Friday, 14 March 2014

Tony Benn, on giving enterprise a bad name

...despite the fact we have been told we are an entrepreneurial society, this is a country today that has an utter contempt for skill. You talk to people who dig coal, run trains, doctors, nurses, dentists, tool-makers – nobody in Britain is interested in them! The whole of the so-called entrepreneurial society has focused on the City news we get in every bulletin, telling us what has happened to the Pound Sterling, to three points of decimals, against a basket of European currencies. Skill is what built this country’s strength, and it is treated with contempt!
The late Tony Benn. These lines were rebroadcast on BBC Radio 4's Today programme after his death was announced this morning. He may have had a point.

In the light of Benn's words, consider Simon Jack's interview with 'itinerant CEO' Tim Parker, currently head honcho at luggage company Samsonite, for the  Today Programme's "Friday Boss" slot. The telling phrase here is 'I'm not an expert in anything particularly. I'm a general businessman, so I rely on a good team of people', which makes me suspect that the 'good team of [skilled] people' below him have more to to do with the success of the company than the highly-paid chief executive (that 'good team' probably includes the poor sods at the coalface, not just the ones in the management's top team, the only staff collectively name-checked by Tim Parker):
SJ: You've worked at some very different groups. You've worked at Clarks for a while, I think you worked at Pathé, is that right?
TP: I own the Pathé archive,
SJ: You own the Pathé Archive?
TP: That's my, sort of, hobby.
SJ: Oh I see, OK
TP: Ha ha ha ... I ran the AA, I ran Quickfit for a time, Kenwood, the appliance company, so yes, you're absolutely right, I've been in lots of different businesses.
SJ: OK, are you the kind of hired gun CEO, the gun-slinging CEO, who comes into a business when its sort of broken and fires a bunch of people and fixes it and what's your .. what kind of chief executive are you?
TP: No, it's true, most of the jobs that I have done have been essentially turnaround jobs, but I think there's a bit of a cliché around what a turnaround CEO is. A lot of the perception is that you're all about cost cutting and I would say, having done, I dunno, six or seven turnarounds, that only about 20% of what you do is really reorganisation cost-cutting. The key part of a turnaround is to create conditions for growth, so the measure of success, to me, is when I look at companies that I have left. Are they in good shape today and have I laid the foundations for growth? And that is really the measure of a good turnaround, it's not a one year change, it;s a five year programme and, you know...
SJ: And what, typically, is job number one, or two, what do you typically have to do, to get right?
TP: Well, in any large organisation, success comes from the team at the top, so if you don't have the right team at the top, it's going to be very, very tough. I'm not an expert in anything particularly. I'm a general businessman, so I rely on a good team of people who are very close to the specifics of a business to take the decisions, so if I get a good team in place, that's a good start. The second is you have to look at ways in which you can spend money more intelligently, and often companies are not spending money intelligently, often they do have probably too many people in certain areas, often they have businesses that aren't making a contribution and you have to, sort of, grab hold of that very quickly. But the key is to use some of the savings that you make to re-invest back into product development, back into marketing, back into things that will gain market share for the...
SJ: Tim Parker there, 'not an expert in anything in particular', in his own words, but chief executive of luggage manufacturer Samsonite.
Tim asks 'when I look at companies that I have left. Are they in good shape today and have I laid the foundations for growth?' How, for example, is the Automobile Association doing, after a sprinkling of 'intinerant CEO' fairy dust?
In September 2004, a company backed by the Permira Funds and funds advised by CVC Capital Partners acquired the AA from Centrica plc. The transaction was valued at approximately €2.7 billion.Sir Trevor Chinn and Tim Parker were appointed as Chairman and CEO respectively on completion of the transaction.
Acromas Holdings, the merged AA and Saga group, has become the latest ­private equity-owned business to abandon plans to float on the stock market this year, reflecting a new militancy among institutions refusing to back businesses with huge debts.
The Guardian, February 2010

 The Sunday Telegraph can reveal that Acromas – the private equity-backed company which owns the AA – has appointed accountants Ernst & Young to explore the potential for a £5bn sale of the roadside assistance company ...
...When it comes, however, the likely split will mark the end of the five-year marriage of the AA and Saga, brought together in one of the most iconic highly leveraged deals of the pre-crisis era.
The Telegraph, September 2012
Unions and MPs have rounded on the owners of the AA's holding company, Acromas, which also houses Saga financial products, for paying tax of 2.7% on profits since its creation in 2007.
The Guardian November 2012
GMB, the union for AA staff, has called has called on Steve Dewey, the AA’s Director of Roadside Operations, to apologise for comments made in the most recent edition of the Company’s audio newsletter for roadside patrol staff.
In the interview Dewey states that he doesn’t “worry to much about morale” and goes on to imply that the fact that Patrols are “still here” means that the Company does not have a problem in this area....
...In a recent survey of GMB members working for the AA over 79% of respondents stated that they felt the company undervalued them as employees.
GMB Southern Region, November 2013
Private equity investors raise funds beyond share markets to invest in a business large or small. This is exactly what happened to the AA; it was bought and de-listed from the stock exchange and run as a private business...
...We established that private equity investors often break implicit contracts with the workforce, for example at the AA long established redundancy terms and working time arrangements were reneged on. In addition to this new owners often seek to change the terms of a final salary pension scheme and suspend payments into the scheme...
...These investors are largely unregulated by the government and the actions described here are all lawful and are part of the way these investors improve the performance of so-called ‘underperforming firms’. What this really means is taking a firm and changing the way stakeholders such as customers and employees are treated. 
GMB, February 2014

It's a rather toxic form of re-investing in the business, where a  CEO, who wasn't a an expert in anything, got parachuted in to grab hold of a massive pile of loot on the back of a highly-leveraged deal (i.e. saddling the company with massive debts), leaving the majority of skilled staff who do the actual work, feeling undervalued, demoralised, with worse terms and conditions. Which is why I tend towards Tony Benn's argument that post-Thatcherite, greed-is-good-style "entrepreneurship" is giving genuine skill and enterprise a bad name.