Capita's Paul Pindar is mad about Leeds United. And it's easy to draw parallels between the troubled team and the loss adjuster's woes. Is Pindar following in Venables' footsteps, or can he turn his team around, asks Andy Cook
Paul Pindar's office is surprisingly small for the chief executive of a FTSE-100 company. And while most clients will be delighted that Pindar is thrifty enough to work from a 20-metre-square room, they might raise an eyebrow at the giant, signed photo of Leeds United FC that fills the wall between his desk and his very modest meeting table.
It's not difficult to see the painful irony: two powerhouses facing high profile departures, both punching below their weight. Leeds have lost Woodgate, Bowyer and Fowler among others, while Capita has lost accounts with Churchill, NFU and Lloyds TSB. And it's not just high profile accounts that Capita has lost recently. Since it acquired McLarens Toplis, 36 of the original 39 senior managers have left including Ian Muress, now piloting account winning tenders with Crawford & Co.
If Capita's claims business is in trouble, you would hardly know it from talking to Pindar. He knows that Capita's reputation is taking a battering, but is adamant that it is all short-term pain for long-term gain.
"We don't want unprofitable business. We just want to be working in relationships that make financial sense for our shareholders," he says.
What Pindar is talking about is the increasing commoditisation of claims management services, where clients play one loss adjuster off against another to beat down fees in return for a place on the preferred supplier's panel.
He says: "We want our customers to view us as being at the higher end, quality-wise. We don't want to be seen as providing a service that is a 'commodity'. I mean, if you look at the loss adjusting industry, one of the mistakes that many have made is to allow service to be driven down at the same time as allowing price to be driven down. You can end up in a vicious circle where the customer gets an increasingly shoddy service and the service provider gets into an increasingly parlous financial position, which in turn means the service gets worse, which in turn means the financial position gets worse...
"No, what you've got to do is to find ways of delivering service whereby the customer feels they're getting something good and paying a fair price, while making a fair return yourself."
Pindar adds that the penny-pinching attitude is not endemic among insurers: "I mean we're having some very sensible discussions with clients at the moment. The old days of the procurement man sitting in the meeting and saying, 'Well, you're charging me 100 for this, which is very interesting but, by the way, the price is 85,' is now a very out-moded, and one which I think most people have the intelligence to work out is actually damaging in the end. To be honest, if a discussion is going to go down that route, we'll say, 'Well, thanks very much, but if you're making this decision solely on the basis of lowest price, we suggest you go and talk to X, Y and Z because we've got other things to do with our time'. I think we're probably bidding for less than half of the opportunities that we actually see at the moment, so we can afford to be selective about working with clients who are going to make their purchasing decision based on the value that we're going to bring to their organisation."
Pindar also talks tough on why so many McClarens senior managers have left since the acquisition in May 2001.
"We don't go into any acquisition with a view that we're simply going to clear out the top team. In the vast majority of transactions that Capita's been engaged in, the senior team who were at the helm of those businesses have remained within Capita. Look at Eastgate. Today, the majority of the Capita insurance services board is made up of ex-Eastgate people. In many ways, that acquisition provided us with a bedrock. With McLarens, we felt the structure of the business was such that we had to make some slightly more significant changes."
In short, Pindar says that McLarens Toplis had poor management and it was therefore inevitable that many of the senior figures would leave.
"The due diligence exercise on McLarens was very hard in terms of understanding the business and we made no secret of that. I mean, it's a big business: 1,800 people, £70m of revenue, something like 80 locations around the country. The quality of management information within the business was not what we would have expected for a business of that size.
"If the question is, knowing what we know now, would we buy McLarens on the same terms as we did at the time, the answer is yes. Definitely."
It is clear that Capita has found absorbing McLarens Toplis difficult. It is now coming up to two years since the acquisition and high-profile staff are still shaking out.
Pindar explains: "We've now finally got in shape the structure of a management team that is pretty coherent. It would have been nice to have been in this position 12 months ago, but sometimes you just don't get all the pieces in the jigsaw falling into place. I'd rather take a long time and get it right than make a knee-jerk response and get it wrong. So yes, we have taken a long time and I'd be the first to admit that, but I think we think we've now got the nucleus of a business that will be pretty successful in 2003. We're going to keep you busy with newsflow in the coming year!
