Firms judged by actions

Click to follow
The Independent Online
Business people all over the mature industrial world have begun to look over their shoulders at the newly industrialised countries of East Asia and wonder what they can do to preserve a competitive advantage against nations with cheaper and frequently better-educated labour. Britain is no exception. One focus for such concern here has been the initiative by the RSA - the Royal Society for the encouragement of Arts, Manufactures & Commerce - to bring together 25 UK-based businesses to ponder how the country might improve its commercial performance. The companies include: public utilities such as Anglian Water, British Gas and the National Grid; food and drinks companies such as Cadbury, Guinness and Whitbread; industrial groups like Blue Circle and Unipart; technology- driven groups like Cable and Wireless, IBM UK, and Thorn EMI; and finance in the shape of NatWest and Rothschild. The result, a paper called Tomorrow's Company: the role of business in a changing world, was published yesterday.

It is an interesting initiative for the RSA, which suggests that it is going back to its own roots as a body seeking to boost the business community. It is an interesting initiative, too, for the companies, for it is making them think about the way they are organised, about their relationships with customers, employees, suppliers and shareholders, and about the way they measure performance.

This is only an interim report, (if an expensive one at pounds 50, pounds 35 to RSA fellows, for less than 36 pages of text), but it gives a good feel for the concerns of business leaders.

The proposition, in a nutshell, is as follows. International competition will become much tougher. Our performance has not been particularly good, which may be associated with our inadequate education and training. Looking ahead, we also need to establish longer-term and less adversarial relationships between companies and their 'stake-holders' (the new jargon for customers, employees and suppliers as well as shareholders). And we need to measure not just financial but also performance in other areas, including the satisfaction of those 'stake-holders'.

All this is presented as a basis for further comment and action with, in particular, a task force looking at the way in which these new measures of performance might be developed.

It is an admirable exercise, but is it a credible one? If one looks at what companies say, it is very different from what they do.

Thus the RSA group was chaired by Sir Anthony Cleaver, chairman of IBM UK, who introduced the report. In the section on people and employment the argument is that companies need to encourage workers to be more flexible, to retrain, to have more 'commitment and dedication to the company's goals'. It acknowledges that most large companies are cutting staff and that 'the traditional notion of a lifelong career is already eroding and needs to be replaced by a commitment to lifelong employability'.

That is fine in theory, but the shift does not occur in a benign way in practice. What has happened at IBM is a very good example of the way the implicit job contract has been changed. People who joined the company seven or 10 years ago would have assumed that their employment was secure.

No option for IBM

IBM worldwide was one of the most admired companies for its commitment to employees. But in the past three years it has had to make - in absolute terms - the largest job cuts of any western industrial company. IBM UK has shed 30 per cent of its workforce since 1990. Faced with the losses it was having to sustain, it had no option. But IBM employees who have lost their jobs might feel it was self-serving that a report chaired by their former boss should call for 'a new adaptability' - and a touch insulting that it should call for 'commitment and dedication'.

Another speaker yesterday was John Neill, chief executive of Unipart. He spoke of the need for longer-term relationships. Well, Unipart was the spare parts division of British Leyland before it was sold to the management. It was part of the same group that is now aggressively rejecting one of the most successful long-term relationships in British industry by selling Rover to BMW instead of keeping the Honda link.

One could argue that this is nothing to do with Unipart, but the preparedness of British Aerospace to sell Rover is part of the same culture by which the managers were able to buy Unipart. They have done very well and deserve all credit for their achievement. But they should recognise that Unipart is the successful company it is precisely because of our short- term 'everything is for sale at a price' culture. Management buyouts are rare in the supposedly long-termist climate of Germany or Japan.

There really is a credibility problem here, which British companies need to confront. They will be judged - by their employees, suppliers and business partners - not by fine words in RSA reports but by events like the job cuts at IBM and the sale of Rover to BMW.