Denis Hanrahan was once caricatured by an illustrator in a newspaper with a big mug of coffee in one hand and a cigarette in the other. His wife bought it for him. "I always go around with a big mug of coffee," he explains. And the cigarette? "Yes, I'm not politically correct," he confesses.

Well, he was once managing director of a cigarette manufacturer, P J Carroll & Co, so it was on the cards that he'd be a smoker. Does this mean that he's not an active sportsman? The tall, fair, athletic-looking businessman responds: "I'm a lapsed golfer." But he is leaving the next day to sail around the Mediterranean. So he sails? "No, it's too cold in Ireland for that. We're going on one of those big things, with air conditioning and everything . . ." Ah, a cruise.

But before that, the annual results of IDA Ireland are coming out and he's talking about how the State agency has fared under his guidance since 1993. People forget how appalling things were at the time he became chairman, he says. "The jobs crisis - nobody had any optimism it could be solved. Then two or three things happened, some fortuitous. The IDA made a decision in the 1980s about information technology industries, pharmaceuticals and healthcare that were right and came to fruition in the 1990s.

"We have been very lucky in that the American economy has had its longest period of boom. Focusing on foreign investment only, it meant you had only one thing to do. There was no confusion of objectives and we kind of held our feet to the fire. What the board did was set targets for the organisation, that it was pretty doubtful it could achieve. The organisation consistently achieved them and set higher targets and they were achieved.

"Raising the sights of the organisation was something people from the outside [board members] brought to the party - also a change of conventional wisdom, where we're moving away from body counts. The most important thing they [the board] has done by a mile is appointing two extremely good chief executives in a row. If you look at public companies, the number who have removed their chief executives in the past month - Procter & Gamble, Xerox . . .

"Appointing good chief executives is a very difficult task and the board can take credit for that. At one level, it's the most important thing a board does - or to recognise if it's wrong and remove that person."

In all discussions about his time with the IDA, Mr Hanrahan makes it quite clear that he does not believe the board should interfere in the running of any organisation. It's another reason why he keeps such a low profile, he says.

"The board has one role: the appointment of the chief executive, developing the philosophy and policies of the organisation and approving major projects, such as Intel.

"We do not get involved in managing the business and we do not interfere with the job of the management. That is an area that some semi-States have been plagued with - interference. We've followed best private sector practice and modelled ourselves on the various codes of practice for public companies."

"Body counts" is a phrase he likes to use in terms of employment. The IDA is not trying to put "bums on seats" anymore and he takes some credit for that change.

By about 1997, it was quite clear that the unemployment situation was going to be solved. "Since then we've been gradually moving for quality, rather than numbers. Intel is a classic example - right at the front in technology on the world front. If you accept we're no longer a low-cost country, then we have to move up the chain, people doing skilled work that will make them worth an Irish-type income."

He has pointed out in the last couple of years that industrial development has not spread anyway evenly geographically, with the preponderance of development in Dublin, which is why the IDA has targeted new regions for special attention.

"The regions and e-business have been very much our focus for the last 18 months." The new focus is on areas north of a line from Dundalk to Galway "and it's quite a hard sell. We've been at it pretty impressively for the last two-and-a-half years. Getting the Prudential Software Centre into Letterkenny was one of the most successful. We will get there, but it will take a couple more years and dogged persistence to achieve".

And while "the traditional thing of swapping money for jobs was right, it's so much more now about capabilities, education and the availability of telecommunications. It's a much different and a much softer sell. "Money is playing an increasingly less important role. People come here because the place is right, not because somebody offers them a few bob. Our job targets are lower for the coming year. Our major competitor agencies - the Scots, Northern Irish and Welsh - are still going after numbers. We would be ahead of them in our thinking."

He acknowledges that even in centres where the IDA has achieved great success, such as Dublin, Limerick and Cork, there are still employment blackspots, "more a social than economic issue", he believes.

So, does the IDA have a social conscience or responsibility in this area? "There are two major problems," he says. "The education system is failing a significant portion of the population. We all say `we have the best education system in the world, blah, blah . . .' just as we were told as children that we had the best climate in the world.

"There is a big problem in education and it's wider than education as far as socially-deprived people are concerned. A lot of money has been put at it and it hasn't worked. Something like 20 per cent of school-leavers have difficulty with things like using the phone book. There are pockets of deprivation. John Lonergan [the governor of Mountjoy Prison] says you can predict today who the residents of the prison will be in 20 years time. And they are living in three postal codes in Dublin.

"The IDA is willing to do its bit, but the options are limited. The difficulty is lack of skills. By definition, foreign investors are going for skills. If you want cheap labour, you go to Morocco or Poland. It's unrealistic to think that, until such time as people have work experience and up-skill themselves, they are realistic candidates to work in foreign companies."

Long-term unemployment, he believes, is "substantially cracked" at 2.1 per cent. He cites initiatives, such as the Microsoft one in Ballymun, which, in its first tranche, took 35 people, did a lot of pre-preparation and then qualified all of them with computer skills.

"I think the IDA can't do a huge amount. It's willing to play its part, but it's a much wider thing than saying `plonk jobs into areas of deprivation'," he says.

For a man who was at Castleknock College with Vincent Browne and at UCD with Henry Kelly and Dr Anthony Clare, Mr Hanrahan is a bit of a rebel himself.

None of his children followed him to the Vincentian school. "They all went to co-ed, nondenominational schools. I don't approve of single-sex, single-religion schools. In terms of developing people as people, these hot-houses may provide better results but I'm not sure they don't leave a trail of other issues behind them."

But then, he did put in a stint as secretary of the Union of Students in Ireland and was very involved in USI Travel. "It was then I realised my whole focus was commercial."

He was responsible for the restructuring of Aer Lingus's ancillary activities. "It was before the plane hit the mountain, but I observed the mountain looming large outside the window," he remarks.

He also restructured Carrolls. There was no future for a small cigarette company, anymore than for any small national company.

He was involved in the Culliton review which led to the split-up of what was then the IDA and Bord Trachtala into the IDA, Enterprise Ireland and Forfas. Now, he's been selling off IDA property in a further consolidation of its new role.

"For reasons that slightly escape me, the IDA had to get into developing buildings; outside Dublin there was no specific market for developing offices. When they got a tenant, they held on to it [the building] and played the business of longterm landlord. Nobody today could see the logic of the Government being the landlord of Microsoft."

Using the money it gets from selling off its properties, the IDA can develop new industrial estates in terms of facilities and infrastructure and private companies can do the construction. "We would only do it where the private sector won't. We offered existing premises to the tenants or to Irish Life, or whoever wants to hold that asset."

The future of the IDA is glowing, he thinks. "We're the model," he says proudly. The other week it was the Maltese and Newfoundlanders who came over here to see how it was done.

"We're ahead of the curve, to use that jargon. We were into call services, shared services. The IDA has tended to be ahead of most development agencies in this part of the developed world and to be recognised by its peer group as being so.

"Part of the reason is that it's a specialist organisation. People work here as a career. They are economic development professionals. We're chasing certain types of industries and we just ignore unsuitable ones. Again, having been fairly successful, we don't have to chase every marginal last one."