Nick Discombe, Chairman

Published in Megabuyte, January 2013. Original article here (£).

discombeThe Megabuyte Interview: Nick Discombe
When Nick Discombe said he wanted a different kind of challenge, a former colleague warned he wouldn’t be any good at being a non-executive. “I was told I was too hands on,” says Discombe, “which in part is what spurred me on.” This was five years ago now, back when Discombe had just overseen the $1bn sale of Nasdaq-listed Witness Systems in his last CEO role. Now five companies look to Discombe as their non-executive chairman: Iris Software (operating as CHS and IAS), SSP Holdings, Lumesse, and Thompson Online Benefits. As experiments go, this non-exec thing is working out quite well for Discombe, he laughs: “So far so good!”

Of course, this is an understatement, as Discombe prefers to let his achievements speak for him. He could be a lot more boasting of his successes if he wanted, I point out towards the end of our chat, but Discombe won’t be pushed: “That doesn’t help anyone, does it! I could sit here and list my achievements, but the last thing a CEO wants to hear from a chairman is how great he or she might have been at some point in some irrelevant time.” Discombe is speaking light-heartedly, before turning serious: “The most important thing you can do as a chairman is to listen. It’s nothing to do with you; it’s all about the CEO and the company. Your job is how can you help them be as successful as they possibly can.”

Intersections of opportunity
Discombe has ensconced himself in the so-called rock’n’roll room at Hellman & Friedman’s London offices during the morning of our meeting, looking business casual in a blue shirt, dress trousers and gadgets strewn across the table. With various British Invasion musicians watching from the photos on the walls, we get into the interview from a somewhat backwards angle, as Discombe’s offer of refreshments results in a trip to the kitchen where the chairman-of-five makes us coffee. We get chatting about the nimbleness of Cloud-only tech companies; Discombe is recently back from the West Coast where he likes to keep his hand in: “One of the things that’s struck me is how fast Saas is impacting mainstream application software. Saas used to be aimed more at niches and verticals [like e-commerce, social, and gaming], but next generation software across the enterprise is coming out of the US now. This is a really exciting time to be in mainstream software.”

What Discombe is most interested in now, he says as he manoeuvres a coaster under my coffee mug, is exploiting new intersections of the market created by disruptive technology. “The big companies surrounding an area disrupted by new technology often don’t have the blended skills necessary to take advantage of opportunities that can arise. Either it’s difficult for them to compete, or they don’t focus on it because they don’t see it as important. [This] creates space for young and innovative companies to thrive.” An example is Thompson Online Benefit, which Discombe has chaired since March 2011: “They work with payroll providers like ADP, application providers like SAP and Workday, and consultancy firms like Towers Watson. Here’s a UK company that’s managed to sign up Google, Apple and Goldman Sachs internationally for what it does. They sit in an area where Saas is a critical component, but they also understand financial services well enough to deliver the next generation of flexible benefits solutions.”

Discombe’s first experience with opportunities created by disruption came back when he was CEO of Eyretel, where traditional voice services intersected with the internet. Discombe, now 50, joined Nasdaq-listed Witness Systems when it acquired LSE-listed Eyretel in 2003, departing after leading its sale in 2007. His chairmanships of Iris Software and SSP Holdings both stem back to 2009, while Lumesse has been his charge since 2010. This is another business sitting in a sweet spot: “Here you have a different dynamic, with customers traditionally acquired on a premise-point solution that included talent acquisition, management and compensation. Today these solutions are increasingly on Saas, and covering multiple modules. The disruption comes from the technology, plus customers looking for more integrated end-to-end solutions to cover more of their workflow.”

Good, hard lessons
From his base near Guilford, Discombe’s five chairmanships ensures a varied schedule. This week he has a board meeting, an investor meeting, and a dinner with a CEO and representatives of a US company they may acquire. The previous day he spent with another CEO discussing issues facing the company. “If the relationship is good I tend to chat with the CEO on the phone at least a couple of times a week. This depends on what’s going on,” says Discombe. “It’s that variety that’s interesting. I love the flexibility and the challenge.”

While emphasising the need to understand the unique situation of each company, Discombe identifies a few issues that tend to resurface: “For growing technology companies, organisational development is something that is woefully underinvested.” Companies often start with founder-style leadership in the early days, before increasingly more staff means added layers of management and the associated communication and control challenges. Once a company gets past 500 people, the CEO needs to stop being a hands-on manager and become a leader, says Discombe: “That shift is really difficult for companies, as it changes what is required from all levels of the organisation. This is often a reason they don’t reach their full potential.”

Product lifecycle challenges is another key issue, notes Discombe, who learned this lesson the hard way back in the 1990s when he worked at Synon. “We went from a startup next to a newsagent in Islington, to £60m in revenue in 7-8 years with no M&A,” says Discombe, who gleaned some valuable insights in dealing with private equity after his company became involved with a US private equity firm to help them crack the overseas market: “The firm was very good, but while we were focused on the US our product lifecycle got out of sync. We ended up getting sold for what felt like not a lot of money at the time. You often need to learn the hard way.”

With a private equity company backing each of the companies which Discombe now chairs, this combination has become something of a speciality: “Private equity and chairman roles are quite a closed world. When they choose someone to work with the cost of getting it wrong is significant, so if you find success there it tends to snowball.” Having said that, it’s clear Discombe enjoys this dynamic: “I like private equity personally as [the investors] focus on the business. They’re often focused on a small number of things, and generally make sure they thoroughly understand the business. Private equity also gives you the opportunity to look at a 4-5 year horizon,” adds Discombe, remembering the contrast of meeting quick-paced reporting schedules for public companies in the US as well as UK. “But you know at some point the private equity firm is going to get out. As you get closer to the exit, some of the flexibility goes away and the company needs to focus some on supporting an exit.”

Lessons in perspective
The flexibility of the non-executive role is something Discombe comes back to several times during our chat, as he enjoys how it allows for varying challenges, more time with his wife and two children, and alternative activities such as teaching and investing in fine wine. But this was never part of a big plan: “Of course you have to be ambitious and driven and all that, but when I started out I had absolutely no idea of where I wanted to end up. I was always interested in tech and I liked working with smart people.”

A key inspiration for Discombe has been Terry Osborne, his chairman when he ran Eyretel. “In the early days there was a point I thought we weren’t going to make payroll, which felt like a pretty dark moment to me. I was on a conference call with the board when Terry said: ‘That’s enough Eyeore, can get we get Tigger back on the call!’ It punctured the tension and allowed us to have a proper conversation about the situation. Terry helped me keep perspective.” Another lesson from Osborne was the importance of a chairman as a sounding board: “Just having someone to talk to can often help you get to the right answer. Even the most confident CEOs often need someone to just chat things through with. I always felt Terry was in my corner, but I also felt Terry would tell me very clearly if he thought i had something wrong.”

This is the sort of bond Discombe aims to build between himself and his CEOs now: one of trust, with a willingness to be open and inquisitive. “The CEO is the only one running the company, but they should be open to advice from the chairman and hopefully other sources of experience too. The best CEOs are very aggressive trying to ensure they understand everything they can from the people around them, in order to make their own decisions.”

With a busy schedule of mandates, Discombe is not actively looking for any new companies to chair right now. But never say never: “I’m much more interested in companies with an aspect I haven’t done before. If you’ve seen it all before you may feel you know it all and it could make you less inquisitive. It’s up to you to keep challenging yourself.”

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