say it how you like, and Sir William Gallagher has never been one for platitudes.
However you put it, the man credited with galvanising Gallagher Group to become one of New Zealand’s few true global companies is indeed moving upstairs in the tech exporter’s stylish black glass Hamilton headquarters.
He’s going to be Gallagher’s president, taking on an ambassadorial job for the $300 million annual revenue, family-owned company.
New chief executive Kahl Betham, a 24-year Gallagher veteran, will steer the ship and champion the group’s ambition to triple in size within the next 10 years — to $1 billion in annual revenue, and the country’s biggest privately-owned tech exporter.
With another company veteran, Steve Tucker, in the executive chairman’s seat, the changes at the top mean that for the first time in 83 years the family company is being “independently led”, as Gallagher puts it.
Gallagher, an engineer by training, recently turned 80, and it’s 59 years since he started fulltime work at the company founded in 1938 by his late father Bill Gallagher Snr as a maker of electric fences for livestock control.
“And I was hanging around for about 15 years before that.
“I thought maybe I should start slowing down a bit — though I haven’t slowed down much.” And he’s “not retiring”, so forget that notion.
He’ll remain on the board as an executive director, and in his new ambassadorial role will start globetrotting again as soon as Covid-19 loosens its hold on the world.
“It’s been 40 years since I’ve been in New Zealand so long,” he says.
Pre-pandemic, Gallagher spent about 150 days of the year travelling internationally on company business, building and maintaining relationships in 174 countries. In the case of Japan, the Netherlands and Ireland, the company’s distributors are now into their third generation.
About 80 per cent of the business is offshore. It’s no surprise, then, that the full extent of the Gallagher Group business is probably better recognised overseas than in New Zealand. What can come as a surprise is just how far its achievements in technology have gone beyond agriculture.
The company is now a world leader in securing what Gallagher calls “two-legged livestock”.
And in the high security area, including at The Five Eyes level, it would be the world technical leader for top security access control systems, he says. Five Eyes is the military intelligence alliance of Canada, New Zealand, Australia, the UK and the US.
Gallagher security access and intruder alarm systems can be found in universities, military establishments, highly sensitive energy sites, government departments and hospitals around the world.
When the Australian Government wanted a top line intruder alarm system, it turned to Gallagher, which once had two competitors across the Tasman but is now number one, says Gallagher.
In New Zealand, the Gallagher name is on the security access systems at the Reserve Bank, Parliament buildings and most banks, to name a few sites.
Another specialty business is cybersecurity, and in that field the UK market is proving extremely promising.
“Cybersecurity is very topical in the UK,” says Gallagher. “They have very high standards and we are one of the few that meet them.
“We’ve got a world-leading [security] product and we’re taking it to the world — as we certainly did with electric fencing.
“The thing about the high security business is it’s very uncrowded. We are ‘it’ in some cases.
“We grew into it.” Gallagher says the realisation that the company had the high security answers many overseas institutions were looking for came when the US Federal Government wanted a specification which called for encryption end-to-end.
“Hello, we said, we’ve got encryption end-to-end . . . we’ve had for nearly 20 years.
“In most of the US market, encryption is a foreign language. Almost no-one up there has it. Then the UK started calling for encryption at rest, and we said we can do that. All the data in our systems can be encrypted at rest and we process it while it’s encrypted.
“Nobody else has got that. We realised that high specification was calling up just what we’ve built.”
New chief executive Betham comes from the security side of the Gallagher business and is a former head of global security.
He says while Gallagher “grew” into high security, the tipping point for the world was the 9/11 terror attack.
“That’s when it was realised there were no background checks on people putting things into planes in the US. So it created a new presidential directive — the Federal Identity Protocol Standard — which required everyone to be background checked and given an encrypted card to prove who they were.
“We were the first to implement using that card and access control. All federal workers in the US and all federal workers and contractors offshore must use it.”
Gallagher put bank encryption in its software way back in the 90s, Betham says. “To get noticed in the USA, you have to have something really special . . . having that certification took us from ‘who are you?’ to up the top.
“But it came out of us being number one provider of choice for the Australian Government for normal access control for the previous 20 years.
“Then the Australian Government invited us to be certified to the highest level of national security for their intelligence and data store and military sites. Now we’re targeting all the Five Eyes.”
When Gallagher says the high security market is uncrowded and the “world’s our oyster”, he’s not kidding. Even with all those international contracts, it still holds less than 1 per cent of the market.
