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Diageo Scotland FD, Richard Bee

Portraits: Glyn Satterley

Even after many years of meeting and interviewing business
leaders all over the world, a new and curious experience is the distinct
­feeling of staring into the whites of capitalism’s eyes and finding that those
eyes are staring blankly, defiantly, unapologetically back at you.

The unrepentant peepers in question belong to Richard Bee, who is coming up
to one year in his job as finance director for Diageo Scotland.

In that year, he has cemented a profile for himself among the FTSE-100 drinks
group’s top brass by working with the Scottish management on arrival last
February to devise a controversial restructuring plan, involving £100m in
­investment, to reduce its production capacity and upgrade some ageing
operations.

Shifting production and packaging of its iconic Scotch whisky brand Johnnie
Walker out of its historic homes in Kilmarnock and Port Dundas to more
economically viable plants in the Ayrshire and Glasgow regions is expected to
save Diageo £40m a year to 2012, but at a cost of 900 jobs to some of Scotland’s
most economically fragile areas. Up to 700 jobs will go at its packaging plant
in Kilmarnock – where Johnnie Walker was born in 1820 and where Diageo is relied
on as a major employer – and 140 jobs will be lost from the decision to close
the historic Port Dundas distillery and adjacent Dundashill cooperage.
Outsourcing distillery co-products haulage and consolidation work to third-party
providers will provide the balance of redundancies.

In good spirits
In contrast to the furore over the announcement on 1 July last year, which
sparked a summer of angry protests, union campaigns and heavy press coverage
over the sheer number of redundancies and the fact that most of the pain centred
on poorer parts of Scotland, Bee is positively cheery about the work ahead and
not hamstrung by the emotional impact on the communities in ­question. “The
reality is, we have too much ­production capacity for the volume we expect to s
ee in the future,” he says. “We considered many different things, a number of
smaller objectives to take cost out and this was at the larger end.” Putting
that in perspective, the Scotch whisky business under his remit makes up about
40% of Diageo’s global volume.

Descended from a long line of accountants, there is an almost audible
ambition coursing through Bee’s veins, explaining why he’s on his seventh job in
11 years with Diageo – and he is one oft he few FTSE-100 FDs not to wear the
regulation suit and tie to a press interview with Financial Director.

One can see why he had a shot at the Scotland FD job given the restructuring
plan.

This isn’t his first experience in a restructuring job. He cut his teeth in
corporate recovery work while qualifying at KPMG, and later, while in his first
Diageo job in business support for its global supply arm, ending up dedicating
two years to the 2001 acquisition of Seagram’s wines and spirits business (which
was jointly bought and split between Diageo and Pernod Ricard). He believes
restructuring is a “natural part” of any manufacturing business.

“I’ve been involved in a number of restructuring projects over my career.
This time around I’ve been more operational as I’m involved in the proposal and
the implementation. I’m on the sharp end this time,” he says. “[In my first role
at Diageo] I got into some work around KPIs for global supply, but it wasn’t
taking up all my time.

The Seagram thing came along and I was supposed to spend 25% of my time on
it, which became 50% and then very quickly, 100%. I spent the next two years of
my life on it, from working with Pernod – which was absolutely fascinating – to
getting a bid together and4 ­getting engaged in the Federal Trade Commission
stuff (where he represented Diageo in its testimony to gain approval of the
acquisition),” he says. “My job there was simple, but daunting: defend the
synergies, one of which was the production footprint, and defend the ­savings we
would be making.”
Whether Diageo anticipated that it could use a good defence when it announced
its Scottish redundancy plans, or was as shocked by the public reaction as the
rest of Scotland was by a very profitable business announcing such deep cuts, it
had a man who could undertake that role in Bee.

Alternative view
Forced by the backlash to do something about the job losses and the threat to
one of Scotland’s biggest exports, Scottish First Minister Alex Salmond asked
the Scottish Executive to engage with Diageo and come up with an alternative
plan to protect jobs.

