As gatekeeper of illycaffè, one of Italy’s most famous coffee brands, CEO Andrea Illy faces some intense competition. He tells Monocle how he has kept the company not just above water, but thriving.
When the topic of family-run companies comes up in conversation in Italy someone invariably brings up the well-known proverb that states the first generation creates, the second preserves and the third destroys. It’s an adage Andrea Illy is familiar with and one the 46-year-old CEO has successfully debunked as head of illycaffè, the coffee firm founded by his Hungarian grandfather in Trieste in 1933.
In charge of one of Italy’s most respected and recognised brands, Illy admits that people in his position face a special set of challenges compared to the average Fortune 500 boss. “As manager of a family business, you embody the brand, which in our case happens to be our last name,” says Illy, sitting in his wood-panelled corner office where on the wall in front of him hangs a portrait of his late father, Ernesto Illy. “You are the custodian of a heritage, a know-how that you are trying to preserve and pass on to the next generation.”
While the weight of responsibility is, at times, great for a family owner, Illy has learned over the years not to micromanage every detail. “That model has its limitations. We try to be a family-run business but without being patriarchal. We take the best from the family business model and combine it with the governance of a public company.”
His approach means that Illy places great trust in people who don’t share his surname to run an enterprise that now employs 800 people and has annual sales of nearly €300m. “Executing things isn’t simple, your colleagues need to be motivated and feel they are completely involved in, and share in, the project you’re envisioning.”
In place of an autocratic management style typically seen at family firms, Illy has opted to give greater autonomy to his executive team. “We made a monumental change last year and for the first time brought in someone from outside the family to take on the role of general manager – which used to be me – since I work the same number of hours as when I started 20 years ago, but the company has grown tenfold and is a 100 times more complex.”
One achievement of his that is not to be found on the company balance sheet is low turnover of staff. “We have two fundamental values everyone here shares: first, a passion for excellence and for things that are well-made; second, a sense that we are trying to build something that’s sustainable.” For Illy’s employees that means focusing on perfecting its premium blend of coffee, which despite the downturn has seen sales rise steadily: today six million shots of its espresso are downed daily at cafés worldwide.
It comes as no surprise that quality control supervisor was Illy’s first job when he was brought on board in 1990. He soon developed exacting protocols to ensure that high standards were met from bean to cup, an initiative that earned the food company ISO 9001 and 14001 certifications. Among the company’s rigorous controls is a sorting machine that uses a laser to analyse 200 beans a second in order to discard defects. “I say the numbers don’t interest me, it’s the quality,” adds Illy.
Touring the factory floor, Illy passes a wall inscribed with the ideal parameters for brewing espresso: 7g of coffee brewed for 30 seconds at 90C under 9 atms of pressure. The calculation comes from the book he co-authored in 1995, a year after becoming CEO. Appropriately titled Espresso Coffee: The Science of Quality, the exhaustive tome covers everything from the DNA of the coffee bean to the effects of caffeine.
Besides executive courses and his learning on the job, the bookish Illy frequents the management section of bookstores to scan for new releases. Although in favour of MBA programmes to prep would-be managers, Illy believes his scientific background (he holds a degree in chemistry) has given him a leg up when it comes to seeing the big picture in business. “In chemistry, it’s a systemic approach, A + B + C, the breakdown of steps to figure out how things interrelate.” It helped him spot the impact of global warming on commodities and led him, in the mid-1990s, to diversify the sources of the company’s beans: its arabica coffee today comes from 15 countries.
Still, Illy confesses some aspects of his work are not easily taught in the classroom of today’s business schools. “Running a family business is not like a public company with shareholders, it is not a profit machine: you are a stakeholder building something for the long run.”
1: What time do you like to be at your desk?
Generally, I’m in the office by 09.00. If my family is in Trieste, I leave by 20.00.
2: Where’s the best place to prepare for leadership – MBA school or on the job?
Both. The manager with only practical experience won’t work. An MBA gives you a boost and gives you a framework.
3: Describe your management style.
I’d call it visionary. I develop a plan and then my team carries this out.
4: Are tough decisions best taken by one person?
Generally, I think decisions should be discussed together by the team.
5: Do you want to be liked or respected?
Respected, but it shouldn’t be reverence. I think it’s important that there’s trust.
6: What does your support team look like?
I have a general manager with whom I have a close working relationship. He acts as co-ordinator and deals with the heads of department.
7: What technology do you carry on a trip?
MacBook Air running Windows, a BlackBerry 9300 and iPhone – we have an illy locator app to find cafés serving our coffee.
8: Do you read management books?
Yes. I browse bookstores whenever I am travelling for work.
9: Run in the morning? Wine with lunch? Socialise with your team after work?
I run 6km three times a week before work. No wine at lunch. If we have guests, I’ll serve Brunello from sister company Mastrojanni, but then drink two espressos.
10: What would your key management advice be?
We live in an unsustainable society. The business community needs to come up with new strategies.