- Managing Me
- Big Ideas
- Managing People
“He’s really good,” says Ray Malone as a staff member exits the room after delivering our drinks. “He’s a really hard worker. He does a good job.”
Malone is easy with praise for those he works with. In the hour LeadingCompany spends interviewing him, it's clear Malone is extremely proud of the people he works with.
If succeeding in business is about having great staff, as Malone insists it is, he’s got reason to be thankful. In the three years Malone has been CEO of AMA Group (it stands for Automotive Aftercare), the company has gone from dire circumstances to steady growth.
In 2010 (the year after Malone took over), the company’s revenues from continuing operations rose 14.2%. The next year (2011) saw another 5% revenue growth, and this year, it added another 12.7%. The share price has increased tenfold – from 4 cents to 40 cents. It rose further in October after Malone and the group’s chief operating officer, Ray Smith-Roberts, both signed five-year contracts with the company.
How does he do it? “It’s not rocket science,” Malone says. “You’ve just got to get on with the job and actually do what you say. It’s dead easy.”
Malone is not the normal fit for a CEO, nor did he come to his position in the usual circumstances.
The 52-year-old was orphaned at 11. He moved to the country to live with an aunt and uncle, and moved back to Melbourne two years later. He attended school until year 9, and then did a spraypainting apprenticeship.
After a few years, he convinced Dulux to try him in sales. “I got a car as part of the packet,” he laughs. “That was a compelling offer at that stage.
“When I went into sales, went around visiting shops, I saw how all these people who didn’t even have a great grasp of the English language were doing very well. So I thought, these guys are having a go – I’ll do the same.”
After several successful years, Malone left to buy a small share of a Mr Gloss panel-beating business, which had been going for 18 months. Eight years later, in 1993, he was leading the group. It specialised in prestige cars. “BMW, Porches – very fussy stuff. The business was all about customer satisfaction. Underlying everything was a strict discipline, which I keep today. You could call me anal about certain things. I’m really bad.”
Mr Gloss built up a reputation, and in 2006, it was bought up by Allomak, the company that would become AMA Group.
In the years leading up to 2009, Allomak bought up 13 businesses in the automotive aftercare market. The structure meant that the acquired companies kept operating as separate businesses as vendors to the parent company. After Allomak bought Mr Gloss, they kept Malone on as head of its panel division.
But not all was well at the parent company.
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Allomak listed in August 2006, and for a while had great success. By 2008, Allomak had revenues of some $70 million, up from $1.1 million in 2006.
But then the global financial crisis hit. By early 2009, the company verged on bankruptcy. It had $50 million in liabilities, and revenues were down to $44 million a year. The stock debuted at 40 cents in 2006, rose to $1.10 at its high point, before plunging to 3.9 cents after an earnings downgrade at the end of 2008.
“They got the business into some serious strife,” Malone says. “When the GFC hit, you couldn’t rob Peter to pay Paul anymore. Their model didn’t work, and it was all going to implode. It was like headless chooks going around. It was terrible. Everyone was going around with their own agenda. There was no cohesiveness. Everyone was disenfranchised. There was no leadership.”
Malone (and three others) were owed a lot of money – Malone was owed the most.
“I had a fair bit of clout, so I got involved. I could either keep it together or tip it over.
“If I tipped it over, I would have gotten to take back the panel arm, and I could have gone on and been a happy panel-beater. Or I could push to keep it together. And it was very compelling to keep it together.”
Two things tipped Malone towards this view. The first was about tax. “We had a lot of write-downs, and would have been better off tax-wise trying to make a go of it,” he says. The other thing was the businesses Allomak had bought together. “We had some very effective people who had run very good businesses. I had a lot of trust and faith in them.”
Malone, by then a minority shareholder in AMA, called a meeting to oust the board in January 2009. He succeeded, joined the new board himself, and aimed to have a concrete plan to suggest to shareholders six months later in July. This passed, and Malone became CEO of the group.
His first order of business was to remove at least $20 million in liabilities from the balance sheet. A quarter of this was achieved through a debt-for-equity swap with the vendors, with the remainder achieved through loans from the bank and another interest-free loan from the vendors.
“Everyone had to take a haircut – the bank, the vendors, everybody,” Malone says.
“If you were a director of a company and you were trying to get all this stuff done, normally, you wouldn’t be able to. Because you weren’t in there yourself feeling the pain. By me taking a haircut, the other vendors followed suit. When I gave the business an interest-free loan, the others followed suit. It was very important, given the position I was in. It allowed me to do a lot of things.”
For the record, Malone is also thankful to his bank – Westpac.
“We negotiated a deal with the bank that was fantastic. I owe a debt to the people at the bank because they had some trust and faith in us.”
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After the liabilities were taken care of for the short-term, Malone shaved off seven of Allomak’s original 13 businesses. One of them was sold, two were liquidated, and four were shut down.
Those who worked for the sold companies, kept their jobs. “When we did that, we did it in a way that was fair for the staff,” Malone adds. “They retained their job and all their accruals; we made sure everything was fine.” The cuts shaved AMA Group’s staff count from 370 to 210.
Some more jobs came out of head office.
Before Malone took over, there were 17 people working out of an office in Sydney.
