Robinson and Sons is recovering well from its early '80s degeneration. The family-owned maker of health care products found its own cure.
Some people have a strange sense of timing. They don't eat till midnight and at three o'clock in the morning they practise the violin. The Robinson family of Chesterfield, Derbyshire, is a bit like that. It is not that they are in any way eccentric. On the contrary, they are business people and, to judge by Philip Robinson, the present head of the family-owned firm, sober and conventional to a degree. But of late, they have tended to arrange their affairs in a singularly irregular fashion.
Robinson is a name to conjure with in Chesterfield, on account of the fact that the family business was founded there more than a century-and-a-half ago and is still the biggest industrial employer in the town. Indeed, Robinson and Sons is by no means unknown in a national context. The company is among Britain's principal manufacturers of run-of-the-mill consumable health care products, such as cotton wool and sticking plasters. It is also a significant supplier of packaging materials to the food industry, and to toiletries, household and other consumer goods producers.
For most of the past 154 years Robinson and Sons has grown and prospered in a steady sort of way, as a family company should that is supposed to keep the aunts and cousins in the style to which they have become accustomed. It has also, from time to time, demonstrated a commendable capacity for innovation. In the last century Robinson developed bleached cotton wool, and was responsible for major improvements in absorbent dressings - also in sanitary towels. After World War II it introduced the disposable nappy. In between it pioneered a method of forming rigid tubular cartons - of a kind still commonly used for certain brands of talcum powder, for instance - out of strips of paper wound in a spiral. There were numerous lesser developments besides.
But seven or eight years ago, while almost every other UK business was making hay in the sunshine, with scarcely a thought for the economic storm that was about to break, Robinson seemed to have lost all sense of purpose. The company was not going anywhere. "We'd become known to our customers as a kind of sleeping giant," says Philip Robinson without a trace of irony. It was being squeezed out of markets it had helped to create, and losing market share right across the board.
More worrying still, accounting losses began to appear, first in the health sector (which then represented about 60% of the whole), but soon afterwards in packaging as well, and in both areas the haemorrhaging increased as time went on. In 1987 the overall loss was three or four times greater than the year before. The next year's results were considerably worse again: the group lost close to £4 million pre-tax, on a turnover of not quite £70 million.
So having failed to benefit from the boom, Robinson entered the recession in a sharply deteriorating condition. Had the trend been maintained the company's continuance might have been in doubt. But once again its timing was remarkable. As the recession deepened, it staged an impressive comeback. This recovery was not, it must be admitted, executed in a single flowing movement. Rather, it was a stuttering, on-off affair. Having hailed 1989 as a turnround year, the company incurred another, admittedly fairly small, trading loss in 1990. But after interest this translated into a much more sizable million-pound deficit at the pre-tax level. Since then, however, Robinson has had two respectably profitable years, and appears to have climbed out of the swamp.
Maybe things turned out luckily after all. For the fact that management had already recognised - and was struggling to eradicate - certain ingrained defects before the recession ever began to bite made the economic climate of the past few years easier to endure. There had been, as Philip Robinson points out, an attitude problem. "Because we'd been here for 150 years it was felt that everything would be all right in the end." It was an attitude that permeated employees at all levels. It was also shared by members of the family.
The company's top team was nothing if not close-knit. Up to the mid-1980s the main board - nine or 10 strong - consisted almost entirely of Robinsons, who were drawn from at least three strata of operating management. But the need for change had by then been recognised, and at the end of 1986 there was a boardroom reshuffle. "It was agonising," recalls Philip Robinson. For at the same time as promoting him to group chief executive - he had been managing director of the packaging division - it removed some of his relations from the table. A few months later the first non-family non-executive director was appointed. Then, at the beginning of '88, chairman Robert Robinson stepped down to deputy chairman, making way for a non-family company head. Tony Slipper, the new chairman, was formerly a senior executive at Cadbury.
As chief executive from January 1987, Philip Robinson was able to begin unscrambling some of his predecessors' work. In the 1960s and '70s, he points out, "diversification was the name of the game". The company had moved into some rather bizarre areas, either by seizing opportunities or as a result of deliberate strategy. Ten years ago it had a foot in the dairy industry, via a calf feeding machine. It made carpet underlay in Australia. It operated paper making machinery in the UK (principally to supply material for the manufacture of diapers). And top management was still looking for a proper third leg to "balance" the business.
By the late '80s the policy had changed: "We started to concentrate back on health care and packaging." That is the construction put on it today, obviously. It is also true that, at the time, the company was losing money at an alarming rate, and needed to get out of loss-making operations - whether core or not - in order to stanch the flow. In any case, most of the fringe activities have disappeared from the books. So have a number of support services. Group transport was one of the first to go, sold to BRS (part of National Freight) which nowadays works for Robinson under contract. Last year the steam-raising plant on the Chesterfield site followed, likewise transferred to "professionals".
Several of the properties thus made redundant on the big, messy estate, which is close to the edge of the town, have been let out to other parties, and bring in an useful £250,000 or so in rents. One of these buildings houses the manufacture of diapers which is also no longer owned by the group. Disposing of disposable nappies clearly called for further agonising decisions, as it was a two-stage process. Diapers were first put into a joint venture with DSG, a Hong Kong-based producer; then, two years later in 1990, Robinson sold out completely to its partner.
