Spotlight On: Simon Arora, CEO of B&M Stores

In 2005, B&M was a small, loss-making chain of stores. In the last 10 years, Simon has turned it into a variety retail giant with 480 locations across the UK and Germany – creating 19,000 jobs and a London Stock Exchange listing along the way. In this feature, Simon shares his thoughts on the keys to his company’s astonishing success, how his time at McKinsey influenced him, and why, at B&M, one plus one equals eleven.

This is the eleventh in our “Spotlight On” series of articles, which feature prominent alumni sharing their thoughts about their careers at the Firm and beyond.

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The first things you will notice about Simon Arora (LON 92-93) if you meet him – besides the fact that he’s an incredibly natty dresser – are his soft-spokenness, eloquence, and self-deprecating sense of humor.

When discussing KPIs at a recent presentation to current firm members at McKinsey’s London Office, he decried the tendency of many companies to create a laundry list. To demonstrate the difficulty of committing too many things to memory, he asked the audience to name the Ten Commandments. “Most people can name a couple, and then they struggle,” he said. “If we can’t remember ten things that Moses told us from Mount Sinai, why would anyone remember ten things told to them by Simon Arora from Manchester?”

That’s why at his own company, he says, he keeps the number of KPIs to three. “Three things on a page,” he adds, with a smile. “I learned that at McKinsey.”

Simon is Chief Executive of B&M Stores, a bargain variety retailer with 480 stores across the U.K. and Germany. Last year, its IPO raised £1.7 billion, and it became one of the biggest listings on the London Stock Exchange in 2015.

When Simon and his two brothers bought B&M in 2004, it was a loss-making concern. Today, the stores have 3 million customers a week, with nearly half of those coming in to shop at least once every two weeks. What’s more, for the past six years, a new B&M location has been opening at an average rate of one a week, and it is now the UK’s 11th most valuable listed retailer. (“We’re knocking on the door of the FTSE 100,” Simon says. “We’re getting there.”) Even more astonishing? This has all been accomplished with no advertising – the stores rely simply on word of mouth.

The company’s success has been a boon to local economies, as well: it’s created more than 19,000 UK jobs over a six-year period, more than any other private-sector business.

It took Simon a while to find his calling. Armed with a Law degree from Cambridge University, he worked as an analyst in the Firm’s London office, as an investment executive, and as a money market trader.

He then founded an import business, Natural World, with his younger brother, Bobby; the company sourced home goods and soft furnishings from Asia. They sold the business for a profit, and found B&M when searching for their next venture.

(By the way, Simon says that he doesn’t know what ‘B&M’ stands for. “Someone once told me that it was obvious – it stands for ‘Bargains and More,’” he says, adding that’s good enough for him.)

We recently sat down with Simon to discuss his leadership of B&M, how his time at McKinsey influenced him, and much more.

You’ve been leading B&M for more than ten years now. What do you find you most enjoy about it?

I get a thrill out of growing the business. For us, that means a store opening – and we’ve been averaging a new store every week for the last five or six years. I always look forward to that e-mail a few hours after an opening, telling me how it went. But more tangibly than that, when you’re actually in a store that’s open for the first time and you’re walking the floor, there is a buzz to what’s going on: the excitement of the new colleagues and the shoppers coming in for the first time.

Is there anything that has surprised you about the stores’ success?

The remarkable fact about our growth is that it’s been achieved with no advertising. Our advertising budget is zero, and we have no loyalty cards – our business is purely built on word of mouth. It comes from the maxim, “If it’s not broken, don’t fix it” – when we started off, we didn’t have an advertising budget, so we didn’t advertise. We then found that we didn’t need one, because the stores were all paying for themselves within a year.

What do you think are some of the factors that have contributed to B&M’s meteoric rise?

We like to keep it simple. We sell name brands that our customers recognize; we have direct sourcing, so there’s no middleman; and we have good retail standards. Our shops are bright and clean, and we make it easy for customers to find things. We’re also good at “trading the season” – we give a lot of floor space to merchandise that shoppers are looking for at each particular time of the year.

What do you find most challenging about your role?

Because we had so few stores when we bought the business, I knew the names of pretty much every store manager and every departmental supervisor in each one of those shops. We now find ourselves with a business with 17,000 colleagues, and clearly that’s no longer feasible. The challenge is translating one’s leadership skills from being very visible and meeting most of your colleagues to one where you’re creating a culture rather than being in a position to physically meet all of them.

