DEREK OATWAY INTERVIEW ‘Our Model is Professional Service with Integrity’
‘Our Model is Professional Service with Integrity’
Mr. DEREK OATWAY is Group Chairman of KK Security Group and a founding father of the company in its eastern African form. He was interviewed by EA Flyer Contributing Editor (Science & Technology) WYCLIFFE MUGA. Resolutely unarmed and with no intention of using firearms in the near future, KK Security nonetheless lands the most demanding, innovative and lucrative contracts in the sector throughout the region. How do they do it? Excerpts of a great conversation:
EA FLYER:I understand you were previously a senior executive in an insurance company before you started KK. So could you start from there and say here I was at, was it ALICO?!
OATWAY: Yes. I’m an insurance man by profession. I had been with AIG for 35 years and I started my association with them in Bermuda. From there, we moved to Delaware, USA, and then to London, then to Beirut and to Cyprus. From there we went back to Delaware as the Executive Vice President. In 1985, I started a new company for AIG in Indonesia and in 1989, we came here to run the ALICO operations in Kenya. Three years later, I retired from AIG and since I felt I knew something about the Kenyan market, saw opportunities, and I decided to stay. I started to work with Kenya Equity, a USAID funded venture capital concern, and then a few friends introduced me to KK Guards as it was known.
Q: It existed before you took it over?
A: Yes. It existed for about 22 years. It was started by a retired Irish policeman named Hugh McGovern and his wife as a cleaning company in Mombasa and then went into the guard business. Initially, when I was with ALICO, we had a small venture capital fund that we were trying to develop and KK Guards had come up as a possible candidate for an investment. It was one-man-band then and we didn’t feel totally comfortable with that because there might be skeletons in the closet. One of the proponents of that proposition was Howard Crooks and he understood our reservations. So he arranged to hire an ex-employee of his by the name of John Larimore to go to work for McGovern for a year and to learn about the business.
After I left ALICO, he suggested that we might look at it as individuals and since he had Larimore there, we had far more confidence in the operation than we had there before.
So we decided to buy it as an investment to see what we could do with it. Mombasa was not a very big market, so decided to take it expand throughout the country and regionally. We into that exercise was to establish training teams and we fortunately found a guy who was interested in training: an ex-British major. He was charged with recruiting trainers and we recruited three ex-British military and one Canadian to establish new kits for the training teams. We put up teams of one expert and two Kenyan trainers and then we went and started to train tea estates in Eldoret, Kericho and others.
Q: At this point you are still a Mombasa-based company or had you moved?
A: We were still in Mombasa. So we were running the domestic operations and then starting to run training operations.
Q: You lived at the Coast at this time?
A: Well, I still lived in Nairobi but we would go back and forth, although my wife wasn’t very pleased about that, that’s the way it was.
Q: With hindsight, was that a gamble or did you more or less know what you were doing? Was there any way you could have seen back then that the security industry would grow the way it has?
A: Well, we knew that the security industry had been stagnant for many years. We thought that if we brought something into the industry that hadn’t been there before, we would have a competitive advantage. That was professional training. We believed that well trained and motivated security officers could make a difference to the industry.
Q: What year was this?
A: We bought the company on December 31st 1992 and by late ’93, the training teams had begun to move upcountry. The tea estates had lots of watchmen who had never been trained. It was a new experience for them. Over a period of several weeks, the entire body of guards were put through a specially designed training program. Moral and performance improved tremendously and the tea estate owners said ‘hey, this has value’. The men now knew what they and to do, why they had to do it, and how to function as a team. So, that was the encouraging element.
Q: That was your first reaching out beyond Mombasa and doing something?
Q: OK. What came next after that?
A: Next came Rwanda. In September 1994, not long after the Rwandan Genocide had ended, the UN and NGOs were going in and they needed security. Howard Crooks, who was the chairman at the time, insisted that KK should be there on the ground to provide this security service. So, we then took two of our experienced trainers and posted them there to start an operation. They set up an office and began selecting, recruiting and training a local guard force of Rwandese.
