James Hall Business Solutions : Business Consulting, Excel Analysis, Recommendations and Implementation

"Enabling companies to improve their performance through high quality analysis"

Project 1:

Labour efficiency in the retail/leisure industry (£15 million per annum direct profitability increase, £150m shareholder value creation)

Great Britain's largest managed pub company with 2,400 sites under private equity ownership (Goldman Sachs, Texas Pacific Group & Blackstone Group) required a solution to obtain labour efficiencies at the operating level. With labour being the largest cost line on the P&L the board of directors were of the opinion that there were labour efficiencies to be gained at the outlet level - but were unsure of a successful methodology to achieve them. With the owners eyeing a date of sale within two or three years it was imperative that the solution was highly effective & quick to implement in order to maximise the price / earnings ratio.

Previously, the managed pub company employed a top tier global strategy consultancy to produce a solution. Their approach was to construct a mathematical model based on a number of pre-chosen variables. Whilst mathematically elegant the ‘solution’ had to be abandoned on implementation since it was impractical. This ‘solution’ was dropped after a couple of months, with the substantial development costs incurred being written off.

James was asked to investigate, devise & develop an alternative methodology. The managed pub estate portfolio was very diverse comprising many concepts. Of paramount importance in James’s mind was the fact that the solution had to be viable in the long term and not detrimental to customer service.

After weighing up a number of possible approaches, James used Excel with VBA (computer programming) to develop a bespoke graphical based solution, providing a clear indication of where overstaffing (and just as importantly understaffing) was taking place in relation to sales for all outlets.

“James’s work on labour management delivered efficiencies of £5 million per annum in the old Spirit Estate (original 1,068 pubs) and £10 million across the new Spirit Estate (integrated Scottish & Newcastle retail estate approx. 1,400 pubs). The estate was broken up and sold in December 2005 and based on the 10 times price earnings ratio James’s work on labour resulted in £150 million in value creation for private equity owners Goldman Sachs, Texas Pacific Group and Blackstone.”

S. Richards, Managing Director, Spirit Group

Along with providing the analysis, James orchestrated a cultural change regarding labour management. Traditionally, outlet managers viewed labour as a cost to be minimised, rather than getting the right number of staff on at the right time to ensure good customer service. Managers were now empowered to make informed decisions on staffing levels for the forthcoming week whilst simultaneously evaluating past performance.

Not content with just providing the ‘numerical’ elements to solving the problem, James devised high impact labour seminars for site managers on how best to interpret and utilise the information, along with tactics for effective labour management. James personally travelled to many area manager meetings conducting these seminars, presenting to over 350 site managers all over Great Britain.

James’s solution was an immense success, with labour expenditure being reduced by £15 million per annum without customer service being jeopardised.

Outlet managers, area managers and operations directors were impressed by the easy to use and interpret information being made available, enabling higher bonuses to be achieved for all concerned due to increasing profits.

On average each site was saving approximately £6,250 per annum when following the labour management system.

When the business was sold two and a quarter years later the proprietors achieved a £150 million price premium as a result of the labour efficiencies from James's system (10 times price earnings multiple).

“I worked with James at The Spirit Group, where we built an outside business with the 241 pub business model, James was a key member of our team in supporting the developing and implementing of a labour modelling initiative. His personal energy, enthusiasm and drive really supported the 241 team realising and attaining our key financial targets. We later sold the 241 Division to Punch for an enterprise value of circa £700M...”

S. Rogers, Director 241 Dining Concept, Spirit Group