UK: Heller on management - Driving necessity. (2 of 2)

UK: Heller on management - Driving necessity. (2 of 2) - Talk to a Belgian like Karel Vinck, chief executive of the Bekaert group, and you get some idea of the application and timescale of efforts like those which won him the foundation's 1990 European Q

Last Updated: 31 Aug 2010

Talk to a Belgian like Karel Vinck, chief executive of the Bekaert group, and you get some idea of the application and timescale of efforts like those which won him the foundation's 1990 European Quality Award - after no less than seven years' hard labour.

The 100-year-old company (making steel wire, steel wire products and steel cord) had its fair share of conservatism. Vinck vanquished this by crafty methods such as first applying total quality management (TQM) to the board itself. Individual projects followed to test the validity of TQM, and the training began: first, again, with Vinck and Co. Now training extends right down to every new employee, and includes an annual visit of 25 people to Japan - for Japan is inevitably both the source of the driving necessity and the shining example for the total quality movement in Europe and the United States.

That driving necessity does not appear to be felt with sufficient urgency in the UK and is the real issue which underlined the Confederation of British Industry's differences with Mrs Thatcher over both economic policy and her fundamentally absurd stance over Europe. The absurdity can be seen by a sideways glance at Fiat. With two thirds of its home market, the Italian giant has 11% of European sales and is thus a pigmy worldwide: yet no British engineering firm has anything like Fiat's size or strength.

To take advantage of the European integration which is thus vastly more imperative for Britain than Fiat, British management must shift to long-termism. It has been far too ready to blame the City for its own (literally) shortcomings. Indeed, Sir John Egan was a loud critic of the financiers who would not recognise that Jaguar was a "money machine" by giving its shares a better rating. The City was wiser than it probably knew, to judge by Jaguar's subsequent history. High ratings should only go to golden long-term prospects.

That is the logic demonstrated by Paul Marsh of the London Business School in a paper, "Short-Termism on Trial", which shows that even a lowly rated share like ICI depends for half its value on the total dividends expected over the next decade. The faster the expected long-term growth in dividends, therefore, the higher the rating - a truism if ever there was one.

If you believe (quite wrongly) that the institutions are only interested in short-term performance, that is what you will attempt to deliver. You thus create a closed loop, from which there is no escape - other than the long leap forward made by companies like Bekaert. The latter claims gains in market share, world leadership in steel cord, higher productivity, more satisfied customers and better relations with suppliers as the result of its seven-year stint: and that kind of competitive performance, not a sparkling short-term profit figure, is what creates a great investment - and great factories.

Thanks to Management Today, everybody knows which are Britain's best factories. But consider this deeply depressing question: if Jaguar is as bad as Hayden said, how much worse are Britain's worst factories? The sooner that all British manufacturers sign up for the principles and practice of total quality the better. For many of them at once will be too late.

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