Q: Just to put this into perspective, your guards in Rwanda?
Q: What was Rwanda like at the time?
A: The first time we went there was in late September. There was no one there. We drove from Kampala and crossed the border. It was absolutely still! There wasn’t a living thing, not even a bird. We went back again in November and we could see the first signs of life returning. Gradually, the population drifted back to their original locations
Q: So you went in more or less immediately after the killings stopped just as the UN was moving in?
A: Yes. Just to see what was happening. Once we were sure some sort of stability was present, we started the operations and as more and more NGOs came in, the demand for security increased. The guard force grew rapidly and the operations were quite successful.
Q: OK. So here you have a company that has moved beyond its initial Mombasa operations to training all over Kenya and then going to Rwanda. What about staff, what did that mean? How many people did you have on your staff by then?
A: When we bought the company, the guard force was about 600 men along with and admin staff of about 30. It was one of the largest companies in Mombasa back then. As we got into training, more expatriate staff and Kenyan were added. With the development of the operations in Rwanda, several of our Kenyan staff were moved to Kigali. As the guard force there grew, we probably reached a total complement of 1000.
And then in 1995, we started operations in Uganda.
Q: May I ask something at this point about Uganda. A country like Uganda, already had security companies. What does it take to get established in a country when you first begin? What was your strategy, what did you do?
A: Well, initially you start off by obtaining the right licenses and permits. It takes time and lots of patience. But there was another problem we met in Uganda. All the existing security companies were armed and we were not armed; we don’t deal with arms. We said, ‘OK, fine, we’ll be here but we’ll not do arms. We’ll provide security services, we’ll train guys who know how to handle all sorts of situations and we’ll use armed police as our backup’
Q: But isn’t that tying your hands behind your back if everyone else is using them?
A: No it isn’t. We believe in doing things professionally. So unless you have professional firearm trainers who can instruct guards on the correct use and maintenance of firearms and provide regular refresher training, don’t do arms. .That’s not the way things are done in Uganda . Up to this day, we are the only company that doesn’t have guns in Uganda and we still have a lot of clients.
Q: Explain that then. Imagine I’m your client. You come up to me and say ‘This is our service’, and I tell you ‘Yes, I’ve always wanted to have someone with a gun at my gate’, and you tell me, ‘Sorry we don’t do guns’. How are you going to convince me that I am still safe with everyone else having a gun?
A: As I mentioned earlier, we have armed police in our response vehicles. If there is an incident which requires arms, the police will provide that element. If you look at any OB [Occurrence Book] in a Ugandan police station, most entries are going to be about a firearm being discharged by guards, either accidentally or intentionally. The client is more at risk with an untrained individual with a gun on his property.
Now the Diplomatic Corps don’t want guns. The major hotels like the Serena and Sheraton don’t have guns. They understand that without firearms, the environment is much more friendly. And now the Inspector General of Police has also come out saying no more guns.
Q: Ok. So what you are saying is the same policy you had used in Kenya, with a focus on professionalism, that’s what led you to oppose the idea of your guards having guns?
Q: And what worked in Kenya worked in Uganda as well?
Q: And you have never found yourself at a disadvantage because your people don’t have guns?
A: No. because we use our the response teams which have armed police on board if needed.
Q: Ok, so what came after this?
Then we opened a sales office in Nairobi in early 1995. We started with two marketers, one ex-policeman and one ex-military, and we got the East African Breweries Contract. That was our first major contract outside of Mombasa.
Q: But you bid for it as a Mombasa-based company?
A: We bid for it as a Kenyan company. And in 1996, we bid for the US Embassy contract in Nairobi.
Q: I imagine that’s a big contract.
A: A very big contract. But it was our first attempt to bid for such a large contract. We lost it to an American company, UIIS (United International Investigative Services). UIIS had a problem securing certain licenses for their alarm transmission. So we offered to provided the alarms infrastructure for them. This partnership proved very valuable as we learned how to run an embassy contract. The contract was for five years. They won a renewal but no longer needed our assistance. But then, a little over two years later, they withdrew, and we took it over and we’ve been there ever since.
