Titans of industry: Selim Bassoul
Selim Bassoul, chairman and chief executive officer of The Middleby Corporation, talks to Michael Jones about his career, his faith and his business philosophy
When Selim Bassoul was in seventh grade junior high at a Jesuit school in Beirut, Lebanon, he was bottom of the class and considered a lost cause academically. Severely dyslexic, in an age when the condition was not recognised, it was only Bassoul’s outstanding performances in the cross country running championships each year that ensured he kept his place in class
Today, having been at the helm of The Middleby Corporation for 15 years, Bassoul is one of the longest serving CEOs of a US publicly listed company. His tenure has seen him turn a struggling, unfocussed firm with a market capitalisation of $15 million in 2000 into a global powerhouse worth $5.5 billion and with over 40 of some of the most respected brands in the business, including Jade, Viking, Blodgett, Pitco, Beech Ovens, Lincat and TurboChef.
Serving all food segments globally, the Elgin, Illinois-based group ranks number one worldwide in the pizza chain, convenience store, fast casual and casual dining sectors. In QSR, its brands have the second largest presence globally.
Having experienced a 20% average growth in international revenues over the past five years, in November 2014 Middleby was added to the annual Fortune Fastest-Growing Companies list, the third-best performing industrial company on the list. It has also been listed as one of Forbes ‘Best performing public companies’ every year since 2004.
The turnaround he has performed in Middleby’s fortunes mirrors that of his own life. And what a life he has led.
From troubled beginnings in his war-torn homeland to top of the tree in corporate America. “I want to be able to, in a small way, change the world,” he tells me with a smile. “It has always been my purpose.”
As we meet in London in early December, Bassoul is preparing to address the annual NASDAQ conference. Stealing time away from his demanding schedule in the lobby of the Waldorf Hilton the 57-year old recalls the pivotal, formative moments in his youth. Moments that were, he feels, responsible for turning him from an underachieving schoolboy with an uncertain future into an academic success and, according to analysts The Motley Fool, one of the most highly regarded, influential CEOs in business.
The fork in the road
The Bassouls were a well-connected family in Lebanese politics and business, but when Beirut fell into civil war when Selim was just 12, they found themselves “asset rich, but cash poor”.
He recalls overhearing his parents talking at night, his father telling his mother “I have only got $20 left in my pocket. That’s all we have now. What am I going to do?” For Bassoul the moment gave him an iron resolve that he would never allow external factors to affect his own future. “I knew in that moment I would never be poor,” he says.
For his mother and father, (formerly an Olympic athlete, competing for Lebanon at the 1948 Games in London), the idea of their son leaving school and taking a family friends’ offer of a civil service job was not an option. “I recall my mother shaking me by the shoulders and saying, ‘You will never work for anyone else,’” he says. “That had a big effect on me.”
An entrepreneurial zeal was building quickly in Bassoul. He threw himself into his studies, achieving the highest grades in his class when he left school. His dream of one day leaving Beirut to head up his own company was now firmly entrenched in his mind. “I always thought I wanted to be an entrepreneur,” he says. “I didn’t know what type of enterprise, but I always had a dream to build something. I felt that legacies occur because you create or change something for the better.”
In 1979 Bassoul graduated from the American University of Beirut, where he received a BA in Business Administration, with distinction (top of the class again). After working for Whinney Murray (now Ernst & Young) in the Middle East he turned down the chance to move to London and continue his career as a chartered accountant by studying at London School of Economics. Instead he opted to continue his postgraduate studies in the US at the Kellogg School of Management at Northwestern University. For him it was a clear choice.
“I always wanted to go to the US. Maybe from watching US movies, US TV and listening to US songs. So I said to my parents, I’ve made the decision to go to Northwestern,” he says.
Bassoul’s parents had to sell a piece of land they were keeping for their retirement to fund him through college. It’s a gesture that touches him to this day. “I will never forget the sacrifice they made. They sold the only asset they had left to send me to school. It shapes your personality and your ambition,” he says.
Bassoul already knew that the US would give him the “entrepreneurial spirit” he wanted. “I knew America would give me a chance for me to network and observe capitalism and entrepreneurship at its source. At the time, Europe was not as entrepreneurial. Neither was the Middle East, because either aristocratic companies or families owned everything and were protected by the government.