“I closed it down,” Malone says. He spends most of his time on site, either at Mr Gloss or the other businesses.
“Before, it was HQ-centric. They thought head office knew more than the subsidiaries.
“It was patently ridiculous! We were this micro-cap, and had this huge support. They were taking up our time and we only had so much.”
Today, AMA Group has an accountant who works in Sydney. There’s Malone, COO Roberts-Smith, six general managers, and a head accountant.
After Malone took over, he kept a low profile for a few years. “Things were going well, but we wanted the numbers to speak for themselves,” he says. “Particularly given we come from a history of spruiking under the previous management. They were fantastic at talking. They just didn’t do it.”
Malone says he’s building a conservative company.
“What we’ve got to be careful of – we’ve got a fantastic model and culture, and we’re in a great space we know like the back of our hand. We’ve just got to be careful not to shoot the goose that lays the golden eggs. If you grow too quickly, you’re either very lucky, or it gets smashed. For us, it’s not about getting smashed. We’re conservative.”
“We don’t like debt,” he says. “We’d rather pay it out and have control.” In June this year, AMA Group’s total debt was down to $10 million, from $50 in February 2009.
“Sometimes, you have to take a step back to take two forward. You’ve got to consolidate. You can’t grow forever.”
AMA Group has grown since 2009, but organically. Asked where the added revenue has come from, Malone says it’s from their competitors.
“We get it from our competitors, then we put a fence around it,” Malone says. “We do it by service and quality. No frills, nothing else. We don’t buy business. We just look after our customers extraordinarily well, so we get repeat business and loyalty. It’s all about relationships.”
There’s plenty of incentive for AMA Group staff to do well by their customers. After all, the business, while publically listed, is majority owned by people who work in it.
“If you work for someone, your family will come first,” Malone says. “I don’t expect the earth from people unless they have equity as well. I’ve always had the golden handcuffs on key people, because I think it’s very important to keep them with us.
AMA’s board has plenty of skin in the game. Malone says they earn more from dividends than they do from their wages.
The executive ranks are also heavily invested.
“Our COO will do very well,” Malone says. “As he deserves to – I always thought I wasn’t too shabby but this guy’s a gun at what he does.”
“All my general managers have equity, as do plenty of staff in every business. I’ve put non-compete agreements in with many of them. I’ve done all sorts of stuff to build proper succession and a safety-buffer for the business.
“This isn’t some ‘Gen Y’ stuff where you move every few years. This is a fantastic opportunity. We get amazing buy-in, and customer service goes up because of that.
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Keeping things in perspective: How Ray Malone leads
What should a leader never say or do?
“You should never expect more than is reasonable from people,” Malone says. “If someone has a crisis and needs something, we just do it. Their family and home is the most important thing.”
“I never humiliate people or anything like that. What I do that a lot of executives don’t do is apologise. I love it when my staff gang up on me – it’s fabulous. What it tells me is that the culture’s working. It’s the environment that I want. It’s better for the group.”
What elements critical to achieving change?
“Staff buy-in, great leadership and clarity.
“Clarity’s the most important. When you know exactly what to and how to do it in the shortest amount of effort. That’s clarity. There is never a moment when we don’t know exactly what we have to do. And it all comes down to common sense.”
What do you look for in your direct reports?
“Number one: they’ve got our back and are on the same page,” Malone says.
Earlier in our interview, he mentions conciseness as a crucial skill.
“If you were a CFO working for me, and gave me 20 sheets of paper, I’d want to strangle you.
“I’d have to go through 20 sheets of paper to get the simple answer. And the simple answer is one or two things, and that’s what I want. I want everything normalised already, so it’s simple and easy so when I look at it, you can see the whole thing on one page.”
What’s your leadership inspiration?
Asked to nominate how he becomes inspired, Malone nominates a “Mr Limanis”.
When Malone was 15 and living in Clayton South in Melbourne, he was mentored by Limanis, a migrant factory worker.
“I thought he was the king,” Malone says. “This guy had four flats and a house in Surrey Hills. He came here in 1962 with a bag, his wife and kids. He couldn’t speak English. But he created a small world for himself, working hard and looking after his family.
“When you’re start in business, it’s a bit like what I imagine a prison term would be. You work crazy hours. You have no freedom. No choices. You have to do things at certain times. You get no holidays. You’re locked in.
“Whenever things got tough, I would think of him, and think, ‘I’ve got a good grasp on English, and he never did’. He did well by placing one foot after another.”
Today, Malone draws inspiration from the business leaders he has surrounded himself with.
“At the moment, the founder of Seek is one of my neighbours. I’ve got the former CEO of Merrill Lynch as another. I’ve got all these people around me who look at life differently.
“I’m like a sponge; I love learning. It’s really quite exciting.”
What was the most challenging moment of your career?
Malone hesitates, and says he probably hasn’t had it yet.
Then he tries a different tact.
“My life’s been a challenging moment I suppose. I lost my parents when I was young. I had to work crazy hours just to live. I’ve gone from living in an old tram near a cemetery, to commission flats in North Melbourne. I’ve had to learn everything. I had little formal education. I had no real family support.
“And now my life’s fabulous compared to what it was.
“But I’ve always thought how lucky I am. There are people who live on tips [or] people with serious disabilities. I’ve been blessed.”