Don't mess with Mr Nasty

You can forget the touchy-feely style of modern management when Allen Yurko is around. The Canadian-born bruiser talks tough and acts tough - and he is revelling in his job of trying to turn Invensys from an old-fashioned metal basher into a modern engineering giant. But the City has its doubts
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There are plenty of gorilla-like figures at the top of the world's leading corporations, but few of them epitomise the brutality of the management genre better than Allen Yurko, chief executive of the engineering colossus, Invensys. Not for this Canadian-born bruiser the touchy feely sensitivities of modern management techniques. He talks tough, he acts tough, and he seems to revel in his reputation as the Mr Nasty of the FTSE100.

But even gorillas have feelings, and Mr Yurko sometimes feels he's misunderstood. He is, he insists, just a regular guy. "I may be demanding and tough but I have an open-door policy and a relaxed management style. My wife will have her girlfriends round and I'll cook. I'm not a gourmet. I can't do anything in the kitchen, but I do a good barbecue. I make my own sauce."

It's a great deal easier to imagine Mr Yurko turning meat on a barbecue than tossing the salad in the kitchen. I meet him on a Friday, dressdown day at Invensys's headquarters in London's Victoria. Mr Yurko is sporting a Polo shirt and regulation chinos suspended with fat braces. But he won't have his photo taken in this relaxed attire. The photographer had to go back after Mr Yurko changed into a suit.

Invensys is the result of the merger in February last year of Mr Yurko's Siebe with the larger BTR. Both companies were built by acquisition, but at the time of merger, Siebe was the more "focused", having long specialised in various areas of the engineering industry. BTR had been established as a classic Eighties conglomerate, and it was still trying to rid itself not just of the label, but of a whole raft of unrelated businesses that no longer fitted. Since the merger, Mr Yurko has continued with the process, disposing of businesses with revenues of more than $4bn. Some 50 plants and 100 offices have been closed.

For those who have survived the cull, life remains tough. "Our reputation in financial markets is no nonsense", says 48-year-old Mr Yurko. "I won't have it any other way. We have to reinvent ourselves every week. Part of our industry is dying because so much technology is being replaced by electronics. We want to be the people that do that. So there has to be constant renewal, and change doesn't come without pain in some cases. We are no longer just metal bashers. We have to be able to offer our customers solutions as well as products."

The Invensys annual report describes the merger as a "significant event in a sector where consolidation is seen as the gateway to opportunity". But there was more to it than that. The merger was as much defensive as anything else. Growth opportunities were drying up, for both companies. Mr Yurko set about selling the less exciting companies within the groups, including BTR's historic automotive division, to focus Invensys on "intelligent automation", control, power and drive systems, all the things that help industry become more efficient by eliminating manpower.

The transformation has taken Mr Yurko longer than expected, largely because he did not expect the disposal programme to take up so much of his time. Full-year figures to be announced this month are unlikely yet to reflect the full benefits of the transformation.

Mr Yurko is keen to put the past behind him. BTR and Siebe have "strained" histories, and Mr Yurko would like them airbrushed from the record. He has met little success. The City's perception of Invensys is largely the same as that of BTR and Siebe, that it is a low-growth business. Mr Yurko's aggressive attempts to change this image have only reinforced his reputation as a bruiser.

There's more to this pain than closing down the odd underperforming plant. Invensys has a "Lean Enterprise" programme which sends statistical engineers called Blackbelts to underperforming parts of the business to map out why they are not working. The Blackbelts stick around until they are fixed. The idea was conceived in the middle of the last decade at Siebe to ensure some named individuals took responsibility for cutting costs.

Invensys now has one thousand of them poring over many of the underperforming businesses acquired in the merger with BTR. Combined with the Blackbelt teams is what Mr Yurko calls his "simultaneous looseness and tight" approach. It's loose in that managers have plenty of responsibility and freedom to make their own decisions. It's tight in that Mr Yurko visits middle-tier managers 10 times a year to check on them.

"There's one strategic planning meeting, one budgeting meeting and 10 gruelling performance reviews," he says. "We get to talk about pure operating performance down at the plant level, productivity metrics, customer service and the like; They make presentations and if the guy's got a problem with a major customer we'll fix it right there." As if regular visits from the CEO weren't enough to keep the Invensys managers on their toes, the company also sets strict "budget and stretch" targets. The stretch targets are designed to be almost impossible to achieve, although many are met. Mr Yurko says his approach should make his employees feel they always have more work to do. He doesn't mind taking flak for missing the odd target here and there, as long as Invensys is always pushing.

The budget is another matter. "The budget is a contract. You do not come off your contract lightly. It's a commitment. Woe be the managing director at Invensys who tries to change his budget three months into the year." Mr Yurko is serious. He is inclined to lose his temper if he feels his standards are not being met.

"It's not a regular occurrence but it does happen. It's not aimed at an individual, it's aimed at an issue like failing on customer service. Some one needs to show a bit of passion and that's what I do - and people are very, very aware of it. You can't hide your feelings in business. Of course, you shouldn't do it in a way that puts people into such a defensive mode that they cringe. I'm not talking over the top, here, I'm talking about upset. Occasionally, some foul language might be sprinkled in."

But Mr Yurko says he believes in letting people make mistakes. It's a lesson he learnt from Barry Stephens, Mr Yurko's chairman at Siebe. Indeed, he admits to making mistakes himself. "I was late in closing a plant in my youth. I thought I had it fixed, but quite frankly even when it was fixed it needed to be closed. I wanted to prove I could turn it around, but it didn't help anyone. If the employees had known three years earlier they were going to lose their jobs, they'd have been off in new careers sooner."

There were other lessons from Mr Stephens too, not least in how to handle the City. Mr Stephens saw Mr Yurko's manner "brash and optimistic" might not go down well in the Square Mile. It's a problem he still feels he is wrestling with.

"The City has a perception I might be too aggressive a manager and therefore might be willing to throw away shareholder value for size," he says. He is irritated by suggestions in the Square Mile that he wants to be "the next Jack Welch". He admires the larger-than-life General Electric boss - "he's the best executive in the world"- but he says he wants only to emulate him, not to be him. Coincidentally, Mr Welch's "Six Sigma" management philosophy became the basis for Siebe's Lean Enterprise programme.

Then again, Mr Yurko genuinely believes there are big benefits to be had from size. "Scale benefits in manufacturing, in research and development do exist. I think we're going to expand from here. I'm hooked on size."

Not for Mr Yurko the lure of a tiny startup. When he leaves Invensys, he hopes to become a non-executive chairman. "It's a nice way to fade out while keeping your hand in. I'm not sure I have the entrepreneurial flair to be in a really small company. I'm not really the kind of person for a startup."

The problem is that the City sees Invensys as a juggernaut which is going to take a long time to turn around. Again, Mr Yurko is anxious to dispel what he regards as a misperception. "It's going to turn round a whole lot faster than people expect. The integration process is well ahead of schedule. And we've got a better growth business than anyone's giving us credit for."

Many analysts are sceptical about engineering as a growth business. In fact, even Invensys has its place in the new economy. Its power systems, for instance, are to be found in many mobile phone base stations.

Even so, Mr Yurko has to be realistic. "People will want to see success in the numbers, and I understand that."

For the time being, the jury is still out, but no one can fault Mr Yurko for lack of energy and determination in attempting to secure the right verdict.