The FD Interview: Phil Bentley, MD, British Gas

Phil Bentley is not like most managing directors. He does not dress like one, for starters, wearing a jumper casually draped around his neck. He does not reign like one, either – his desk sits at the end of a plain, open-plan office – and, rather refreshingly, he does not try to weasel out of difficult questions the boss of British Gas is sure to face.

Take, for example, what is now the annual winter uproar – rising energy prices. In December, amid the coldest winter since records began, British Gas said bills would go up in 2011 by seven percent. Few saw the funny side, not least because in the first six months of 2010 British Gas profits hit a cosy £585m – nearly double the £295m reported the previous year. Analysts expect it to report 2010 year-end profits of £1.2bn.

But Bentley is unruffled by the juxtaposition. “My job is about explaining that the two are not connected,” he says. Bills are up due to the wholesale price of fuel rising 25 percent in a year, “and even after this rise we still operate on the same margins of about £2 per customer, per month. The point is, our profits have gone up, not because we’re ripping people off but because we’ve sold more gas, cut our costs and gained about half a million new customers. We wouldn’t be building our customer base if we weren’t competitive.”

Bentley has been MD of British Gas since 2007, when he moved from finance director of parent company Centrica after seven years. He already had a good grasp of the MD role, having served as Europe MD – in addition to retaining the finance job – between 2004 and 2006.

He started corporate life in 1992 with BP, spending 15 years in international in oil and gas exploration. Leaving for Diageo in 1997, where he spent three years – joining as group treasurer and director of risk management and spending his last year as FD for its UDV Guinness – it is evident Bentley long had designs on a non-finance role, though he is at pains to stress that explaining the numbers is what he enjoys.

“I began a programme in 2009 of inviting dissatisfied customers to come in, look around and hear what we are all about. By the end of the day, they love us,” he proclaims. “When we’re transparent with our numbers, and people know how we operate, they lose all the emotional stuff they’ve clung on to about how we left their mother without gas 10 years ago on Christmas Day. It’s quite a transformation.”

Dealing with complaints

Transform is precisely what Bentley had to do after leaving the Centrica FD post to take the MD gig.

“When I joined British Gas, we had rising complaints,” he says, referring to 2007, when complaints to the business numbered 21,427. “Now they’ve fallen by 90 percent. We lost one million customers and now we’re getting them back.

“We were at the bottom of most customer service league tables, and now we’re top or second. We’ve picked up Best Company and Top Employer awards, and in 2010 were voted fifth-placed Brand of the Year by the Marketing Society. This is good news. The more I can tell people about this, the better,” he adds.

Bentley accuses his predecessor, Mark Clare, of failing to face a baying press. “The fact that I do sends a strong signal,” he says. “The buck stops with me – I’m the representative of 30,000 employees, and I tell it how it is. I’m straight with the figures and believe I get respect for it.” And he may have noted that Clare, who left to become Barratt Development’s chief executive, had a similar career trajectory, becoming FD for Centrica in 1997 after joining British Gas three years previously, and taking on a stint as MD for the residential energy division of the business in 2002.

The former FD’s commitment to transparency can be best illustrated by an extraordinary open letter to the editor of The Mirror in 2009. It detailed the amount of tax British Gas paid to the government, the three rounds of price cuts it made in the 20 months prior to the seven percent hike which, it said, meant bills are actually no higher than they were two years ago, and highlighted how much it invests and the 5,000 jobs he created. These messages were able to reach four million people, unedited. In what any business would see as a major coup, the newspaper ran the letter, word for word, in its business pages.

And Bentley is an unrepentant champion for the business.

“Rightly or wrongly, British Gas has something in the British psyche,” Bentley says. “We have a latent relationship with the British public. We have a relationship with one in every second house, and you have to understand it, not fight it. We should be celebrated as a national treasure, but we aren’t, so we have to do our best to explain that it’s a pretty good deal to get all the energy you could want for only £1.20 a day. It’s an education process.”

Bentley says he was brought into Centrica as FD to run a corporate clearout of non-gas businesses, which at the time included the AA and Goldfish. “[We got] out of things that were a distraction and returned to what we were good at,” he recalls. “I think the board understood that, with my previous oil and finance director experience, I could make the business transformation that was needed at the MD level.” And he says that coming from a finance background gives him the edge.

“We’re a ‘retail and a detail’ business, and my finance background educates and characterises all of my decision making,” he says. An example is in the distinction Bentley makes between fact-based decision making and gut-based decision making: he believes too many FTSE bosses rely on the latter without referring to the rigour he says his FD experiences gave him.