Q: If this isn’t a trade secret, big contracts like the EABL and the US Embassy, everyone in the security business would want this. What would you say was your edge? What gave you an advantage over your competition?
A: Well, we take such contracts very seriously. We believe they can only be run professionally when you assign a professional project manager to run them.
Q: Surely, all the other companies can hire a dedicated expert as well?
A: Yes, but we have a unique and rigorous training program which can provide trained security officers with whom the professional can work.
Q: So you are saying that it’s the focus on professionalism. When you started all those years ago in Mombasa, this is what was getting you all these extra contracts and all this extra work?
Q: So that’s really the heart of the security business? People want to deal with professional service?
A: People want to deal with professional companies and our model is service with integrity: we don’t bribe, we don’t accept bribes and we don’t give bribes. And there are quite a lot of people who want to deal with a company like that.
Q: So, looking back then, it means what you made was the right strategic decision. If you are going to offer a security service, there should be no question of anyone doubting whether there is integrity in your employees, in the whole setup. They need to be sure that, in this one crucial thing which – who knows – might cost me my life, I want to deal with people who know what they are doing and who I can trust. Is that more or less what it boils down to?
A: Yes. That’s it. The client looks at what you are offering, he looks at your experience, he looks at how professional you are and he makes his decision.
Q: Once you’ve said that the only clients you deal with are those who valued what you had to offer, which is professionalism and integrity, I think that says it all.
So then, even with all the things you had going for you, people would always be interested. No one believes that anyone can be so lucky that everything just goes up and up. What was a low point for KK Security? To give you an example, one of your rival companies, there is a time when there was barely a week when one of their cash-in-transit vans was not involved in a robbery, which was obviously planned from within. That must have been a terrible time for them. I know nothing of that sort has applied to KK, but you can’t be so lucky that you didn’t have some bad times?
A: Of course there were bad times. Whenever you take over an operation, one always tends to underestimate the resources that you are going to need. The previous owners had a very unique way of accounting. So, as a consequence, there was quite a discrepancy between what the books showed should be in the bank and what exactly was in the bank. So we found the issue of cash flow to be quite a challenge.
And then, of course, being new kids on the block, we were trying to do everything by the book and suddenly we had problems with the Kenya Revenue Authority, we had problems with the NHIF and all these issues were attracting penalties and they became quite a financial issue.
Q: But you had your guy there for a year before. Surely he saw all these things?
A: He saw them but he didn’t quite appreciate the impact of them because he wasn’t a financial man. So cash flow wasn’t that be an issue for him, but it was a very big issue as far as we were concerned. And then there was the case of a previous cash-in-transit incident that had happened at the African Safari Club many years earlier which we didn’t know about. That was really disturbing. But, fortunately, it became time-barred and we escaped.
So, even though we had some insider information, we were not prepared for all these skeletons that came out of the closet.
Q: Isn’t it strange, there you are saying, ‘Let’s have someone in there who will keep an eye so that we know exactly what we are getting into’, and still you find you didn’t really know what you were getting into?
A: Well, since then we’ve bought many companies. But now, we use only professional companies to do the ‘due diligence’ Even then, we still have the occasional surprise. But we have to keep on pushing.
Q: OK. At a personal level, was there ever a point where you said to yourself, ‘Why on earth did I ever get into this?’ When things seem to be going wrong and flying off the handle?
A: No, I don’t think so. You take on something you’ve got to finish it.
Q: It doesn’t prevent you from feeling some despair sometimes?
A: Of course you have bad days and you are grateful for a Whitecap at the end of the day ……or two. But then you can suck it up and move on. But we always knew that we were on to something.
