MBS Events
James Palumbo - The Palumbo Affair
In conversation with Mark Hollingsworth,
Thu October 25, 2001
| The Fine Art Society, London
The Fine Arts Society is an unusually refined venue for a chat with James Palumbo, owner of the hip nightclub Ministry of Sound which pioneered cutting edge dance music. Palumbo may be an Old Etonian and product of a privileged upbringing, but he long ago rejected his family roots and is virtually addicted to his company which is now an international youth brand. “I only care about my business”, he told me. He does not court publicity and very rarely gives interviews. So it is a treat to be given an audience with the Prime Minister of Sound who revealed some of his unorthodox management methods and a surprisingly cautious business strategy:
“I wanted to piss my parents off in the most offensive way and make more money than them”, says Palumbo when I ask him why he invested £250,000 of his own money into an untried nightclub in 1991. “I was ejected from my family home when I was 20, so I may have been motivated by revenge against my father. I knew nothing about nightclubs and I was like a lot of City traders who invested in nightclubs and wine bars mainly to get laid. But I knew the guys who set it up really well and all my instincts told me it would work out”.
The Ministry of Sound may now be a highly successful brand business with a turnover of £120 million incorporating CDs, radio stations, tours and internet. But at the beginning it was a drug-infested, violence-ridden, financial disaster. A year after its launch, bankruptcy was looming. The main problem was drug-dealing by the doormen. “I fought a very scary battle against the south London drug barons”, recalled Palumbo. “My door team was run by two brothers. One had been in prison for armed robbery and the other for hitting a policeman over the head with a crow bar. To get them out, I had to get the whole club wired up to prove to the police irrefutably that drug-dealing was going on”.
After confronting the drug barons, Palumbo consulted a management psychoanalyst and was immediately converted. “I am a big supporter of using his techniques in management and that psychoanalyst has come to my business every week for the past eight years. Before I didn’t think about how I managed people and negotiations. Now every time someone comes up my stairs, there is a right and wrong way of talking to them”.
Why not use outside, objective consultants? I asked. “This guy (the psychoanalyst) has circumvented consultants”, he replied. “If you are completely open and clear and direct with people, I find 90 per cent of problems can be resolved by talking them through. I think consultants prey on a company’s insecurity and now I don’t need them so much”.
Unusually, Palumbo also draws on military tactics. “I give a lot of my executives the book ‘The Art of War’ by Tsan Su which has really influenced me”, he says. “It’s all about Chinese military tactics : when to be inscrutable, when to advance or pretend to be weak or strong. It’s a menu of how to conduct military campaigns which I apply to meetings and negotiations. But it takes years for its lessons to sink in. So it’s really funny because after reading the book, some of my executives apply the wrong military tactics and so they prolong negotiations rather than finish them. But I’m a great believer in Chinese war philosophy. One of the lessons is that you need to let people make mistakes, whereas before I would have jumped on them”.
And yet Palumbo retains a ruthless streak. When asked about Jack Welch, former CEO of GE and his policy of regularly purging 10 per cent of his company, he immediately agreed. “I think Jack Welch is absolutely right”, he replied. “Tomorrow I’m going to fire 17 per cent of my workforce. One of them is my senior operations guy who has been with me for nine years. He will be traumatised but he has not grown in the past three years. We have tried to help him and sent him on courses but he is stuck. You have to cull the weakest. We’re also sacking our whole internal PR team because they’re not quite good enough”.
Despite being head of a multi-cultural youth corporation, Palumbo has doubts about the commercial value of brands. “My marketing director, Mark Rodol, who has fantastic taste, thinks the brand counts for a lot”, he says. “But I am more sceptical. I think it’s a lot more to do with being content…We have done very little marketing. We’ve never had the money so we’ve done stunts like beaming rude messages about the Royal Family near Buckingham Palace or bidding for the Royal Yacht Britannia to turn it into a disco”.
Some bankers have criticised Palumbo for not borrowing more and expanding his business, but he is surpisingly conservative. “I have a horror of debt”, he says. “I don’t believe in borrowing and I would rather my business be half the size than be in debt. Also, Ministry of Sound is still relatively small and so we are very careful and won’t execute a project unless we are 90 per cent sure of getting it right”.
One of the many paradoxes of James Palumbo is his lack of passion for his own product. He is a fan of traditional English classical composers like Vaughan Williams and Edward Elgar. “Dance music has a certain repetitive quality”, he says. “But intellectually it is clearly not as interesting as Benjamin Brittan. I don’t dislike it but I just can’t bring myself to listen to it”
Like many tycoons, Palumbo is driven, committed and dedicated to his own business and he admits he lacks balance in his life. “I feel very guilty”, he said when asked about children. “I have a son who is ten years old and I absolutely adore him but I’m not a good father. In the summer holidays I only saw him for two days and a few weekends. It’s because I have to be alert in my business, running up and down the battle lines. My son may well resent me later in life. On the other hand, I support my family, I am dedicated to his welfare and pay his school fees. But I admit that I don’t have that balance quite right in my life”.
Do you think that you will ever get that balance right ?
“I don’t know. I must confess that I go through phases when I want to sell the whole of my business and I am going through one of those periods now”.
At 38, James Palumbo has the potential to be the next Sir Richard Branson (a comparison he does not welcome) or the next Rupert Murdoch (whom he admires). Whether he will acheive that goal, only time will tell.
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