Wednesday, October 4, 2006

The Swedish Crime Stoppers, Inc.

Currents' Fall issue 2006.

To many Americans, Sweden is more known for social security, than for stopping crime. But then we have Securitas, Inc., which around year 2000 became America’s largest private security company through a series of acquisitions orchestrated by Don Walker. He ran the U.S. security giant Pinkerton before it was picked up by the Swedes. Currents' editor Hans Sandberg interviewed him about Securitas in the U.S.

Don Walker started out working for the Federal Bureau of Investigations back in the 1960’s, but later left the FBI to set-up his own security programs, first at a bank in New York, then at a company in Cleveland, Ohio, and six years later he started a similar program for a company in Nashville, TN, which eventually was spun-off as a wholly-owned security company. With the help of investors, he bought out the company and sold it to Pinkerton in 1991, where he became executive vice president and chief operating officer (COO.) Today, Don Walker is chairman of Securitas in the U.S., and of it's daughter company, Pinkerton. Securitas’ American branch has about 100,000 employees and about 2.6 billion dollars in revenues.

How do you explain Securitas presence in the American market?
“When I was COO for Pinkerton, we analyzed the competition in the U.S. and the world, because we were expanding Pinkerton internationally. Securitas was a company we watched very closely – this was before 1999 – as it had made some significant acquisitions in Spain, Germany, France, and the Scandinavian countries.”
“It was obvious that the Securitas leadership had the ambition to be number one in Europe, and that it didn’t take much of a stretch of the imagination to think that they wanted to get into the American market, since it was the biggest security market in the world.”

What followed next was a set of meetings with key players in the industry to gage market facts and trends, and obtain general information about how to raise standards and develop the industry. It was during this process that the leadership of Pinkerton came to know the leadership of Securitas. “In 1998 we started to have serious discussions with them which culminated in the acquisition in early 1999,” he says.

One would think that the Americans would have the upper hand in the security business. How come it wasn’t Pinkerton that bought Securitas? And what did the Swedes bring to the table?
“When we saw what Securitas had accomplished, how they did it, and the stock market’s appreciation of what they had done, we realized that we could learn something from them. They had a model and a plan. It was fairly simple, easy to understand and easy to communicate. Even though we all like to think that we know more about our positions than anybody else, we understood that Securitas had taken a fresh look at security,” Don Walker explains.
“It was not an issue of pride, but of professionalism. This is a tedious business with lots of details, and Securitas simplified it with their model. That’s why they were able to do certain things in Europe, and we brought that model to the U.S.”

Could you say that they benefited from coming in with an outsider’s perspective?
“Yes, definitively. Most people tend to get buried in the details, no matter what the job is. Or sometimes people focus on doing the same things differently, but there was no need to do more of the same. Securitas and in particular Thomas Berglund, was a dreamer who could visualize what should be. He had a very broad and deep imagination, which incorporated the idea of taking a risk. As Thomas and Håkan Winberg developed the strategy, and presented it to the Securitas board, it became very clear to the board, and the U.S. market, that they were on the right track.”

Don Walker says that Thomas Berglund early on in the talks made clear that he didn’t want to create just another U.S. security company. He wanted to lead and change the industry, and knew that it took market size to do that.
“He asked if we could create the largest security company in the United States, and I said, absolutely. Then he asked to see our plans for how to do that, so I put forth a strategy of acquisitions that was consistent with Securitas’ plans. Securitas then acquired Pinkerton.”

Within a year, Securitas has bought up a large part of the private American security industry, including American Protective Services (APS,) First Security Services, Smith’s Security, Doyle’s Security, and Burns International Security, which was the second largest security company in the U.S.
“Before buying Burns, we had grown Securitas from a company with roughly 600 million dollars in U.S. sales, to a company doing about a 1.3 billion dollars. Burns added another 1.1 billion,” he says.

What is Securitas in the U.S. today? You fused a number of regional and local security companies with Pinkerton at the core?

