George Tamke, Clayton Dubilier & Rice

When Clayton Dubilier first invested in Kinko's in 1996, what was the game plan?
The game plan that originally gets laid out is never the one that ultimately gets executed. We started out focusing on what was traditionally Kinko's heritage ? the individual and the small enterprise. Its presence was strong on the college campuses. At that time, the products and services were fundamentally around black-and-white copies. The thought was that we would be able to leverage what had been done while improving on the economies of scale. We really didn't have the proliferation of low-cost, colour home printers. Now, instead of going to Kinko's for small volume jobs, people just do it at home.

What was your first big challenge?
Our first task was to bring together about 126 regional entities. While they may have offered primarily the same copying services, what was in the stores, how the stores were laid out and what additional products and services were provided was really left up to each of the 126 original partners. Any strength, taken to an extreme, becomes a weakness. We were dealing with these very entrepreneurial people who were used to running their businesses the way they thought was right. When a major capital decision was to be made, every one of these guys had to get around the table and decide whether or not to do it.

The first couple of years were spent just trying to behave like an entity, so that if you went into a store in LA versus one in New York, you would be able to get the same products and services with consistent quality. Let me tell you – that was a very difficult task. But we worked hard on best practices and we dramatically improved the profitability of the business and were getting good marks from a customer satisfaction point of view.

How did your focus on larger customers evolve?
We started going into large corporate accounts and saying, ?Let us help you analyse your print costs?. We were able to demonstrate to these large accounts savings in the range of 15 percent to 25 percent. Through the end of this most recent fourth quarter, we were able to grow our large-account corporate business by 20 percent. Had we not broadened our base to go after the corporate accounts and come up with what we think is a sustainable competitive advantage, it would be a very, very different story.

Is it normal for a Clayton Dubilier principal to completely take over the operations of a portfolio company?
Kinko's is very typical of a Clayton Dubilier investment. In the very early stages, one of the CD&R operating partners becomes the CEO of the business. You really get your arms around what's going on. You meet the people, you meet the customers, and you have a great understanding of what the issues and challenges are. And then the objective for the operating partner is to replace himself with a world-class CEO that he can work with, and you revert to the chairman's role.

After I recruited the current CEO, Gary Kusin, I spent an enormous amount of time with him. I was able to bring to the table an informed view as to what was going on. I think Gary would say that having me as a sounding board was extremely beneficial to him and something that he had never had before. We could agree to disagree, but at least we had the debate. He recognised that value, and took advantage of it.

Speaking of world-class operators, what role does former General Electric CEO Jack Welch play at your firm?

Three times a year, we review our portfolio companies, where the CEO, working with the operating partner, will decide on what the issue of the day is. Jack sits in on those meetings and obviously has tremendous insight in terms of the things you need to worry about and think about. The other way we use Jack is that before we bring any new investment to the full firm, we have a screening committee, which is a subset of the firm made up of operating and financial partners who play the devil's advocate role. They look for all the warts. Jack sits in on those and plays a very active role. With Jack, we try to take advantage of all the experiences he's garnered over the years.

I'm guessing that when it comes to pointing out warts, Jack Welch isn't demure?
That bone doesn't exist in his body. Let me put it this way, when Jack speaks, there's no question in your mind about what the hell he means.