Q: Yes. That was what kept you going. You knew that even with all these problems there is potential here. And, of course, in the long run, your insights were vindicated by what came later. OK, so, what was the point where you felt …well, in biblical terms, it would be when you are on top of the mountain and you can see the Promised Land? What was the point where you said to yourself, ‘Aha, I knew it, I knew it, here it is’?
A: Well, I don’t think we have reached that point.
Q: No? Even with all this growth? There must have been a point where instead of a Tusker, you took a glass of champagne.
A: Obviously getting the embassy contract was a milestone. That was a game-changer because we started from a small company to a serious company.
Q: In terms of perception or turn-over or what?
A: In terms of perception and, to a certain degree, turn-over. But it was the significance of that contract vis-à-vis anything else we had before – and its impact on the market. After all, the US Embassy contracts only go to companies who have the professional credentials to perform.
Q: True, it says a great deal.
A: So, that, in fact, was a game changer and that happened in 03.
Q: And did you pursue it with a plan to have a game changer in mind or was it just the business which came along at that time? Was it your strategic goal?
A: Well, as mentioned earlier, we had bid for it in ‘96 and again in ’01 when we got a little closer. But then they ran into problems in ’03 and we were called in by the embassy to take over the contract. So we had our nose under the tent, if you like.
Q: So you just had to wriggle your head in, next your shoulders and before they knew it, you were right in there?
A: Yes. We had made our presence felt. They felt we had become a serious player in the market and invited us to tender. They gave us a shot and we made the most of it.
Q: So, essentially, they were looking for a First World security service, so to speak, right here in Kenya?
A: Yes, they did not have much time to fill the void when UIIS left. And there were not many companies who would take the chance for the remaining contract period without having some assurance that they would be granted the next contract extension. We took the chance and it has worked out well, for both parties, we believe.
Q: And yet you would have invested so heavily?
A: Exactly. So it was a gamble, but our relationships were good and we were successful when the bid finally came out for a five-year contract in 2006.
Q: OK. Now that was a game-changer. Was there any other, maybe not a total game changer like that, but something which reinforced the idea that you were no longer a small company?
A: Well, the success of the operations in Rwanda generated funds for expansion. Tanzania was the next adventure. Initially, we started providing security for the mining areas in the west of the county out of Mwanza. Then we bought a company in Arusha known as Security Express. And eventually we entered the Dar market where we currently have our TZ headquarters.
Q: So, looking forward now, what is there that you have not done which you particularly hope to do? There’s a compelling vision which has brought you this far. Where does the vision lead from this point onwards?
A: First of all, we now have U.S. embassy contracts in Nairobi, Dar-es-Salaam, and Kigali. We hope to get others. Running an embassy contract requires a very special effort and we have dedicated professionals who know just how to do that. From a PR point of view, it’s electric because any incoming business, be they American, British or European, checks out which company is providing security for the US embassy. That gives KK an edge.
So we look to expand our embassy penetration and that brings in other embassies. The British High Commissions, the Swedish embassies and other major embassies in East Africa are looking for professional security providers. And we want to be their company of choice.
And now we have new opportunities created by the entry of Oil and Gas companies. We expect this to be the next big market expansion.
Q: Could you explain that a little more?
A: Well, the oil and gas companies will be coming in for explorations. They’ll need catering, they’ll need security, they’ll need all the logistical support and we’ll be able to provide them.
Q: Aha. Now that’s where I’m curious about something. Surely, you’ll need guns this time?
Q: Turkana is awash with AK-47s! You must know that.
A: Well, we’ll work the situation out. If we have to have guns, we will either use domestic Kenyan forces for support or we’ll have to get professionals. We’ll make that assessment. But, there are still a lot of things which you can do with electronics that can obviate the need for guns. That may be a challenge for us, but if we have to go for guns, we’ll have trained professionals.
But, logistically, all these O&G operations are going to need support. All they want to do is to look for oil, whether it is on land or at sea. But they still need catering, they will still need laundry services, they will still need all the peripherals required for operations. So that’s the next big thing.
