Accountancy & Management: Understanding the importance of partnership: Roger Trapp reports on the improving relationship between UK suppliers and their Japanese customers

CONTRASTING pictures of the state of British industry are to be found in reports published recently by two of the UK's largest firms of accountants and management consultants.

First the good news: relations between British suppliers and the Japanese companies operating in the UK that they serve have improved over the past five years to the point where the British actually underestimate their high standing.

This finding in A Happy Marriage - which Touche Ross calls the first survey of its kind - is backed up by the claim that British suppliers now recognise the overriding importance that the Japanese attach to the highest production standards. In other words, quality is far more important than price.

But this appears to sit ill with Coopers & Lybrand's claim in its report, People's Training and Development - the Vision and the Reality, that only two in five companies have systems designed to tell them whether their managers have the skills necessary to do their jobs.

The truth, of course, is that the state of management in British industry today is patchy. Where, for instance, a company is either supplying Japanese operations or in a market where they are making their presence felt the chances are that management is responding to the challenge. Elsewhere, though, the story is less encouraging.

The Coopers survey says that companies are recognising the increasing demands on their executives, for example, to manage people with widely differing values and expectations and to cross national boundaries. But appraising them is little more than an annual ritual.

In an improvement on the experience of the last recession, companies have also maintained their commitment to staff training during the current downturn; in some cases the amount spent on internal training has increased. And Coopers' other work demonstrates that those companies with above-average investment in training and development were the same ones that performed better than average in terms of profit and overseas market share.

But, despite this recognition of the importance of people, the firm's survey shows 'a worrying gap in companies' armouries against the pressures of growth and change which they will face in the next few years,' says Sheila Drew Smith, a Coopers partner and author of the report.

In particular, she points to new types of skills shortages - managerial and professional, understanding of information technology and languages, as opposed to the old crafts shortages, and the inability to deal with change in an international context.

Within this, there is a special problem related to older staff. A recent report from the Organisation for Economic Co-operation and Development pointed out that Britain and other European countries had significantly smaller proportions of older workers than the Japanese. But demographic changes indicate that in the future there may not be such pressure on older staff to make way for younger colleagues. As a result, companies could do well to stop concentrating their training efforts on younger employees and apply more resources to older workers - who might then not feel so keen to take up offers of early retirement.

While the OECD condemned private and public sector schemes as inducing this outflow of experience from the workforce, there is little other evidence of any concerted approach to training and education.

Indeed, the Coopers report - based on the findings of a Gallup telephone survey of senior executives from more than 100 leading UK companies, a series of personal interviews and the firm's own experience of the area - shows that government measures have generally had little effect on companies' training and development plans.

Three out of five companies said that initiatives, other than health and safety regulations and the National Vocational Qualifications framework, had not influenced them. This is not unduly surprising, since many of the developments will be aimed at smaller companies not covered by the survey. But even here there is a problem of confusion caused by the plethora of activities, including the Training and Enterprise Councils, Opportunity 2000 and the Management Charter Initiative.

All of this is commendable, and of value, but recent experience suggests that the key issues on which development of the UK labour force depends only get through if there is a clear need - rather than an abstract desire.

This is how British suppliers have succeeded in impressing their Japanese customers, as reported by Touche Ross. Motor industry components makers, for instance, knew that if they did not satisfy the likes of Nissan and Toyota, even Honda through the link with Rover, they would collapse.

But even this survey suggests that all is a long way from perfect. Based on the firm's own experience gained through advising Japanese companies and interviews with Japanese manufacturing companies with UK operations, British companies supplying them, UK-based Japanese components companies and UK suppliers not currently serving Japanese manufacturers, it suggests that British companies have slipped up in one important area - by failing to understand the importance of the concept of partnership.

The notion does not stop with the supplier's commitment to providing total satisfaction to the manufacturer. It also implies a long-term relationship and a feeling that the two sides are part of a family. 'After- work socialising is a feature of business life in Japan which has been transferred to their western operations. The Japanese consider socialising to be an essential part of relationship-building,' says Egmont Kock, a Touche Ross partner and author of the report. And perhaps it is British companies' lack of understanding of this - for all the progress they have made - that contributes to them being rated lower than their Japanese counterparts on most counts.

As Mr Kock says: 'The conclusion of the report is that, although things are improving, there is much work to be done before UK suppliers meet the full expectations of their Japanese customers.'

(Photograph omitted)