Bee was selected as Diageo’s point of contact for the government’s people and
was the daily point of contact for partners at BDO, the audit firm which won the
mandate from the Executive to represent government interests at the bargaining
table, meet with Diageo’s management to examine the facts and figures behind
their restructuring decisions and formulate a plan B.

“Our primary thought was that the government would want to see if there were
holes in our financial case, so Bryan Donaghey (Diageo Scotland’s managing
director) asked me to take the lead,” he reveals.

“I was a bit nervous beforehand. You could draw conclusions about our
business case ­without actually seeing the plant, so I built a plan for
engagement based on that and we had seen BDO’s scope document so we knew what it
was trying to do,” says Bee. “We had them look round the sites and I checked in
with them every day to make sure they were getting what they needed.

“Then I got them together with myself, Richard Bedford (grain malt distilling
director for Diageo Scotland), David Kavanagh (engineering director) and John
Paterson (head of spirits and ready-to-drink packaging and supply for major
markets in the UK, Europe and North America) to take them through the ­business
case step by step, the thinking behind our plan, the key assumptions and why we
arrived at those assumptions.”

Bee was well placed to explain this, having worked alongside Donaghey and
group global supply director and executive committee member, David Gosnell, to
write the paper on their restructuring ideas that was submitted for
consideration by the board and got the ball rolling.

One senses that neither Diageo nor Bee was about to let government
intervention become the fly in the ointment. Despite three months of work put
into the alternative plan by BDO, the Scottish Executive, unions and local
government ­representatives, Diageo took just a week to review and reject it
outright, forcing the Scottish government into a humiliating climbdown. “I still
do not believe that Diageo appreciates the social consequences of its financial
decision in turning its back on 200 years of history in Port Dundas and
Kilmarnock,” Scotland’s Cabinet secretary for finance, John Swinney, said of the
rejection.

Bee, however, saw it as a double success. “They had no impact on our plans
other than confirming that we’d got the right decision. I personally feel very
positive about it because we engaged with [BDO] in a very open way, took it
through the plans, answered all its questions and, as a result, it basically
said our plans were sensible,” he says. “None of the proposals it put on the
table came anywhere near what we needed to do and none of them were ideas we had
not already considered and rejected ourselves; they resulted in significant job
losses, but the financial case was much worse. They weren’t viable solutions.”

He continues. “The good news was two-fold: one, whatever they came up with
wasn’t better than what we put on the table and two, they were able to say that
Diageo was helpful and open, that we didn’t hide anything or try to lead them
off the track. It would have been very embarrassing if they had come up with
­something that was a better alternative. We went through a huge amount of
challenge on it, but something like that doesn’t get to Diageo’s board unless
it’s been reviewed at all the relevant stages. The engagement was certainly a
challenging opportunity, but it was absolutely right for me to do it as FD of
this business to lead that discussion. And I thoroughly enjoyed it.”

Future wrangles
Even once the restructuring is done, expected to be in 2012, Bee hints at future
wrangles Diageo may have with the government if it decides to move parts of its
business out of Scotland, which many believe is inevitable. As the controversy
over its restructuring plans rumbled on last ­summer, Diageo came under fire for
having taken millions of pounds in government grants for ­preserving a certain
quota of jobs in a certain period of time in the past. “Diageo had grants for
jobs in Leaven and Kilmarnock of around £2m, but all the employment requirements
for those grants were completed and satisfied, so there’s no connection in our
mind. We could have applied for grants associated with this restructuring, but
chose not to,” he says.

“If an appropriate situation comes up – for example, if there’s a choice
about whether we bottle here in Scotland or somewhere else in the world and
there’s an opportunity to apply for a grant to support that, for me that is the
right thing for the government to support. Our job is to ensure our business is
as competitive as it can be and we are competing in a global marketplace from
within Scotland; we are arguably overweight in bottling our products in
Scotland, but we believe there is power in that today.