Q: And has it ever occurred to you that, for an opportunity like that, an international company much bigger than yours might say ‘US Embassy was nice, and the other embassies were nice, but if there is oil, there is no way we are letting KK eat that cake by themselves’?
A: Of course not. We do expect many competitors. But they will need local input and guidance. We will form joint ventures using each partner’s expertise to deliver that which is required. That is how we can establish ourselves as a major player.
Q: I would say that the broad trend in the whole region is towards a level playing field. We are moving away from the days when decisions were made purely at the individual and person level to where you have to have committees; to where you have to justify to the public why you made the decision you made; whether the public is your shareholders, or whether that public is the voting public. . .
So increasingly, in many ways you were ahead of your time when you started, but the rest of the country is catching up with the same ideas – that if this is the service you are offering, you better offer it in the most professional and committed way possible. People want to be sure of that– I’ll give you a small example. Increasingly now, people will take their cars to garages where the service is actually done professionally because they know, you take your car to the Jua Kali round the corner, he may even make your car seem OK, but will he resist replacing some small part and putting in something else which will take you for the next two, three weeks then you are back with him? So you want a situation where you take away that temptation. You know whom you are dealing with and when you go to sleep you know they are going to do what they are supposed to do.
A: Yes, we recognize that.
Q: Well, you recognized that way before a lot of people. Because, when you first started, the way business was done in Kenya was, ‘I know this guy’ and a lot of things were done under the table. There is a lot of that still happening, but not so much.
A: Yes, we have to be ever vigilant. Even in our recruiting process, we began hearing stories about how much it was costing to join KK! So we had to change the vetting program. Now applicants are initially vetted for height and weight and health and all that. But before they are actually allowed to join the training program, they are vetted by a panel of three staff members, which is headed by a senior executive. I head one, James Omwando, the CEO, heads one and so on. And that is how we stopped that. So it doesn’t make any difference how much you pay because it’s not going to help you. The word is out there now, so no one pays anymore.
Q: It only takes half a handful of people who paid to get in and then the whole system just crumbles.
A: That’s right, and it’s a very tempting offer.
Q: It is, especially with the levels of unemployment we have now.
A: So that’s how you prevent that. It means that every week, three executives are going to have to spend the afternoon interviewing people and selecting the right types to join KK.
Q: Which ideally you shouldn’t even have to get involved, but it’s the only thing which works?
A: It’s the only way to stop it and we’ve been doing that for almost three years.
Q: And these are the same systems that you have in Rwanda, Uganda and everywhere else?
A: Yes, to a large extent.
Q: So that the person who gets a job knows they are qualified for it and in a way also will value and respect it?
A: Yes. And having gotten through that stage – that’s only Stage One – then they have to pass the training program and it’s a pass or fail. 70% do but 30% don’t. But when the guy finishes, at the pass-out parade, a few things have happened. He is a changed individual. This guy believes in himself now because he’s has knowledge and that has given him power. He’s a totally different fellow than when he came in two weeks earlier –particularly his self-belief. And when we give out their certificates every week, we look them in the eye and they look us in the eye and you can see whether the guy believes. All the guys I see believe and they are proud and that new self respect they have in themselves is invaluable. That deters them from temptation; it makes them want to be part of a team and it gives a guy self-worth and that’s very important.
Q: Yes, I agree completely – especially when you are dealing with security. Not only the temptations as you say, but people’s lives may be at stake, depending on the situation.
A: Right. So when we start with a guy who had no skills before, and two weeks later, he can do CPR (cardiopulmonary resuscitation); he can bandage your arm; he can stop your bleeding; he can put out your fire; he can take you to the ambulance; he can do things he had no idea he could do. He is valuable to himself and to his community. He’s got skill levels that he didn’t have before and he appreciates that.
Q: Tell me one thing, you mentioned fire. There’s something I’ve always wondered. If I’m not subscribed to your fire engine service and my house catches fire, is it that this is just a lesson I should learn and next time I should subscribe or do you rush toward any fire so long as it is in the range? I’ve seen KK trucks helping put out fires in the oddest places, so I wonder if all these people are subscribing to your service.