The US was the true entrepreneurial capitalistic system, and I wanted to be embedded in it and learn.”
At Northwestern Bassoul would go on to receive a Masters of Business Administration and a certificate in accounting. There he learned three key lessons that he carries with him still.
“Firstly, I learned that rewards come with risks. I never had a big appreciation for risk, so one of the things I learned as an MBA is the risk-return equation. The second thing I learned is for every action, there is a reaction, whether it’s a competitor’s strategy or a capital expenditure or investment you need or borrowing to get there. I’ve learned there was always interaction of learning,” he says.
The final key business lesson Bassoul learned at Northwestern came from esteemed finance professor Alfred Rappaport. “He said to me, ‘It doesn’t matter how rich you are, how financially solid you are, cash is king. You have to manage cash.’ I got that ingrained in me. We don’t run our company through net income, we run it through cash. Coming from a culture in the Middle East where cash is everything, it meant something to me. There was no borrowing to be had in during a civil war. It was all about cash.”
After his studies Bassoul worked in the healthcare industry for eight years, firstly for American Hospital Supply and Baxter Healthcare in various positions including mergers and acquisitions, corporate planning and, aged 28, as a regional director in the Middle East and Africa.
Prior to joining The Middleby Corporation Bassoul worked for eight years in commercial food equipment for Premark Inc, a unit of ITW, as director of marketing, general manager of the cookchill division and vice president of sales for the Vulcan cooking division.
Healthcare and foodservice are not obvious bedfellows, I suggest to him. So why the switch in industries? “I’ve always been a contrarian and a nonconventional executive,” he says. “When I left healthcare to come to food equipment, it was not a very exciting business. People didn’t change ovens often, they used old equipment. The new equipment didn’t have any real technology and the business was full of brands that had rested on their laurels and were living in the past.”
In Middleby, however, a firm with a 100+ year history and proud manufacturing heritage, Bassoul saw huge potential. “It was a great brand,” he says. “They had done a wonderful job developing the revolving oven and automating the pizza business, but they had lost focus. They were no longer dealing with core competency. This was a huge challenge. Nobody lied to me. From the beginning, they told me, ‘Selim, we can’t guarantee where we’re going’, because they were struggling and they wanted me to be part of the turnaround.”
The risks Bassoul took were twofold. First, in switching from a high-flying career at Premark to take a pay cut to join “an unknown, not well-run company” in Middleby. The second risk was to sell the house he had just built to buy a large stake in the business. “It was our dream house, my father even came over from Lebanon and supervised the construction on the house, and I sold it to buy shares in Middleby and became the second-largest shareholder at the time, when nobody was willing to invest in them. These were big risks. Failure was not an option,” he says. “An old boss of mine said, ‘Don’t fear failure, fear success.’ I’ve never forgotten that.”
Being prepared to take risks has earned Bassoul plaudits since taking over the reins of Middleby in January 2001. “The biggest risk I took was when I bought Blodgett Pitco from Maytag, right after 9/11 happened,” he says. “Everybody said, ‘You’re crazy. Why are you buying this company?’”
Back in 2001, Blodgett Pitco was actually a bigger firm than Middleby. The cost of the acquisition was approximately $100 million. “No banks would lend us the money, we ended up using a high-yield, very expensive, interest-bearing financing strategy. Everybody was questioning it, because I had not made an acquisition before, but it turned out we had done really great due diligence.
“We knew the weakness of Blodgett and Pitco and what we were strong at. I think the most important thing is we knew in the first 90 days, how we were going to turn around the company. We didn’t have a five-year plan, we had a 90- day plan, so we were not crushed by that huge debt and interest payments.”
A raft of successful acquisitions, over 50, has followed under Bassoul. “Middleby has been the biggest acquirer of all time in the industry. Nobody has ever done what we’ve done,” he says.
The right stuff
In 2014 Middleby acquired Concordia, Market Forge, U-Line, Desmon and Goldstein Eswood, but even without the impact of those acquisitions the business still grew by 11%. For Bassoul, the success of the business is attributable to a few key factors: ensuring that Middleby products stay ahead of the curve, getting a highly de-centralised management structure in place and building the right team by focussing on the characteristics he demands from his 4,500 employees.