“But if that means we can’t sell our products competitively elsewhere in the
world, that could be a problem for us.”

We return to the jam-packed CV that has taken him (and in the last decade, a
wife and three young children) to several cities in England, western Ireland,
Belgium and North America. Bee pulled out of the running for a job with Diageo
in the Far East because of concerns around a previous restructuring effort there
and the impact on his family.

He admits that the number of roles he has stayed in for two years or less
reflects the fact that he gets bored easily. He has taken a two-pronged attack
to his finance career, keeping one ear to the ground on upcoming opportunities
that provide exposure to different elements of the contemporary group FD job, as
well as simply going for roles that get his synapses snapping.

“I was 18 months into a performance ­management role when I landed at
Diageo’s Great Britain business [as commercial FD for Diageo Great Britain]. One
of the conversations I was having there was, ‘I’d like to be FD of a ­business,
please.’ It was almost a bit of a barrier for me to being able to move on.”

Then an opportunity came up in Belgium [FD, Belgium & Netherlands, which
Bee took up in 2004], “probably a little earlier than was ideal in terms of
where I was with my role, but it was a business FD job so I took it.” That
lasted 14 months because the role was made redundant in another restructuring
exercise, but Bee made capital from it and found himself in Connecticut as vice
president of financial planning and analysis for Diageo’s North American
business just a month later.

“I was really enjoying the job and would have liked to stay longer. But on
the other hand, I feel lucky because I think it is very important for a finance
generalist to find opportunities to build expertise. It was probably a bit soon,
but I felt that those jobs didn’t come up that often.”

Fifteen months into that job, an FD role for a supply business came up there.
Rather than ­moving again, he combined the two, staying put for nearly four
years before coming back to Europe last February for the Scotland FD role
(which, true to form, also encompasses the role of FD, Europe supply).

“If I ever did just one thing, I’d be bored,” Bee concedes. “I’ve been
challenged every step of the way and if I wasn’t I would be bored – but it’s
never happened to me,” he admits. “[Diageo CEO] Paul Walsh often talks about
wanting Diageo to be an iconic company in the way that Procter & Gamble or
Coca Cola is. The only way we’re going to achieve that if we do it individually.
That really energises me. It is a bit daunting sometimes, but it keeps me
engaged.”

What’s next?
Temptation lurks in many corners for Bee’s next move. He wants to be a part of
Diageo’s financial leadership group and is currently reviewing the financial
capabilities in his team that, he indicates, will probably lead to change within
the finance function as the group expects more output from reduced resources.
He’s keen on an FD job at one of Diageo’s bigger markets, but equally interested
in moving to a treasury role.

“Some exposure to ­treasury is a good thing if you’re going to continue up
the finance ladder. I don’t see myself being a CEO. I like the controlled
finance environment; I don’t like the term beancounter, but someone’s got to
count the beans and I like being a strong business partner with those blocks of
experience,” he says. Bee had some exposure to investor relations under the CFO
in the US and put an IR role in Edinburgh on the list if the Scotland FD gig
didn’t materialise. That’s a direction he has on his radar, too.

The try-everything-once mentality seems to be something Bee imparts on his
70-strong finance function, which sets the financial direction and provides
financial leadership to Diageo’s production business across worldwide Scotch
Whisky, Irish Cream production and European vodka and rum production, with his
team spread across Scotland, Ireland and Italy. “One of the things I coach my
staff to think about is to consider the exposure and experience you might get in
a role even if you hate it. You can do it for two years, then go and do
something else. Nothing is forever,” he says. “I had a very tough time in my l
ast role with P&G and I found it difficult to settle into that team. But I
can genuinely say I’ve never had a role I didn’t get a lot out of.

“There’s always something there: and if there isn’t, you can get out and do
something else”. Make no mistake, you’ll be hearing from Bee in the future.

For more interviews with leading FDs, go to
www.financialdirector.co.uk/interviews

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