If the look in Susan Haughey’s eye had been different that day in Dubai, perhaps one of Scotland’s leading engineering businesses would not have been born. Willie Haughey started up his City Refrigeration business as an alternative to moving permanently to the Middle East where he had been earning more money tax free than he could hope to earn in a staff role in the UK.
He and his wife visited Dubai where they had had an offer to live and work. Haughey, who was created a life peer as Lord Haughey of Hutchesontown in September 2013, recalls: “It was quite obvious that although Susan was saying yes, her eyes were saying no.
“Actually, it was Susan who set up the business while I was still working in the Middle East,
so I’ve been a fraud standing up there winning awards all these years.”
He says that from the start the couple made a perfect business team with Susan taking care of the accounting, the back office, and the admin. Willie worked on delivering the jobs and went out and found the business.
The business was funded using £70,000 they had built up whilst Willie was working in the Middle East. They had two employees, “a guy we knew and my brother as an apprentice.”
“To start with it was really, really tough to get business. After chapping [knocking on] the doors and treading the streets for a year, the money was nearly running out. I was getting to the stage when I was ready to send my CV away again when we got a break – on the
day of the World Cup Final in 1986.”
Haughey was called in to the Videodrome, one of the largest pubs in Glasgow. “They had 600 people in the pub – it was Tennent Caledonian’s biggest account – and they had all these people and the beer wasn’t flowing. I stayed there all day and night to make sure it was all right,” Haughey says.
The incident began a relationship with Tennent Caledonian Brewers that is still key to the City Refrigeration business. Indeed, work for brewers was central to the company’s growth in its first nine years. One experience in particular demonstrates how Haughhey’s original concept struck a chord.
He had been working on the roof of Marks & Spencer’s store in Glasgow on a scorching hot day when he and his apprentice took a break to get something to drink. But the Cokes they bought were unpleasantly hot. This, the barman told them, was because pubs could get refrigeration engineers in the winter but never in summer.
“The licensed trade thought they played second fiddle to big retailers and that was probably true and always stuck in my mind,” he says. “So when we put our first van on the road we put on it ‘specialist to the licensed trade’ when we didn’t have one customer.”
Haughey stresses that to him customer service is all-important. He learned that when he had earlier been working in Abu Dhabi – he went out to work as head engineer but very soon had the opportunity to step into the general manager’s shoes. He remembers going to see the company’s main client and despite being untried as a general manger the client put his trust in him – because, as a German, he had a real respect for Scots.
“That was an eye opener. People think that for financial services and engineering there is no-one to beat Scots,” Haughey says. “If a guy or a company trusts you like that you can never let them down. That was a great lesson for me.” He describes his next two years in the Emirate as a “working MBA.”
“What I learned there was that the service delivery was all important – and then you look at the bottom line. If you give the customer more than they were expecting, faster than they were expecting, you will always be there.”
In City Refrigeration’s early days, that meant changing the way jobs had always been done.
Haughey recalls: “There was a regular problem with draymen, who came to deliver beer shipments to a pub’s cellar, turning the freezer off on the panel outside the cold store, putting the deliveries of beer in and then forgetting to turn the freezer back on when they left. As a result hundreds of gallons of beer had to be poured down the drain.
“I went to the brewers and said I can design you a better control panel. There is a red button that the draymen could press to turn off the freezer but it automatically comes back on when they go away.”
So that became City’s approach: “You tell us what you do and we’ll do it for a wee while and if we’ve got a better idea, we’ll tell you about it, trial it and if it works we’ll bring it in.”
Haughey stresses that along with customer service and innovation, one of the biggest lessons for a leader is in maintaining a total focus on the business. “If I can give you the hard lessons I have learned it would be one: concentrate and focus totally on your own business and don’t get involved in too many things until you can afford to,” he says.
He learned that the hard way, he says, when he became a director of Celtic Football Club, of which he has long been a passionate supporter. He ploughed money into the club, which he had received from selling a large slice of the equity in the City Refrigeration business. In 1994 he made the deal for £5.6m, a cash and share deal that left the Haugheys with a 36% share of the business.
“During the next two and half years I spent too much time with Celtic where I was a non-executive director and I had completely taken my eye off the ball with City,” he admits ruefully. “Don’t ever get involved in a business where you make most of the decisions with your heart.”
This lack of focus hit City’s profitability. “When I sold the business we were turning over £6m and making £830,000 but over the next two and half years we were stagnating, going back the way – we still had turnover of over £6m but making nothing like the same profit.”
Haughey’s total re-engagement led to more innovations, not just in practical engineering process but also in business process – in the way that the business relates to its clients. He sums up this approach: “We bring absolute transparency to contracting. We very seldom tender: we go into partnership.”