“Middleby did not have a strong team when I joined. It had a 30% annual turnover of its staff. People were regularly retiring, leaving or being poached by competitors. I started assembling the best team I could,” he says. Middleby now retain, Bassoul tells me with pride, a staggering 98% of all their staff. “It’s important to retain the talent,” says Bassoul. “Because it builds loyalty. People who’ve been with you help hire people they know from their community.
“One of the things that has been a big success is the fact that I promote the idea of having families working for me. This is against every principle of HR. It was the first unconventional thing I did when I joined. I have husbands and wives, parents and children working for each other and reporting to each other.
“It’s been such a success because those people are preachers for other people to join the organisation and they now have leverage to say, ‘we have to succeed together’. People like to work for me because I give them full empowerment.
“There’s not a lot of supervision at Middleby and people adore this.”
The common thread Bassoul is looking for in his employees is “a huge passion to win”, he says. “A winner gets up every morning and comes to work wanting to learn, wanting to be a change agent. And that happens at any level.
“Everybody in your organisation matters. And that’s why I only allow three degrees of separation between me and the lowest ranked person in our organisation.”
For Bassoul, this is not necessarily about having a lean management structure, it’s about staying connected with all facets of the organisation.
“When I became CEO of Middleby, there were seven layers of management. Human nature says, ‘I need to build this organisation vertically’. And that’s what has doomed many companies. As they succeed, they become a matrix organisation or hierocratic. That’s one reason I left Premark. It was so matrix driven. It’s important we keep pushing away that hierarchy. I would rather have fewer managers, more soldiers.”
Bassoul is particularly forthcoming when asked what characteristics he avoids in his team. “I can distil into four groups the attributes that I don’t want,” he says. First, I don’t want a whiner working on my team. Second, ‘the sniper’, where it’s always somebody else’s fault. Third, ‘the passive-aggressive’ – the person who tells you what you want to hear, but then it never gets done. But the most difficult to weed out, and it takes me the most time, is ‘the contaminator’. The contaminator is somebody who is very smart, but uses all their intelligence to undermine.”
In good faith
When asked to describe how he divides up his day and allocates his time Bassoul gives a typically candid response. “30% of my time is allocated to customers and connectivity. Learning trends and looking at what the customer is interested in. It’s making sure that I don’t get irrelevant. I don’t want to ever become what the horse and cart was to the automobile,” he says.
The next 30% of his working day is spent on ‘people issues’, making sure his team are incentivised correctly and not becoming unfocused. It is also, says Bassoul, making sure that they get the resource they need to get the job done.
“And that encompasses a lot of saying ‘no’. ‘No, we don’t need to do this’. ‘No, you don’t need to hire that individual.’”
The next 30% sees Bassoul focusing on the type of disruptive technology and ‘total engineering innovation’ that no customer in the market is ever going to give you. “It’s where you take a risk and do something beyond the norm,” says Bassoul. “Nobody told Steve Jobs ‘you need to create an iPhone or an iPod’.”
For Bassoul, that final 10%, of his day is spent in prayer. “I’m a Christian. I spend two hours a day praying, in the morning and in the evening. Those prayers are about God guiding me to keep a purpose in my life. My faith has given me purpose since I was young. Because I was one of lucky few able to leave Beirut I’ve realised you have to give back.
And Bassoul is in one of those positions of power where he is genuinely able to make a difference to people’s lives.
Back in 2000, he began looking into the trends of energy usage in the foodservice industry. Something he felt was going to be an increasing concern to the planet and global population. “In the US nobody talked about energy. I had seen a study that said that energy usage had been rising for the last 25 years and nobody was attacking it.
“So I said, I have to do something, to be environmentally friendly. There were only two companies in 2000 that were innovating products for energy. Toyota, which had introduced the Prius, and Middleby, which introduced a whole slew of highly energy efficient pizza ovens.
“When I grew up in Lebanon, energy was a luxury item. Power is still rationed today. So I came to the US and found people were really wasting energy. I always felt we had an obligation to protect energy when other countries don’t have it.”