Gallagher Group doesn’t sell high security products in China, says Betham. He recalls with a smile the popular advice of 10 years ago, that for a tech company to be a success it should put its best technology people in the US, its manufacturing in China and go offshore.
“We find by having done none of those things, by keeping everything here and focusing on really high value things you can be number one at, you actually get substantive competitive advantage.
“We wouldn’t have been able to get into the military in the US if we had gone to China like all our competitors in America did. Because we are in the Waikato, we have a competitive advantage.
“Because we have our R&D and our manufacturing here, we get a high quality, innovative product, the [intellectual property] fully protected. And tech is a really big story that is needed in New Zealand right now.”
Another little-known field of Gallagher expertise is manufacturing fuel pump systems. The Australasian business is a small part of the group — though it has 85 per cent of the New Zealand market — and has taken a big hit during Covid-19 lockdowns on either side of the Tasman as fuel sales to motorists slumped.
Gallagher believes fuel consumption fell by up 70 per cent, resulting in new pump orders being cancelled or postponed and the hard decision to trim staff. Betham says Gallagher, as usual, took a long term view and discouraged staff shedding. The group has 1000 staff globally plus 200 in associate companies.
The security side employs almost 70 per cent of the total 170 R&D staff, and up to 400 people are employed in manufacturing in New Zealand.
Gallagher notes that the uncertain future for petroleum products casts a shadow on the fuel systems business.
Given that nearly 50 years of international relationship-building is a cornerstone of the group’s success, how much has Covid-19’s impact on travel curbed the business?
“Relationships are in good heart but it does mean the impediment of no expansion,” says Gallagher.
“You don’t meet new people and it’s difficult to expand. The good news is, no-one else is doing any better.
“But I don’t believe in the long term it’s sustainable. We have to travel again. We have long-term relationships but security particularly is a fairly new business and very much evolving.
“It’s very difficult to get that evolution going without eyeballs. Teams or Zoom is good for updating, but not so good for laying foundations.”
Gallagher says the March year’s financial performance is “looking pretty good”, though the security side, which has been catching up with agriculture business earnings, has taken a hit from the pandemic. With the agriculture side surprising him by growing 20 per cent in revenue, he’s hoping to continue a proud tradition of never declaring an overall group annual loss.
Betham says the security business was hit because customers didn’t expand, but that will be temporary.
There’s been a positive side to being confined by border restrictions, he says.
“It’s allowed us to focus on what is really important. Seeing a lot more of each other has allowed us to create strategically and bond as a team. The last five to 10 years have been exceptional — this year has been a nice reset and re-go.”
Gallagher’s leadership has won him many plaudits, so what does “leadership” mean to him?
“I describe it as coach management. When someone has a problem, you try to get the answer out of them. You coach people to give you the answer.
“If you coach people without you giving them the answer, then you don’t have to be there. The reverse is the one-man band. I’ve seen one-man bands get up to nearly 100 people with one person making all the decisions. You get a whole lot of sycophants and when that person is away, nothing happens.
“You encourage them to run the decision off you and if it’s off-line you get them round to the way it’s ought to be, and once you do that you can go away. I learned that very early.”
Leadership means delegating, not abdicating, he says. “You delegate and monitor. And you don’t make a decision and hide it. Be prepared to put it up on a whiteboard — if you can’t defend it, don’t do it. If the decision is going to depend on secrecy, think again.”
Integrity, ethics and a conscience are musts in business relationships, he says. “We don’t let the other person’s lack of integrity compromise ours. I’ve been through a few of those. In God we trust — others pay cash.”
With younger generations working in the business and family shareholders heavily represented on the board, Gallagher Group will always be privately-owned, he says.
“We’ve not seen the need to list — basically listed companies have a much shorter life. We are fortunate enough to generate capital at a faster rate than we can use it.
“We are very lowly geared and have little bank debt.
“Money hasn’t really stopped us doing anything for the last 20 years.” Last word to Betham: “I see us being private as a super power.”
Because we have our R&D and our manufacturing here, we get a high quality, innovative product, the [intellectual property] fully protected. And tech is a really big story that is needed in New Zealand right now.
Kahl Betham, Gallagher Group
We’ve not seen the need to list — basically listed companies have a much shorter life. We are fortunate enough to generate capital at a faster rate than we can use it.
Sir William Gallagher