Travel's man is not the usual high-flyer

by Nick Smith

Friday 2nd April 2004

Not many chief executives whose business pulls in turnover of $630 million can boast a communist father who manned the barricades in 1951 during the waterfront strikes.

Or a grandmother whose activities lending money and subsequent repossession of debtors' goods attracted the interest of the Christchurch constabulary.

But then House of Travel chief executive Chris Paulsen is not your ordinary corporate high-flyer, even if his company is expected to turn over $630 million this financial year.

Mr Paulsen is unusual because while House of Travel's top owner-operators enjoy an income comparable to a top chief executive in the region of $600,000 the holding company share of each store's profit is capped at $26,000, plus the 1% "ticket clipping" on provision of services.

The 52-year-old is also unique because he talks about business in terms of relationships, comparing it to close friendships or marriage. Such is his belief in the equality of his, it must be said, polygamous marriage to the 85 store owner- operators that ownership is shared 50-50, a structure at odds with prevailing wisdom that still demands franchises or the wholly owned head-office scenario.

"It has worked because when the big problem came up of sharing income ... I am a great believer in any partnership relationship and if the rewards are out of kilter with the value that you bring to the relationship, [the marriage] will ultimately fail," Mr Paulsen says.

"You must be realistic about the value you are adding and it must be in proportion to what you are taking out."

It is easy to dismiss such talk as part of the move to management gobbledegook, up there with triple bottom-line reporting, if it was not so incredibly successful. And the ownership structure and profit-sharing arrangement is the key to House of Travel's success.

Yet the structure was denounced as insane and Mr Paulsen declared mad in 1986 when he set up the business, then boasting only five South Island stores. The critics expected failure.

Mr Paulsen is used to predictions of failure. His dad had hopes of a highly skilled job based on his brightness at primary school. Expectations were subsequently downgraded with progressive school reports and by the time he failed School Certificate, "he just hoped I would get a job."

His father betrayed the Lyttelton-based Paulsens by leaving the wharf town: "He went over the hill, he emigrated" ... to Christchurch.

"Dad was a watersider, he was a communist involved in the lockout all the Paulsens worked on the wharves."

But when as a Christchurch cabinetmaker in the 1960s, Mr Paulsen senior returned to the port to organise transport of mahogany logs, he struck the nasty side of unionism.

Watersiders held a stop-work meeting, taking them past knock-off time, meaning the mahogany would lie on the wharves until Saturday. "He just went in there and told them 'this is not what we fought for in the 50s. He really gave them hell."

"[He was told] 'if you don't get out now, this wood will stay here for the next 15 years'. He was really upset [what with] the sacrifices he made."

His father was not the only family character. His grandmother, who surely deserves her own biography, had also immigrated to Christchurch, and set up a corner store in the Woolston area.

Because the many poor people could not afford to buy food, Mrs Paulsen set up a credit agency: "She became a money lender and a bookie. She was convicted. She was very enterprising."

Eventually, after a brush with the law when found reclaiming property through a debtor's window, she got an offer from Hay's store to bring her credit agency to the department store.

She was offered partnership or a salary: "She took salary, Hay's became huge ... she could have ended up a wealthy woman."

Despite his pater's pessimism, Mr Paulsen did get a job as an office junior with Air New Zealand. He was delighted until he realised he was the recipient of educative nepotism.

Mr Paulsen went to St Bede's College and his manager was an old boy and in the habit of only hiring employees who had attended the Christchurch Catholic boys' school. Mr Paulsen was apparently the only St Bede's applicant at least that is the way he tells it.

By age 25, he was appointed Air New Zealand's district sales manager for Southland but was somewhat chagrined when he discovered he was responsible for only five travel agents.

Apparently the previous incumbent leavened the boredom by working part-time for the TAB. When Mr Paulsen questioned the wisdom of the structure, "they sent a guy down to explain I didn't have the right attitude."

In 1986, he created House of Travel, having already been in partnership for six years with five retail outlets, the basis for what would become a national empire.

Mr Paulsen rejected the wholly owned Thomas Cook model because it was too hierarchical. But "there wasn't much value in franchises other than relationships" because "they made their money only by clipping the ticket."

"I thought it would be great to set up a business focused on the customer. It would be retail driven," he says of the operation that revolutionised retail travel.

The beauty of the 50-50 ownership structure is "no one has true control" and "the focus is to be successful."

"They know they don't have control and we don't have control ... we have to co-operate." If disagreement occurs, the contract stipulates both parties must go to court for mediation, he says.

The results speak for themselves: "The average-sized travel agency turns over $2.8 million. The average-sized House of Travel agency turns over in excess of $6 million."

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