You’re listed as a founder of B&M Retail, even though it had previously existed. Is this because you inherently changed the way the store operates?

When we bought the company, it was a very localized business selling close-out inventory – what we call “clearance product” in the UK. The stores looked a little bit like jumble sales. They weren’t something that you’d be proud of. We put in a disciplined inventory model process, and in that sense, we consider ourselves as having founded the current format that exists and is being rolled out.

Your brother Bobby, who joined you in buying B&M, is the company’s Trading Director, and your brother Robin joined in 2008. Are there particular challenges in running a company with close family members?

There are challenges, but there are also great advantages as well. I take the view that the foundation of any team, be that a family member team or a team of professional managers, the foundation has to be trust. I’m fortunate that between myself and my brothers, one hundred percent absolute trust is a given. We trust each other to do the jobs that we’ve taken on for ourselves, and there is a very clear understanding of the delineation of responsibilities. I don’t second guess Bobby’s decisions, and vice versa. That’s also true with our youngest brother, Robin.

Had you always seen yourself as someone who would lead a company?

This brings me nicely to my stint at McKinsey, which I enjoyed tremendously and I see as being hugely instrumental in allowing me to develop as a business person. One of the things that jumps off the page from my CV is that I had three jobs in the first five years after graduating. My role at McKinsey was the one I enjoyed the most. The alarm bells did start ringing after the fourth or fifth year, though, that frankly I was probably too impatient to accept an orthodox career with any one large corporation within a sector such as banking or venture capital. I suppose what that’s saying is that, having experienced being a professional and working within large corporates, I realized that actually what I really wanted to do was work for myself and explore my entrepreneurial aspirations.

What qualities would you say have helped shape your career?

Impatience, I think, which translates into wanting to be the fastest-growing UK retailer – which hopefully we’re on our way to achieving. The other element I’d mention is that my wife says I have an excessive dose of paranoia. I spend my working day, and indeed my sleeping hours, worrying that something’s going to go wrong. I take the view that actually that can be quite healthy for a business: if you worry about what’s going to go wrong, hopefully you’ll put the fires out before they take hold, or you’ll see the pitfalls before you trip over them. I’m always thinking, “What is going to be the next growing pain?”

How did your time at McKinsey help prepare you for your subsequent career?

I have very fond memories of my time at McKinsey, and my time there was hugely influential. What sticks with me is the culture and how powerful it is, and how enjoyable it was to be part of. I think it’s wonderful that what is probably seen within the firm as being routine is something that I remember as being so very special. There’s a sense of camaraderie that exists when you’ve got bright people working for a common goal.

One thing that I took away was the importance of very clear, intellectual, sound strategic thinking, and also the equal importance of common sense. I was fortunate enough to work with some partners who, whilst wanting the intellectual rigor, also were very good at sitting back and just applying the common-sense test to what it is we were saying or thinking.

I also took away the idea of not immersing yourself with just the day-to-day, or what’s going to happen in the next six to 12 months, but really thinking about what the picture of your business and your sector is over the next five years.

At McKinsey, you work hard and everyone has very high expectations of the quality of each other’s work. That’s a good thing, and I absolutely have tried to bring a fraction of that to the businesses that I’ve run subsequently. Also, McKinsey is very much a meritocracy. If you’re capable of doing the job, you’re entrusted to do it. On one of the engagements I worked on, I mastered the material and the partner had the confidence in me to allow me to formally present a significant part of it to the board of the client, at the lowly age of 22 years old. I was honored to be entrusted with that responsibility, and in my own business, I have applied the ethos that if people are up to the job, you entrust them to get on with it without worrying too much about how many years’ service they’ve done or what their job title is.

Is there someone at McKinsey who you would consider your most influential mentor, and what was the best piece of advice they gave you?

One of the engagements I worked on was with Scott Nyquist, who at that time was a Partner in the energy practice. I had told him I was thinking of doing an MBA, and asked him if entrepreneurship is something that can be taught in business school. He shared with me that there is an elective at Harvard on entrepreneurship, and he summed up the elective in two or three sound bites – one of which was that timing is everything. In business, those who do well are those who understand where their businesses are in the cycle, and time correctly either their exit from or entry into that business. When I look at my own career in terms of getting the leg up from successfully exiting the first business and getting into the second business, a lot of it, I’m the first to accept, was about luck and timing. Scott’s words of advice were very much in my mind when thinking about those things.

How have you leveraged the alumni network over the years?

