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The One That Almost Got Away

Wednesday, May 1, 2013 - 11:50

Tasmanian salmon producer Tassal came close to extinction just a decade ago, but it is now becoming a global player, thanks to a unique turnaround strategy adopted by its CEO Mark Ryan. Gerard McManus reports

"You are not here to work with me, you are not here to work for me, you are here to work instead of me," sums up the broad managerial philosophy of Mark Ryan – a simple but powerful philosophy about empowering people.

For someone whose background is in the rolled-up-sleeves, punctilious methods of a corporate insolvency practitioner, it is an unlikely way to want to operate. But the CEO of Tassal Group says because expertise is increasingly so critical and specialised, particularly in his industry, there is little choice but to leave many of the important things of his business to other people.

"We have intentionally built our people strategy on engaging local and international capability in all aspects of our business, ranging from marine scientists, veterinarians, safety people, engineers, fish farmers, sustainability, sales and marketing; leading and managing all those people is crucial to the success of the business," he says.

"I cannot have all the in-depth information they have, nor do I need to.

"I don't know what I don't know; I need to ensure people feel empowered enough to ensure I know what I need to know. It is about getting the people involved to own the process."

Breeding and growing salmon is a business like no other. Where other farmers may cite locusts, snails or mice as pest threats to profitability, Ryan cites ravenous seals. It's a stark metaphor for Ryan's ability to tame the wild.

Tassal's corporate structure reflects Ryan's devolution of responsibilities, with, for example, a specialist head of risk, a head of sustainability, as well as conventional heads of areas such as sales and marketing.

After a decade at the helm of Australia's biggest Atlantic salmon producer and distributor, Ryan has had infrastructure and working capital cycle. "Unless you have a long-term strategic road map you don't know where you are going. You need to ensure you balance the operational, financial and strategic requirements of the business to ensure its sustainability and to maximise shareholder value – while at the same time never losing sight of the people and their safety," he said.

"Now, of course, a lot can change during that time, but so can strategy. We are not afraid of change, if things fundamentally change you move and adapt. The overall targets may take a little longer than originally anticipated, but if you address things early enough then you will give yourself every chance to still get there."

In 2002, after being called in with KordaMentha Partners as receiver and manager for Tassal, Ryan emerged from being the business' funeral director to its delivery nurse.

In a highly unorthodox manoeuvre, at least in terms of recent Australian corporate history, Tassal, in receivership, acquired the business assets of Nortas, another salmon producer.

Ryan says the KordaMentha team saw there was a viable underlying business, but it had been stifled by poor management, too much cost and overburdened with debt to the bank. "As a receiver you never really get to turn around a business. We recognised there was a good core business at the heart of the company," he says.

"There had been a variety of operational mistakes; management had made some poor operational and financial decisions, and there was no real focus on risk mitigation.

"I was able to put in place all those learnings I had acquired from working as a receiver to ensure a successful turnaround of Tassal."

At the time, Tassal had accumulated debts of $40 million and Ryan and his team worked to counter the problems, including an oversupply of salmon, a severe cash flow crunch and myriad structural problems.
Costs were stripped back and loss-making divisions shut down. One part of the solution was a bold decision to buy out a key competitor, Nortas, which at the time was the third largest salmon producer in the country.

Integral to the Tassal turnaround was a management shake up – getting to the essence of Tassal's core business and shedding what was not essential.

Ryan remains a great admirer of Mark Mentha, who along with Mark Korda, are household names in the insolvency business.

As to his current attitude to managing what has turned into a viable, sustainable business, you can take the man out of the insolvency practice, but you can't take the receiver entirely out of the man.

The 43-year-old CEO still regards the failure to understand numbers as well as a lack of focus on cash as the biggest mistakes of many businesses.

"Numbers and cash are what make any business tick," he says.

"Not everyone treats cash as king, but you need to be able to understand the true cost of doing business, what the cost and income drivers are and, ultimately, what cash it generates. A good P&L (profit and loss statement) is fine, but if you haven't got cash, you cannot do the things you need to do to ensure a viable, sustainable business."

Once the new structure was in place, just a year later Tassal re-emerged with its competitor folded into the business. It was sold for $43 million and in the same year floated on the ASX.

The full year results for 2012 showed a healthy profit before tax of $59.6 million ($28.1 million after tax) from revenue of $261 million.

CEO Ryan has also tried to bring environmental groups, such as the World Wildlife Fund and other ENGOs, inside the consultation tent to improve environmental practices.

Ryan diplomatically describes Tasmania as having a "strong ENGO" presence.

In reality, environmental groups are so powerful in Tasmania they can make or break some businesses. The introduction and development of a government-backed Atlantic salmon industry from 1960 probably may not be permitted today.

Given the volatility of international prices and fierce competition from Chile and Norway, one of Ryan's key objectives is to encourage Australians to eat more salmon, in collaboration with leading retailers.

The basic business strategy has two bookends, according to Ryan.

The first is to grow domestic-per-capita consumption and the other end is to ensure the business is competing internationally and operating at international best-practice cost to match and/or better global competitors' costs.

In simple terms, if Australians regularly eat more salmon, this will provide a solid sustainable base for Tassal's ambitions to become a successful international player.

"We want people to think of salmon as a dish of choice for breakfast, lunch and dinner. We want to get people comfortable with the idea of salmon, not as an exotic dish, but something they are familiar with for everyday use," he says.

"In other words, how can I cook salmon differently so I can cook more often?"

So this has involved working with retailers and with cooking shows to build that familiarity.

In terms of the other bookend, Ryan has brought in 20 senior people from across the globe to manage various parts of the business and upskill employees, not to just model against international best practices, but to implement and ultimately achieve them.

The umbrella sitting over the top of everything is a philosophy of economic and environmental sustainability.