Britain's Most Admired Companies: A bumpy ride that's far from over

This year's winner Unilever is a worthy champion, a company with an admirable reputation got the hard way, by careful nurturing over many decades.

by Andrew Saunders
Last Updated: 09 Oct 2013

Artistic licence aside, 2010 really has been a rollercoaster ride for UK plc, a year that began with what seemed to be the bottoming out of the recession and the start of the climb back to growth. And yet here we are 12 months on from the previous Britain's Most Admired Companies Awards, facing the realisation that recovery now looks less certain than we hoped and, instead of a steady climb to sunlit uplands, we're looking at a pretty bumpy and uncomfortable journey to a future where the sun may not be shining.


But little is to be gained by dwelling on such gloomy prospects. It won't make them any less likely to happen. Far better to realise that the bumps in the road, the poor visibility and the uncertainty of our destination are not transient but are here to stay. This is the new normal; the NICE decade of non-inflationary constant expansion is over, and the successful firms and individuals are the ones who embrace the situation with energy, optimism and vigour.

Our 2010 winner is precisely such an organisation, a firm whose long-term ethos, consistency of purpose and refusal to bow to the whims of corporate fashion has often attracted criticism from some powerful influences in the investment and financial community - especially those whose interest lies in making a quick buck.

And yet it has stuck to its guns despite such pressures and, over the course of many years, has built up a bedrock of admiration among its peers. Such hard-won approval, unlike the quickly won and more mutable variety, remains un-affected by the harshest of economic storms. Britain's Most Admired Company for 2010 is Unilever.

It's a real case of consistent virtue duly rewarded, says the author of the survey, Professor Mike Brown of Birmingham University Business School. 'This year's most admired company could be considered as the proverbial serial runner-up, having being in the top six Most Admired Companies on no fewer than nine separate occasions,' he says. 'Finally, this year, its pedigree has been deservedly rewarded as a winner.'

Unilever - which makes an eclectic range of branded food, home and personal care products, ranging from Marmite, Lipton tea and Flora, through Cif and Domestos to Dove, Sunsilk and Vaseline - beat its nearest sector rival, Associated British Foods, by over eight points and scored highly across all the nine judging criteria. Fittingly for a business renowned for the quality of its employee development (many thousands of the industry's brightest and best have cut their teeth at Unilever), it also wins the overall award for its ability to attract, retain and develop top talent.

Thanks to its long history of trying to do the right thing, Unilever has also become something of an example to the more thoughtful, less frothy times we are living in.

Having been in on the ground floor of the CSR movement in the 1990s, it's now a champion of sustainability throughout its supply chain, vigorously grappling with issues such as deforestation and the palm oil conundrum.

In November, CEO Paul Polman raised the corporate sustainability bar by several more notches, when he unveiled what he described as 'new business model' centred on three ambitious environmental pledges, to be achieved by 2020. These are: to cut the environmental impact of its products in half by slashing water use and carbon emissions; to sustainably source all its agricultural supplies; and to improve the health and well-being of a billion people across the world. Oh, and to do all this while doubling its sales revenues at the same time.

Thanks to the combined efforts of Polman and his predecessor, Patrick Cescau, the Anglo-Dutch giant has been busily streamlining its organisational hierarchy, cutting costs, boosting margins and improving agility and speed to market. In the first nine months of the year, Unilever's underlying revenues (adjusted for changes in ingredients prices) are up 3.8% to EUR33.443bn, and its net profit is a hefty 29% up to EUR3.556bn.

Polman has also been rebalancing the company's brand portfolio, focusing more on personal care products. It's a smart move, because expertise in emulsion technologies from Unilever's margarine and spreads business can be readily applied to generate higher margins in face cream, shampoo and bodywashes.

It also has structural advantages that should help it to keep up its winning performance, not least its substantial presence in the emerging markets, responsible for around half its revenues. But despite all this - and six successive quarters of revenue growth and margin improvements - historic doubts remain in the City. Unilever still struggles to impress investors and its shares consistently underperform in comparison with the likes of Procter & Gamble. Perhaps now is the time for a reassessment of its strengths.

This year's top-of-table action has not been confined to a brand-new winner either. Six of the top 10 were outside it in 2009, including second-placed outsourcing group Serco, which has risen from virtual unknown to the acknowledged leader of its industry over the past few years. This is reflected in a rise of 22 places in our ranking.

Serco has its fingers in many lucrative pies, from running the Dubai Metro to the London 'Boris Bikes' cycle hire scheme, via managing prisons and the UK's Atomic Weapons Establishment. It has proved remarkably resilient for a firm that is dependent on the public sector for 90% of its revenues and should do well from the Comprehensive Spending Review. But it should recognise that it's now in a responsible and highly visible public position and act accordingly - it can't afford any more public blunders like last month's leaked 'request' to suppliers to reduce their prices.

Keeping such a diverse range of operations firing on all cylinders is no mean accomplishment for chief executive Chris Hyman and his team - in recognition of which Serco Group wins the coveted overall award for quality of management.

The highest top 10 climber is Glasgow-based mobile generator specialist Aggreko, up from 52nd to 10th, closely followed by hotels to coffee shops group Whitbread, up from 39th to fifth, and Berkeley Group, up from 21st to sixth - the highest ever placing for Tony Pidgley's high-performing housebuilder.