It is an approach that has been introduced not just in the UK but also in a wider geographical footprint. “The MD of Woolworths in Australia said to us recently ‘Whether we use City or not you’re going to change the face of maintenance in Australia’.” This began with the remarkable relationship Haughey’s business has had with their first and biggest retail client.
“Asda were the perfect partner,” he says. “The success of City in the past 17 years – a huge part of it is that Asda have treated us like a real partner. What Asda liked about us was that
we were a small company, a private company, that was willing to be moulded.”
This approach meant running a completely open book – showing Asda how much the materials cost, how much the labour cost and then adding a percentage on top of that. The relationship between City Refrigeration and the retail giant began in 1997 when they had the opportunity to tender for one contract in a single UK region.
At this time City’s turnover was £10m and the Asda contract alone was worth £5m. This huge spurt in their business was, of course, not realised without a lot of sweat and tears and some pretty fast footwork.
“We were thinking about it every night and day. We would be going to a meeting with Asda when they had asked us the next day for a copy of our Health and Safety policy. When Susan turned up the next day it was a good job that nobody actually touched it because the
ink was probably still wet,” he jokes.
“We’d like to thank some of the companies from whom we plagiarised their HR policies!”
Success meant getting the corporate governance right, meeting all the statutory requirements, setting up a call centre to meet the volume of demand and making sure all
the administration was handled efficiently.
City Refrigeration was in competition with four other companies servicing the rest of Asda.
“It’s fair to say we came top in every category: delivery of service, corporate governance and most importantly within budget.”
The idea was that after two years Asda would whittle the suppliers down to two and then one. On the eventful day, Willie and Susan were taken into a room to be told they were going to be Asda’s facilities management supplier for the whole country. “So when we walked into the room our turnover was £15m and when we walked out it was £45m,” Haughey says.
The growth has continued with Haughey having brought his impressive business HQ and its 700 employees to the Gorbals area of Glasgow where he grew up. City Refrigeration Holdings, recently ranked as 60th largest business in Scotland, has a turnover of more than £458m. The HQ also hosts Entrepreneurial Spark or ESpark, a mentoring and business hatchery that Haughey supports – a striking example of ‘giving something back.’
“In 2001, when I won Entrepreneur of the Year, the Exchange asked me to come and do various talks to try and share some of that with the up-and-coming entrepreneurs. I think since then I’ve just got the bug,” Haughey explains.
“I’ve tried to help businesses through the Entrepreneurial Exchange, which is a fantastic organisation, and then getting involved in setting up the first ESpark hatchery in Scotland. It’s one of the best things Susan and I have been involved in. The glow you get seeing these people marching out of here to their new premises with five employees is amazing.”
He adds an example: “Two boys turned up here two years ago with an idea for a business. Last week they were standing up at the annual awards dinner, returning to give something back to the people here and saying ‘by the way, next year we’ll be turning over £5m.’ It took me nine years to get to that,” he laughs.
“For Scotland to come from the bottom quartile to the top in the success rate for start-up businesses in such a short period of time is absolutely phenomenal.
Haughey speaks with pride about Entrepreneurial Spark: “If you want to start a business, you can do so with no financial burden hanging round your neck. You know you haven’t put your house on the line or given up security over your car to get office space. Everything is free so that has to be a big thing. It takes the pressure off and gives you more time to prove your idea is correct.
“But I think that being in an environment where everyone round about you is an entrepreneur where, if you are having a bad day, they’re helping you through that. You’re getting mentoring – the help that Jim Duffy and the team are giving them is invaluable.
“Bringing in big law companies, accountancy companies to give you lectures, to give you pro bono advice, all of this. If you and me had been sitting down 15 years ago with the Entrepreneurial Exchange, which I thought was brilliant, we would have been saying ‘Here are all the things that are missing – what they have done in here is ticked every box’.
We give all the space free, all the telephony, all the computers, everything is free, there is no charge whatsoever and they can now be in there for a year. What we also do is try and help them with our contacts.”
So is this the opposite of the BBC’s programme Dragons’ Den? “The total opposite, we put
our money up for nothing,” he says.
And that is no small amount of money, Haughey estimates that the financial contribution probably amounts to about £400,000 a year in kind and in cost.
Asked what would happen if City grows to the point when it needs all the space in the impressive office building including that occupied by ESpark, Haughey doesn’t hesitate: “I wouldn’t put them out, I would go and rent somewhere else. Or if I could find them somewhere…but there’s no doubt that this working environment helps them as well. They think they’re part of something big. But what is great is that my people feed off them as well. They’re amazed at how everybody goes about this building with a smile on their face.”