A: It depends. Some large clients require a fire engine for an employee concentration like the UN. That vehicle might respond to a nearby emergency gratis. In the industrial area, where there could be a significant exposure to a chemical fire, several companies may join together to secure a vehicle for their common protection. If there is a fire in the immediate area, we’ve got to put it out. Similarly, when there is a major fire in a high rise, and we have the only vehicle with a long enough ladder, we volunteer.
Q: And, in any case, that’s where the risk is higher. That’s why they are investing in it – because they know the risk is there.
A: Yeah. If you get a major fire in the industrial area, a lot of people are going to suffer. The worth of those vehicles is not being fully appreciated by the insurance companies and the community at large because it’s a major saving, a major deterrent and it should be supported more by the insurance industry with lower premiums.
Q: It’s a new idea. Once again, you are a little ahead of the curve but I think we’ll eventually catch up.
A: And everything we do in this market, we know we have about a six-month lead time before it’s copied, but it’s OK.
Q: That’s in any industry, actually. So, looking back, is there anything you would do differently? Something which you said, ‘This made sense at the time, but, looking back, I think maybe we should have gone about it differently’?
A: We initially had our own vehicle service unit, we had our own garage.
Q: How many vehicles?
A: In those days in Mombasa we had about 12 or 13 vehicles and bikes. The next thing we know, the garage is also doing commercial work! So we contracted it to the guy who was running it and he ran it for a number of years.
Initially, when we bought the company, we had dogs. But they were the wrong type of dogs. They were not professional dogs. So, we got out of the dog business. When we acquired EARS, they had already started the professional dog program with about 30 dogs. Now we’ve got about 400.
Q: 400 dogs all over East and Central Africa?
A: Well, 500 all over. Each location has its own professional dog master. We feed them on a special diet, we bred them, we have our own vet who checks on them. They are expensive animals. It’s a big business and you’ve got to have people who love dogs.
Q: True. Dogs can in some sense read people in a way that humans can’t. A dog knows when you are scared of him, knows when you want to harm him, even if you think you are just sitting there quietly.
A: And that’s very true. When you take a security officer and he says ‘I want to be a dog handler’, the relationship between him and the dog is very telling. He either has it or he doesn’t. If he doesn’t, that’s the end of the story.
Q: Now, in the US, when you look at a residential house, it’s almost all electronic security. A bank might have a guard, but you barely ever see a guard outside anyone’s home.
Q: So, are we heading there and, if so, all these highly-skilled guards you have invested in, would they be redundant, or is that so many miles away that it’s not an issue at this point?
A: Well it’s all going to come down to the police force. In the US, your electronic device is attached to either a police station or to a control room which is connected to the police station. On activation, they call the police and the police respond. They don’t respond themselves.
Q: I agree, but the basic problem here is that Kenya is still a poor country, Even if we had a police force which had a greater level of professionalism, the levels of poverty in this country are such that crime levels are very high, which keeps them fully occupied. If we had twice the size of police force we have and they in turn had twice the number of cars, or even three times, they still wouldn’t be enough, and . . . it’s not just that when you have massive poverty you have massive crime. Crime itself is getting more sophisticated. Like I don’t think anyone in one of the embassies you look after is scared that people will steal things. What they are afraid of is that a mad man will come and try to blow the place up. That has got nothing to do with poverty. But that will usually be beyond the skills of the sort of police force that we are talking about who go round in cars and so on.
A: Any violation of your space is intolerable; that disturbs people. So these people need comfort in knowing that somebody is looking after their interests 24 hours a day. If they have a flat tyre on the road, we are going to fix it, if they have any accident, we are going to be there; we are going to take care of them. And that’s what our objective is: to make them feel as safe and comfortable as we possibly can.
Q: So that they can focus on the work which brought them here . . .
A: Exactly. And leave this country feeling, ‘Wow, I had a great time in Kenya’.