FACE TO FACE: Russ Houlden – A Portable Numbers Person

As an eight-year-old, Russ Houlden climbed on his bike and set off to his friend’s place seven miles and three towns away. He had never cycled more than about half mile from his Warwickshire home before, but that hot summer day long bike ride seemed like good idea. He put his head down and rode.
“I didn’t even know his address,” Houlden remembers with smile. “I just thought I could find it somehow,” he says, before adding with quiet confidence, “and I did.”
This story of daring and distance was the first memory that leapt to mind when Telecom’s new chief financial officer started telling NZ Management about growing up in the British Midlands, and it’s hardly surprising such tale is floating around his frontal lobes these days. It doesn’t take degree in Freudian psychology to see the comparisons between his childhood mission and his new one at New Zealand’s largest publicly listed company.
Just six months ago, Houlden had seen the new year in as financial director of the large, profitable London law firm Lovells, which has 1600 lawyers and 26 offices worldwide, and was planning for his seventh year in the role. Yet in whirlwind few weeks, the 49-year-old temporarily left behind his wife, two boys and upmarket London lifestyle for distant destination, embarking on risky journey with only rough idea of where it all might lead.
The stark difference between past and present is that bike ride through the English countryside sounds like green and pleasant day out. Trying to turn around large but ailing telco at the bottom of the world, with politicians breathing down your neck and profits tanking, anything but. No sooner was he off the plane on April 10 than he had to listen as his new boss, fellow Brit and former BT colleague Paul Reynolds, told analysts that Telecom’s prifits would continue to fall for the next two or three years.
Houlden, however, is not your usual risk-averse bean-counter. Although he has the restrained air of considered, diligent professional, his love of water-skiing and ballroom dancing hint at more adventurous bottom-line. Backing up that impression is the statement that Telecom’s precarious position was the very thing that piqued his interest in the job.
“The turnaround, the transformation [were what attracted me]. You could see that there was big set of problems here. It had already taken the hit from the regulator and taken hit in terms of share price. Paul was here and was starting to make some change happen, and I could see that it was place where I could come along and help make that change happen. It’s what I like doing. I don’t really like steady state; it doesn’t do it for me.”
Telecom then, with all its accompanying woes, must thrill him to bits. He ticks them off as we talk – “a reduction in the share price of around 30 percent”, “the regulator came in with some very big intervention”, “the staff don’t like the fact there’s been more negative press than positive about Telecom for the past few years”, and so on.
In the face of this challenge, Houlden is almost rubbing his hands with glee. Take this slice of our conversation as an example:
NZ Management: “Telecom’s quarterly results aren’t even as good as year ago.”
Houlden: “And they’re going to keep going down. For the next two years we keep going down.”
NZ Management: “So how do you respond as CFO? Falling profits, unhappy customers, greater regulation must seem like the worst of all worlds.”
Houlden: “I think it’s great.”
NZ Management: “Why? Because it’s as hard as it gets?”
Houlden: “There’s no doubt that when we turn round this company, people will know we’ve turned it round…”
When it is suggested that he sounds like an old sea captain singing loudly to himself as he pilots his ship through roaring storm, he chortles and nods.
“I’m maybe bit unusual, because when CEOs have been asked to describe me, they’ve often used the word creative. That’s bit scary because you don’t normally look to accountants for that. But they don’t mean creative accounting. They mean creative in finding solutions that someone else may have not have thought of, or finding the way through what might seem an intractable problem.”
Although you wouldn’t get any clues from his English public school accent, Houlden meets the criteria needed to call himself Cockney – born to pair of Londoners “within the sound of Bow bells”. But he moved to north London when he was only few months old and then, aged seven, to Shrewley, small village few miles from Warwick Castle. He went to Warwick School, boys-only public school, and happily jokes that this means he has “absolutely no social skills. But it’s good fun trying to make up for that.”
Houlden’s was 1960s’ childhood. His mother was mother of two boys and housewife, his father director of the Coal Board, then the biggest company in Britain with around 400,000 employees.
“You could say his career peaked quite early. He was in his late 40s. After that he’d had enough and turned into professor of corporate strategy and consultant.”
Skill at maths was valued in the Houlden household (his brother is civil engineer), but it wasn’t until he was 16 that Houlden took the “conscious decision” to follow career in the business world. Starting at Warwick University in the late 1970s, he chose management science degree because, he says, he had determined that he wanted to “add value to society” through commerce.
While hardly Che Guevarian stance, he says the greater good has always motivated him; the greater good of capitalism and value creation, that is. He admired companies that “made stuff” such as cars and paint.
“I used to think of professional services as the leeches of society who just plucked the value that manufacturers created. As you can imagine,” he continues with smile as dry as dust, “my views on this have changed.”
For his first job he turned down Shell, Ford and several chartered accountants to work with “a great chief accountant”, Clifford Day at ICI Paints (of which Dulux is the main consumer brand name). He did his first acquisition and first divestment there, aged 23. Day was particularly good at developing top-end people, talent Houlden sought to copy. “Although I do think his approach has its limitations. If you only look after your best people, you’re wasting 95 percent of your people.”
Going from one extreme to the other, he later worked under finance director, Jim Michie, at ICI Chemicals and Polymers. “He was getting close to communist. His view was that you have to proactively develop everyone. He was absolutely for the masses… So everybody had committee that was looking after their careers.
“I think I’m somewhere in the middle. I want to develop more than the top 10, but equally if you go to the extent that he [Michie] went to, it’s lot of effort for quite small reward, because lot of people are pretty happy in the job they have.”
While Houlden leans towards the “pure capitalism” view of companies as vehicles designed to deliver for shareholders, rather than the stakeholder model, he’s all too aware of what damage too much purity did to Telecom.
“One of the things that led Telecom into the problems it’s had is an excessive focus on delivering for shareholders only. That ended up in disaster because the drive for shareholder-only results meant the customers didn’t get very good deal and customers got grumpy.”
This approach drew in the politicians, then the regulator (the Commerce Commission), causing the share price to plummet. “So driving short-term shareholder-only results patently doesn’t work, even for shareholders.”
The obvious conclusion, he’s realised, is that whether you have shareholders or all stakeholders in mind, you’ve got to make sure your customers are happy. It’s the only way to get Telecom “back to where it should be”, as the New Zealand’s preferred telco.