What’s the difference between Securitas in the U.S. and in Europe?
“Well, it’s really a totally new company. When you take ten acquisitions with ten different cultures and mold those together, then you have to create a new culture.”
“It took a lot of hard work, but the Securitas model was a roadmap that made it easier.”

We had three objectives in mind and we accomplished them:

  1. Establish a clear market leadership in each region of the country, as well as in the U.S. as a whole.
  2. Create a large platform for organic growth.
  3. Achieve density and cost efficiency.
“We’ve achieved all three, so now we are in the process of refinement and transitioning from selling services to selling security solutions.”

When you had just packaged these changes, 9/11 happened? How did 9/11 change things? Has it affected growth and strategy?
“It changed things in certain regions in the U.S., obviously in Boston, New York, Washington, D.C., Chicago and other mayor cities east of the Mississippi River. It was a change in attitude and perspective, but I would not say that there has been much of a change in other parts of the country.”

It must have been hard to merge ten different corporate cultures, but how about the merging with a corporate culture that came from Sweden, with its labor laws and so on? Swedish companies entering the U.S. can have a hard time dealing with America itself, its size, complications and lawsuits. People sometimes think that the world is more globalized than it really is. How was it for Securitas in the U.S. to work with the Swedes and the original model?
“The Securitas management probably underestimated the legal system in the U.S. They believed that there were differences in every country, but I don’t think that they fully appreciated the legal system, and how litigious the U.S. environment can be. Neither did they always understand the extent to which the industry is the controlled by individual states. It was an educational process,” he says

One would think that security is a very local business where you need to get down to the nitty-gritty of things? How come then that we are getting global companies with models that you can transfer from China to the U.S. and so on?
“This has changed dramatically over the past few years. Smaller accounts and contracts are local, but major U.S. corporations – not so much European and Asian corporations with the exception of Toyota – are looking for global commonalities. We have been talking about this major shift as far back as 1999, and even before that. Globalization is real and security is part of that.”

Could one say that the Swedish background affects the relationship to labor?
“Training is definitively a benefit that we have received from the Swedish experience. Thomas Berglund has been so committed to the Securitas executive training program that he personally attended every session. That’s been a major time commitment. Through his example, everybody understood that we are not just talking about training, but that it is real. Securitas has been very supportive in encouraging new training programs, some of them from Sweden, some from Norway and other countries. This has been a benefit of this new corporate structure within Securitas. We have all benefited from each other’s experiences.

So training is not only for executives?
“No, it goes all the way down.”

Does that affect your ability to retain staff?
“There are several things, of which retention is one. It’s also that we are telling people that we care, and that there is a career path. People may start as a security officer, and work themselves up to a supervisor and security manager. We have several vice presidents that started as security officers.”

Securitas has a national footprint in the U.S. and is spreading out into consulting. Is that the wave of the future?
“Yes, consulting, investigations, and risk analysis. We are working with the energy industry, and the government, especially the federal government.”

Isn’t hard to work with the federal government when you are a foreign-owned company?
“We’ve addressed these issues by creating Pinkerton Government Services, which has an independent board of directors in the U.S., and is well received to handle top secret or cleared government contracts. But Securitas can handle many other contracts that don’t need to be cleared.”

Will Securitas U.S. experience help in your global expansion?
“We’ve already announced that we are expanding into new markets. We’ve just opened our first office in India, Pinkerton Investigation Services, and we’ve just opened our first office in China. We have a company in Argentina that is relatively new, and we are working on a company in Brazil. It’s a global expansion.”

What is your impression of working with Swedes?
“We’ve all been impressed by how hardworking and dedicated the Swedish management is, and how loyal they are to the company. Sometimes we’ve had concerns that our particular issues here were not as well understood as they should be, but then we had to step back, and say that maybe we didn’t do such a good job in explaining it. It’s an educational process, because people from different cultures have differences. It doesn’t matter who you are, or what country you are from. What is important is to have an open mind and work together. It’s been fine, a good relationship.”

Hans Sandberg