Paul Lester is chair of FTSE 250 companies McCarthy & Stone, a developer and manager of retirement communities, and Essentra, an industrial manufacturer. Previously, Paul was chair of Forterra, a supplier of building products, group managing director of Balfour Beatty, CEO of engineering services company VT Group, and chair of John Laing Infrastructure Fund.
Was there a moment in your life that defines you?
When I got headhunted by Schlumberger in the 80s to head a factory with close to 500 employees — I was 29 and couldn’t believe it. I remember showing up on the first day and thinking “Bloody hell, this is quite serious” when people on the shop floor actually treated me as the general manager!
Schlumberger had a surprisingly modern culture for the time, with little hierarchy and a hands-off approach as long as you reached your targets — this was a multi-billion-dollar firm, but there were barely 60 people in the headquarters, and you could just pop into the CEO’s office to have a chat. That management style stayed with me, and to this day I still aim to get rid of formality and bureaucracy within my boards. Organisations need directors who can be frank and easily say what’s on their minds.
How did the Covid-19 pandemic impact your boards?
Like many companies, at the businesses I chair we started a weekly board call — which we tried to keep to under an hour, because management was busy enough as it was. The executives had to make quick decisions and get on with it, so during these meetings the “board of directors” was primarily a “sounding board of directors” — we played a role, but it was more about providing reassurance and support than directives.
“The executives had to make quick decisions and get on with it, so during these meetings the ‘board of directors’ was primarily a ‘sounding board of directors.’”
There were no big approval processes or convoluted papers: we were focused on cashflow and on how long we could last — and, in McCarthy & Stone’s case, on how we could quite literally save the lives of our residents.
What did you learn from this crisis?
First off, that boards can move a lot quicker than in the past. With everyone aligned under one clear goal, directors could give executives the room they needed to deliver — and management teams passed the test with flying colours. There was confidence previously, of course, but it had never been tested to quite that level, and one of the consequences of this crisis is that trust in management has gone up enormously.
Secondly, the suspicion that people aren’t putting in a full shift at home has gone out the window. One business I’m involved with — a healthcare-focused call centre — moved the whole of its 350 staff members to their homes, and after a short initial drop the productivity was quickly back close to normal.
Combined, these two points open up opportunities. That call centre, for example, employs quite a few graduates during the summer months, and many have asked if they could continue working with us remotely once they go back to university. We also had a “spare” office — an unused mirror of the main one, on a different network — as part of our business-continuity plans; now, why even keep it? We’ve done a few surveys internally and, in a different company I’m part of, originally 90% of employees said they’d rather work from home. We’ve repeated the survey recently and it’s now dropped to 80%. I anticipate the future will hold a model closer to 50:50 at home/in the office, with different office space usage.
“The calendar year has pretty much been written off, so you can test interesting ideas without being pilloried by shareholders. If you’ve ever been thinking about trying something new, this is the time to do it.”
Granted, not all organisations are compatible with such changes. But I’d expect transformation in some aspect or another across the board. The calendar year has pretty much been written off, so you can test interesting ideas without being pilloried by shareholders. If you’ve ever been thinking about trying something new, this is the time to do it.
What should be on every board’s agenda?
ESG was one of our biggest topics before Covid-19 hit. There’s been a lot of box-ticking, greenwashing, and rubbish talk around it in the past, but it’s deadly serious today — and it’s not going away.
Externally, shareholders are increasingly demanding more visibility around these matters, because they’re often a positive sign of long-term value creation. Measuring, demonstrating, and reporting on what you’re doing in this area is going to be a massive change for many boards.
“Measuring, demonstrating, and reporting on what you’re doing [around ESG] is going to be a massive change for many boards.”
Internally too — especially when it comes to sustainable environmental practices — a lot of employees take these issues at heart. Many of the younger ones have skills that are highly in demand and they’ll move to businesses that align with their views if yours doesn’t.
At the companies I’m involved with, we’ve set up sustainability committees, chaired by one of the non-executives, with every board member strongly encouraged to attend as an observer. And ESG is a mandatory item on every single board agenda — otherwise, it would just be pushed away by the urgent matters that invariably crop up.
What is the smartest business decision you’ve made, or the one you’re the proudest of?
Turning a shipbuilder — VT Group — into a very large engineering business.
But I’d be lying if I was saying it was all thanks to me. We had a fantastic team at the top, and we were lucky that some competitors weren’t treating their customers right, which sent quite a few contracts our way.
What is your Golden Rule?
I don’t really have one, but I’d say: Don’t drink your own bathwater. Sometimes, you have to recognise you have been more lucky than brilliant.
The more I progress in my career, the more I realise it wasn’t just me that got me here, but a mix of good people and good fortune. It’s a useful reminder to keep your feet on the ground.