"The deal with Aurora was a competitive process. When it started off, I can't remember how many people were bidding. Then it came down to six, then three, then two and, after a six-month process, Capita was picked. Our financial offer, we understand, was not the most generous, so we were picked on the value that we are going to add to the client and the depth of career development that we are going to offer to the 370 people that join us. All this suggests to me an organisation that has done an awful lot of due diligence and is satisfied that Capita really has got something to offer."
Critics of Capita question its commitment to the market after being stung by a deal where value seems to have disappeared down the drain. "We've heard the odd comment like: 'Capita is not going to be in this for very long. It's the sort of business that they may well get out of so they're not committed.'
"In truth, of all the businesses in the Capita Group, the one that we are most excited about is this one, and when you come and interview us in 15 years, you will find that we've got a billion-pound business in this area. It is going to be extremely big, and we are here for the long-term. We are dead serious about being the number one player in the market today, and we are going to go from strength to strength," claims Pindar.
Is there any evidence to support that claim? "Yes, in terms of external surveys that are done on Capita's market position in business process outsourcing in the insurance sector, like Romtec 2001."
It is clear that Capita has the strongest outsourcing presence in the market, but the claim that the loss adjusting business is going from strength to strength has to be taken with a pinch of salt.
The constant stream of bad news is an itch that Pindar cannot scratch. As Bill Dye, Pindar's right hand man, explains that the special investigations team has been recruiting new staff, Pindar interrupts: "I thought we'd just laid people off. We've not been recruiting as well and building a business outfit? Dear me, that's going to make a rotten story, isn't it?"
Pindar, who took home £397,000 in 2001, including a performance-related bonus of £144,000, is supremely confident. This, in part, is fuelled by his personal claims experience when a burst pipe damaged his Westminster penthouse.
"I had a loss adjuster come and visit. It was one of the competition, who shall remain nameless, and it was a very unimpressive experience. It was so disorganised. I don't know where to start really. They turned up later than they said they'd turn up, the whole thing was a paper-driven process where the scraps of paper came out of the briefcase and the notes were taken on those scraps, so it wasn't even as if there was a form."
"They'd forgotten to bring their camera with them to take photos of the flood damage. It took about four goes to explain a very simple problem, so the calibre of the individual was not inspiring, and when I phoned up the customer who was paying this loss adjuster three weeks later and said, 'Can we settle the claim?', they'd still not recieved the report. Eventually, I got the claim settled in full, because it was absolutely bang to rights, but the whole process was pretty uninspiring, and the customer, who was Norwich Union (NU), was not to blame in any way, NU have been as good as gold [Incidentally, NU is Capita's biggest loss adjusting client]. They paid the claim out in full.
"It's not an industry that exactly covers itself in glory at the moment."
And that, reckons Pindar, is Capita's opportunity. He wants to offer value for money, not just "lowest price and never mind the quality".
There is cause for optimism. Capita's Eastgate operation is profitable and innovative. Last year, it implemented Consumer Direct with Abbey National. This is an operation whereby Capita handles Abbey's general insurance operations all the way from the screens in the branches to the panel of insurers and the consequent claims. And although it has not quite caught fire following tentative inquiries from, it is rumoured, HSBC and Royal Bank of Scotland, Pindar refuses to comment on the interest of the banks, but adds that a deal with a smaller operator is in the pipeline.
Pindar reckons that David O'Leary is the best manager Leeds United has had recently.
"I think he was good at motivating the team. I mean, they had a bunch of players that weren't the greatest in the world and made it to the semi-final of the European Champions League."
He reserves his criticism for Leeds chairman Peter Ridsdale: "As chairman of a public company, Ridsdale acted like a supporter. He spent money like it was going out of fashion, and I think he's got an awful lot to answer for regarding Leeds' current financial position, because he should have learned to say 'no' to O'Leary.
"To allow him to end up with six strikers when only two are needed on the field - and to spend £10m a throw on them - is pretty naïve.
"And then to go and promptly sell them for half the price you paid..."
He adds: "Leeds have really lost the plot in the last six months. It was bad strategy for O'Leary to write a book. You should never ever shit on your own team."
And with his reorganisation now in place, it seems like the next six months are going to be crucial to Capita's insurance business. Will it, too, lose the plot?