I have tried to keep in touch with some of my fellow analysts from 20 years ago. I sense a little bit of pride and a smile comes to my face every time I see a name in print from one of my contemporaries, be that somebody who’s gone into journalism or gone into business or fund management or lots of different sectors. It is always nice to see a name pop up from those times at McKinsey.

Who inspires you?

The most inspirational figure in my life is my late father. He came to the UK in the late ’60s as an immigrant from India pretty much with ten pounds in his pocket. He was a self-employed market trader – “markets” in the flea market sense of the word, not the City markets. It is a classic immigrant story in the sense that what money he made he spent on educating his kids. He also loved talking to his sons about business and commerce, and he filled us with ambition and self-confidence. When I think about everything I’ve done in business, a large part of it is just that it’s in my DNA.

Who else has influenced you?

I’ve been business partners with my younger brother, Bobby, for the last 20 years. There’s a Punjabi saying from our childhood that we both believe in: “one plus one equals eleven.” He has been shoulder to shoulder with me throughout my business career, and I do believe that we’ve both been more effective by virtue of that relationship.

What accomplishment either personal or professional are you most proud of?

The business went through its IPO in June of 2014 and in London, we have an electronic version of the ringing of the bell that you will all know from the TV screens in New York. It’s 8:00 in the morning. You’re on the balcony at the London Stock Exchange building. They’ve got large screens and a countdown to the moment that your shares are listed. I had the management team and my family around me and at that moment, it was a bit of a struggle to hold back the tears because we were very proud of the fact that the business had grown from 20 shops to being a listed business. I’m told it’s the largest-ever flotation of a retail business in the London Stock Exchange history, which was a nice little accomplishment. It was an emotional moment. It was a milestone that, when I’m retired, I’ll no doubt look back on with a lot of fondness.

What would your 20-year-old self think about what you’ve accomplished?

I’m the first to accept my brothers and I have been very lucky. We went into discount retailing just before an extended period of tough economic times – in other words, a good time to be a discount retailer. I’d like to think my 20-year-old self would have the wisdom to say, “Crikey, you landed on your feet there, guys. That was fortunate.”

Who and what is most important to you in your life?

I do believe it’s not a coincidence that a disproportionate number of very successful entrepreneurs have had the benefit of a very stable, supportive, long-term marriage or relationship or home life that’s allowed them to pursue their careers without the destruction of disconnects in their family life – so definitely my wife. Also, as I’ve mentioned, my two brothers. In terms of places, Delhi. I go back to India on a regular basis, and I have very fond memories of childhood holidays there. In the early days of our import business, it was in India that we started doing most of our importing, so I feel very connected to India. Another thing that’s important to me is an organization called YPO – Young Presidents Organization. It’s an American-based network of chief executives, and I have the pleasure and the honor of being Chairman of the chapter of YPO that is in the northwest of England. I’ve been in that network now for 12 years, and it’s been really valuable to me in terms of developing my leadership skills and my business interests generally.

What is the last book you read?

I read a lot of business leaders’ biographies or autobiographies. The last one I read is “A Bazaar Life,” by David Alliance. He’s an entrepreneur who came to the UK and in particular, Manchester, my hometown, in the 1960s. It was a fascinating read. I loved learning about his early days in Manchester building and running what became one of the world’s largest textile companies. It very much reminded me of my own late father’s experiences of arriving as a penniless immigrant in the northwest of England.

What are your interests outside the office?

I love traveling. My favorite place in the world is somewhere I’ve not been before, wherever that may be. It sounds like a cliché but in my study on the wall, there is a large, oversized map with little pins in it representing places that I’ve been to either by myself or with my family. By the time I’m 70, I would like to be looking at a wall filled with pins.

Do you have any words of wisdom that you would like to share either with alumni, current consultants or people who are thinking about joining McKinsey?

What I recall as being very special about my time in McKinsey is that I was surrounded by really bright people. I would encourage everyone who’s fortunate enough to be within the firm to just embrace that, because it is very special.

I also reflect on the fact that although it’s a professional services firm and my firm colleagues were highly motivated by client service, I did sense that a lot of the people I was working with were also entrepreneurial people and they were interested in the process of entrepreneurialism and building businesses. I remember very fondly long conversations about that subject and business growth. I think one of the biggest misconceptions that people outside consulting have about the profession is that it’s not entrepreneurial. I actually think it absolutely is entrepreneurial, and that people within McKinsey do think that way quite often.