“You might make two or three decisions a year where you rely on instinct, such as hiring people, but in terms of the big buckets of strategy, these have to be about choices,” he says. “Strategy is about making up, testing and deciding on choices, and it has to be a formula based on evidence.”

 

 

To this end, Bentley makes sure he is personally plugged into testing in every aspect of return on investment. “I demand testing of our marketing messages, for how a single word or two can lead to uplift among customers. I also want to test how we get detractors of the brand back on board,” he adds. “The fact is, in the court of public opinion we have to be careful about everything we do, and I want to know the consequences of everything, to know whether the money we invest is worth it. I’m very analytical.”

For anyone in a position vaguely finance-related at British Gas, having the former FD as boss must be either comforting in that he supports their cause, or irritating if he gets too involved in matters he used to be in charge of. So which is it for Bentley? Does he ever get tempted to send advice upwards to outgoing British Gas group FD Ashley Almanza?

“Good question,” remarks Bentley. And it is one he ponders for at least 15 seconds. “I recruited him [Almanza] myself and I have a healthy respect for what he does,” he says. “On what he does, and what his standards are, I’m tremendously impressed. I’ve no complaints.”

But while he might like to show he is still tempted to scrutinise balance sheets like in days gone by, Bentley realises his priorities are different now.

“My time and effort goes where my new worries are,” he says, staying on the subject of the relationship between himself and Almanza (who will be replaced in March by Brazilian mining company CFO Fabio de Oliveira Barbosa). “I now realise I don’t need to worry about finance because Ashley is all over it.”

Maybe the influence of his wife, Mhairi McEwan – who runs her own brand and marketing consultancy, BrandLearning – is rubbing off. But Bentley’s transition from FD to MD can be viewed through the decisions he says he is now taking, which might turn other finance people cold.

“As MD you learn that it’s actually worth taking a financial hit on some things, because the soft, brand value of doing it is worth more than what the balance sheet might indicate,” he argues. For instance, he explains: “Until recently, all our customer service telephone numbers were 0845 numbers. So, in effect, we used to make money out of dissatisfied customers caught in call centre queues. I decided this should stop. Technically, you could say we’re now losing money because of it, but it’s all about doing things better for the customer, making us the favoured choice for consumers.”

Today, an increasing number of FDs make the jump to CEO or MD positions, and while Bentley admits it was not necessarily his master plan to be the boss of one of the most talked-about energy providers, he concedes he knew he “didn’t want to be in pure finance all his life”.

“I’ve always been interested in the mix of strategy and business, and when I did my MBA, it made me realise there were many more avenues in business than just finance,” he says.

Bentley uses this subject to push his view that finance professionals do not take their professional development seriously enough.

“I bore my kids saying this, but my watchword is: ‘Never stop investing in your human capital.’ For finance people, just doing finance is not good enough. There’s more to life than the ICAEW,” he says (though he is CIMA-qualified). “The CIMA qualification takes you more into the business environment, and I’ve not looked back.”

Broader business horizons

Bentley says that having served as audit committee chairman and non-executive director at Kingfisher, owner of B&Q, until last year helped hugely in broadening his business horizons. He says other FDs should seek out as many non-executive positions as they can.

“I found that looking at audit papers at Kingfisher was a great way of getting an insight into the financial health of a company,” he says. “This skill has stayed with me at British Gas. When we were looking at buying a company from Enron before its infamous collapse, the audit papers we saw then were not as good as they could have been, and we decided not to buy. It’s almost as if we knew something wasn’t right.”

Today, Bentley gets calls on an almost weekly basis with offers of other non-executive positions. He is holding out for one that really interests him.

“I’ve told headhunters I’m only really interested in other retail businesses,” he says. “One that’s about service and customers. Maybe a high street retailer, or even a bank.” A bank? Really? Does he not think they still have a huge popularity mountain to climb, especially as they have just announced another round of eye-watering bonuses? He brushes it off. “Banks are just retailers, like everyone else,” he says. “I think they’re fascinating. It’s just they’ve lost their way. All they need to do is get back to what British Gas is trying to do – being all about the customer and the management of risk.”

Clearly, Bentley has full confidence in his ability to communicate and explain. But this is one former FD who is using transparency with numbers to create a culture of transparency throughout the business, and it is a form of transparency he thinks others could learn from.

“I’ll talk to anyone now,” he says, rejecting previous national newspaper articles that have labelled him as uncomfortable with the press. “The best thing a company can do is invest in understanding and talking to its customers.” 

 

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