Berkeley also takes no fewer than three of the overall awards - for financial soundness, value as a long-term investment and use of corporate assets. That's a truly outstanding performance for a business in a sector that has felt and is still feeling the impact of a huge downturn in the property market. But thanks to razor-sharp management of its land bank and astute stewardship of resources, Pidgley and MD Rob Perrins have made Berkeley into a real star of the UK business firmament. It romped home a clear 11 points ahead of its nearest sector rival.

Also deserving of mention is last year's winner, BSkyB, which continues to put in a sterling performance, despite a slight slip to fourth overall. It hit its target to have 10 million subscribers by the end of 2010 some weeks early, and takes the overall award for innovation for the second year running.

On the subject of innovation, this year also marks something of a change in the rules of engagement for Britain's Most Admired Companies, part of our ongoing efforts to ensure that the research continues to be representative of the changing UK business landscape. It's a landscape that is no longer dominated by UK-owned, publicly listed companies to anything like the extent it was five or 10 years ago. Each year brings a swathe of takeovers, reducing the pool of potential Most Admired Companies every time. Past winner Cadbury's is the latest such firm to have been lost in this way, acquired by Kraft in January. Then there's the rise in alternative ownership models, from private equity at one extreme to employee ownership at the other.

So while the vast majority of companies included in the BMAC research remain listed on UK stock markets as they always have been, this year we have made a few special exemptions in order to fill some of the more obvious gaps that have developed over the years. Businesses like Asda and the Co-operative Group, which contribute just as much to economic and working life in the UK as their listed rivals, but have not been allowed in to Most Admired before. We freely admit that it's an experiment, and that by doing so BMAC's level playing field has been tilted slightly, but this is simply a reflection of changes that have happened in the real world.

The highest scorer of all these newly eligible companies is the country's best-known employee-owned business, John Lewis Partnership. It manages an impressive 12th place overall, and second in its sector behind the mighty Tesco. With a total sector score of 597.6, the food and personal retail sector remains the most optimistic in the survey this year.

Perhaps even more significantly, JLP has taken the overall award for quality of goods & services. The Partnership has had a pretty good year, with middle-class favourite Waitrose in particular doing well - third-quarter sales were up 9% year on year in a hugely competitive market. For its first time out in BMAC this is a strong showing indeed - we would not be surprised if JLP turns out to be in the running for the top honours in years to come.

Among those firms that have always been included in our research, there are going to be a lot of new bums on hot seats next year. The chief execs of Tesco, Rolls-Royce and Barclays, in particular, are all set to bow out in March, while in the latter part of 2010 Whitbread boss Alan Parker donned pipe and slippers. HSBC's thoughtful and hugely respected chairman Stephen Green has already joined the Government, while in January its current chief executive, Michael Geoghegan, will also step down.

That's a lot of movement and it amounts to a significant changing of the guard in the upper ranks of UK plc. The departures of Sir Terry Leahy and Sir John Rose are particularly noteworthy, as they are both bosses of many years' standing, highly successful figures who have had the good luck or good judgment to be able to decide the time of their departure.

Leahy is the undisputed king of Most Admired and deserves his own send-off (see p41). But Rolls-Royce's Sir John Rose is a hardly less substantial figure, a man who has made a virtue of shunning the limelight but whose firm has grown enormously under his stewardship - a journey reflected by its BMAC performance. In 2003, RR was languishing at 71st place overall, before jumping to 18th in 2004. By 2005 it was in the top 10 and has stayed there since. Whether his successor John Rishton can keep this up depends to some extent on how damaging the fault with the Trent 900 engine proves to be. Qantas grounded its A380 fleet when a Trent 900 exploded in mid-air in November. RR says the problem lies in a single external engine component and isn't a systemic issue - but Qantas says it will have to replace as many as 40 engines. That would cost RR dearly, both financially and in reputation.

Finally, no consideration of BMAC would be complete without a quick rundown of the big losers this year. No prizes for guessing that BP has taken an almighty Deepwater Horizon-shaped header, plumbing the depths of BMAC in much the same way as its ill-fated oil well did the Gulf of Mexico's seabed. It's down over a hundred places from seventh to 113th after a truly disastrous year that cost CEO Tony Hayward - the product of what was once regarded as the best succession planning system around - his job.

Now the leak has been plugged and the sound and fury have died down a bit, BP has emerged less badly damaged than it might have been. It's also increasingly clear that it was by no means the only one responsible for the debacle. All the same, there wasn't much to admire in its slow-witted and inept response to a situation that threatened its very survival.

Habitual bottom dweller Enterprise Inns is up, but not by much, from last overall in 2009 to 218 out of 230 this year. It's joined in the Stygian depths by fellow pub chain Punch Taverns. Both these outfits have been exposed by the recession for the cynical leveraged property plays that many always suspected. Well-run pub businesses can still prosper, as 73rd place JD Wetherspoon demonstrates. Tim Martin's firm has continued to trade well, thanks to good management and an eye for new ideas - pub breakfasts are now almost as popular as pub lunches, it seems.

But schadenfreude is a dangerous indulgence in times like these - right now, UK plc needs as many of its constituent firms to be on top of their game as possible. Only then will we be able to make the most of the new normal, and perhaps even get off the rollercoaster altogether and board the smooth, fast-running recovery express.

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