Time for more brain, less brawn at BZW

City & Business
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The Independent Online
Bill Harrison, BZW's new chief executive, appears to have spent too much time on gardening leave if his handling of the senior management reshuffle he orchestrated last week is anything to go by. It appears to have been carried out with the sensitivity of a man who has become too accustomed to the brutality that is a prerequisite for a serious assault on stubborn weeds and garden debris.

The main casualty of Mr Harrison's clumsy attempt to assert his authority at BZW was Donald Brydon, who was deputy to David Band before his untimely death earlier this year and has since been acting chief executive.

When Mr Harrison was plucked from Robert Fleming in the summer to take on the chief executive's role it was widely accepted that Mr Brydon would not stay at BZW. Typically he remained intensely loyal, despite his disappointment, and saw through the interregnum with absolute professionalism while Mr Harrison completed his obligatory leave. The question then arises that if Mr Brydon was going anyway why did Mr Harrison insist on such a public departure? More worryingly, why did Barclays chief executive Martin Taylor endorse so fully Mr Harrison's unnecessary flexing of his garden-honed muscles?

There was the usual flam about bringing in a new generation of managers, creating a more integrated approach to management and the like. Mr Harrison did not need a deputy chief executive but mysteriously he does need a chairman, two deputy chairmen and two vice-chairmen for good measure.

The concern here is not for Mr Brydon. He is an experienced and well respected fund manager who now has excellent investment bank management credentials. He will have no difficulty in securing gainful employment (Morgan Grenfell Asset Management perhaps) in a City that sets great store by the combination of integrity and ability that is Mr Brydon's hallmark.

No, the real worry is for the BZW staff who must now be a little nervous about how this new era of aggression will affect them. Changes at the top always create uncertainty and inevitably produce casualties. What differentiates the wheat from the chaff on these occasions is the manner in which that change is handled. Mr Harrison has sent out some disturbing signals to a business that relies on people for its success.

Mr Harrison has an excellent pedigree for the job and has no need to make such an overt show that he is the boss. He is charged with the responsibility of developing one of the few British investment banks that could lay genuine claim to be competing on the global stage. He will better discharge that responsibility and win more respect by demonstrating he has skills more relevant to the back office than the back garden.

Survival of the fittest

Last Thursday, BTR announced it was shedding 37 businesses and incurring pounds 622m of restructuring charges and the shares rose 9.5p. Two days earlier, Williams Holdings said it was sticking to its core businesses and making a pounds 5m restructuring provision and the shares fell 1.5p. The contrasting market response on the day does not truly reflect the contrasting market view of two companies, which were once peas out of the same pod.

BTR and Williams, along with Hanson, were corporate children of the 1980s. They made their reputation from aggressive acquisitions and made fortunes for their investors. But the conglomerates that could do no wrong in the excessive 1980s found themselves caught in the cold chill of the more austere 1990s. The quality of their accounting, their earnings and their management was questioned. No one wanted to catch the falling stars. Investors preferred to pocket more secure investments to save for a rainy day.

This investor disenchantment and an economic climate unconducive to the acquisition-driven conglomerate has prompted a dramatic rethink across the sector. While Hanson and BTR mumbled about focus, Williams backed up its words with action. Overseeing such a fundamental change from random acquisition to focused development takes a long time. Williams began in 1990 but is only now beginning to see the real recognition of its achievements. In the past few months, Williams has outperformed the sector by 25 per cent and is regarded as the jewel, albeit in a somewhat tarnished crown.

This does not augur well for long-suffering investors in BTR. Ian Strachan, who took over as the new chief executive in January, talks a good transition but the enormity of the task should not be underestimated. The extent of the divestment programme and the level of the provisions (a favourite tool of BTR's) will make it extremely difficult for investors to make any sense of how well it is doing in meeting its stated objectives.

Hanson addressed this issue by proposing a demerger of the entire group. That has not yielded any great value for investors in its own right, but there is a chance that once the individual businesses get a chance to show what they can do as stand-alone companies that investors will better appreciate the investment attractions. There will certainly be a clarity that is bound to remain elusive at BTR.

Williams' focus on fire protection, security and building products is well established and performance and prospects are readily identifiable. Williams' flexibility to make sizeable acquisitions is only improved by the discreet commitment to sell businesses that do not have global potential.

Predictable is not a word that has always been associated with Williams, but it is one which the company deserves. An undemanding market rating makes it a much better proposition than BTR, which will have to wait a long time before it is described in such mature terms.

One last chance

Next week will see either the relaunch or comeback of the City Promotion Panel, depending on your view about whether the body instigated by Chancellor Kenneth Clarke to represent the Square Mile's interests is either a lame duck or a dead duck. As Eric Cantona might say: "Who cares?"

The CPP may not have been a roaring success to date but reports from last week's meeting suggest there is a much greater sense of purpose to the panel. It has worthy and important objectives, which demand that it be given one last chance to realise the potential vested in it.

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