The issue of wastage also concerned Bassoul many years before it became the latest buzzword marketing tool for manufacturers. He cites the fact that, according to data from Waste Management, 80% of all food waste in the US comes from restaurants, while water wastage is another huge topic.
“A lot of water is wasted in a kitchen,” says Bassoul. “I’ve created a steamer [from TurboChef] that uses zero water. This has saved one seafood chain more than 400 million gallons of water a year. I created things that sounded impossible and made them possible. I think the energy saving that Middleby has created in the industry counts in millions of BTUs and kilowatts, every year. In 2014 we’ll have saved over two billion gallons of water through our innovation.”
With water costs increasing in 30 major US cities by 6% (a 33% rise since 2010 according to Circle of Blue Water data) product innovation that can deliver annual savings per unit is increasingly attractive to clients.
“Now, everybody talks about energy. But Middleby were the first to help our customers measure the savings they were getting from our products. We asked ‘What is your pay back on using a energy saving appliance?’”
Effective from January 2015, Middleby has implemented a plan to pay back the difference to any customer who doesn’t feel they are getting the appropriate saving, across all products that are energy or water saving. That’s almost 60% of Middleby products.
Putting his money where his mouth is has been a trait for Bassoul and Middleby since he became COO of the firm in 1999.
Then, he introduced a unique ‘no quibble warranty’ that meant if any customer was unhappy with a product, they could immediately take it back for a refund.
“This goes back to my faith,” says Bassoul. “I’ve always wanted to be upstanding. Under my leadership I don’t want to blame anybody else. I have a mentor called Jim Sinegal, the founder of CostCo. At CostCo you can return anything. So he taught me that the best way to improve your quality and your suppliers is to implement a no questions- asked return policy, because the customer will then tell you exactly how they felt about that product. We’re the only ones to do that in our industry now. The highest return I’ve done was $6 million. And we won the customer again, because we became better. Maybe that’s why we’ve been so blessed with the huge success we’ve had.”
Bassoul praises Sinegal “for dignifying and providing opportunity for his people”. That kind of thinking led Bassoul in 2014 to set up his Dignity Foundation to help disadvantaged people, including single mothers struggling for work and felons convicted of minor offences. US-wide centres of training teach career and life skills and Bassoul plans to take the Dignity Foundation global. “We can train people to change their outlook,” he says. “My job is to give people a stake in society so they can co-exist in harmony in a working environment. My aunt told me ‘if you smile, the world smiles with you.’ I’m a great believer in this.”
A QUESTION OF FAITH
Selim Bassoul’s aunt was a nun in Lebanon who created orphanages around the Middle East. Famed for helping a huge number of impoverished people, particularly during the civil war, without discrimination against religion or race, her kindness and ceaseless devotion left a huge impression on Bassoul.
“When people knocked on her door – whether Christian or Muslim, she took them in and helped. I feel that legacies occur because you create something, you change something for the better,” he says. “I’m not interested in resting. I’m here to help people who don’t have the opportunity. I’m able to bridge people’s lives, in the US and Lebanon, by helping them get back on their feet. Those people don’t want money from you. They want to find a job. I’ve always been trying to help as much as I can. This is not about having a big heart. This is an obligation. It’s what leaders do,” he says.
BASSOUL ON HIS LEADERSHIP PHILOSOPHY
“I am the custodian of the culture and the environment. I can drive it to be ugly, or to be good. So the vision in my mind has always been that one day I would be leading an organisation where the employee will drive home with greater self-esteem, feeling that they have learned a lot and played a significant role in the [company’s] success.
“For me, management is a noble profession, if practiced well. It offers ways to help others learn and grow. You must take responsibility and contribute to the success of a team. I want to inspire. I want to change behaviour.”
THE CHANGE AGENT
Bassoul’s next venture will potentially change the lives of four billion people. Within the next two years Bassoul will launch a clean cook ‘refugee stove’ that can also pasteurize water and allow people in war-torn or remote areas to charge their cell phones.
“Every year, around 450,000 worldwide are killed in the process of finding a source of fuel. I want to create an appliance that cooks a family meal fast with minimum fuel and no toxic fumes. I will give it to them for almost nothing. The prototype is unbelievable. I can change the lives of four billion people with it and I will not rest until I get it done,” he says.