Nor are the reasons for the difficulty hard to see: they encapsulate the predicament of the middle-size manufacturer. Here was a business which Robinson had pioneered in the '70s, which had been successful for a period, attracted a lot of investment and grown to a fair size. But by the late '80s, says Philip Robinson, diapers were consuming large amounts of management time and resources but generating losses, not profits. The trouble was that the company found itself squeezed between the likes of Colgate-Palmolive, Peaudouce and Procter and Gamble on the one hand, and the low-cost own-label producers on the other.
It was not just a matter of being unable to match the promotional support of the "big boys". With only two or three machines at its disposal, the company could not afford product development either. "Product development means taking a machine out of production and making modifications to it. That was one of the traps we found ourselves in." So, in the end, diapers had to go. Robinson continues to distribute the Cosifit brand to UK pharmacists on behalf of DSG, but no longer has any direct responsibility for the product's manufacture.
Three years ago Philip Robinson recruited an outsider to stem the escalating losses in the rest of the health care division. Andrew Lauder, the manager in question, had met turnround situations before, at Waddington and elsewhere, and is not modest about his achievements or abilities as a company doctor. "I knew very little about this company, but I knew what I could do with it," he says. "The main problem was that it had lost focus. After three weeks I said (to divisional subordinates) that what we were good at making we would do better, and what we were not good at we would get out of." So away with distractions like paper mills which need to operate round the clock in order to be profitable - and frequently are not even then.
Lauder closed down a branch factory making plasters in Manchester and transferred its operations to Chesterfield, where several more activities were combined (or otherwise relocated). Next came the warehouse "which was very big but badly run". ("One of our very large customers told me it was very low in terms of service - I was able to home in on that.") It was reorganised and equipped with new racking (or second-hand, to be precise), holding markedly fewer items than in the past (3,600 lines were cut down to 1,200 in short order). As a result, a million pounds are said to have been taken out of stocks. And over the past three years the level of customer service has improved no less than nine times. "There are three things which matter in manufacturing," Lauder lays down. "They are service, quality and innovative product development."
As soon as he became chief executive in 1987, Philip Robinson cast round for means of overcoming the inertia and conservatism that gripped the company. First, he split half of it into smaller units reporting directly to himself. Thus packaging became four separate businesses, distinguished less by market than by process. (Nowadays specialisation is the name of the game.) The manufacture of folded cartons is closely allied to printing: capital in-tensive, high volume, with many competitors. Plastic packaging - a 1970s acquisition - shares some of these characteristics but employs very different, injection moulding, technology. At the other end of the scale "special products" makes a wide variety of paperboard or composite packs, including spirally-wound talc tubes: it is labour intensive, fairly low volume, and has comparatively few competitors.
Health care meanwhile remains unaffected by all this scission. With its broad product range (plus two quite distinct markets - pharmacists and hospitals), it is the most important division by far, and the most independent. "They're letting me have a free rein," remarks the flamboyant Lauder. But while the packaging divisions individually have less impact on group performance (Carton packaging, the biggest, turns over little more than half health care's £30 million), each is largely self-contained, both physically and organisationally; it has its own sales force and own personnel function, for example. And in every case the division general manager has full responsibility for developing the business.
More motivation for divisional managers was a step in the right direction. But Philip Robinson aspired "to get everyone involved". Maybe he could count on the loyalty that's usually given to an old family company, but what about commitment? "I wanted people to identify with the (new) business units they worked in." As it happened, Robinson had been "exposed to the principles of total quality management". Here, he thought, was the change agent that he needed.
The brand of quality management selected was that of the American guru Philip Crosby. Off went the divisional chiefs to Crosby's establishment in Richmond, Surrey. Their managers followed in ones and twos, and most divisions set up in-house training for everyone. There was no order from "on high" that units should embrace TQM Crosby-style. The plastics division, for one, did not: it had previously retained PERA for a conventional product quality assignment. The cartons division, on the other hand, "put 320 people through very intensive training, with a minimum of six hours for the shopfloor". Today divisional general manager John Wood confesses to being less than "evangelical" about the results.
TQM training was not, in every case, an outstanding success. It could raise expectations unreasonably. Although working conditions might be a possible cause of error, the remedy could be difficult to carry through. (It is not necessarily simple to install air conditioning during a recession, for example.) Consequently the momentum sometimes flagged. Yet management continues to believe in TQM. "I would never say the programme was a failure or a success - it's a tool for bringing about change," Philip Robinson insists. "If there had been no change," he adds, "the company would have failed."
There has, indisputably, been change, and in the right direction too. While turnover remains lower than in the mid-'80s, the loss-makers have been eliminated and productivity is sharply up. One reason, of course, is the fall in numbers brought about by the divestment of diapers and other operations (plus some redundancies, although "very few were compulsory"). These days Robinson employs around 1,300 people, including roughly 1,000 in Chesterfield; five years ago the payroll total exceeded 2,300. Another reason is that the company kept up the rate of investment even while the balance sheet was shrinking. "We maintained a high level of spending on training, particularly of the shopfloor and supervisors."
Investment in plant and machinery has constantly, and comfortably, exceeded the level of depreciation. Thus the carton division has lately completed a £4 million investment programme. With four big six-colour printing machines, and an improved plant layout, Wood reckons that his unit is now a very flexible and effective competitor in a high-volume, commodity-type industry. Similarly, Paul Cox's plastic packaging business recently installed a large new machine for volume production of food drums. The orders are already in the pot.
In high-volume packaging, innovation is inevitably directed mostly towards process improvement, but elsewhere a fresh attitude to product innovation can also be seen. Designing ingenious presentation packs is a function of special products, but these tend to be expensive and numbers are small. However the division is just on the point of launching a spirally-wound paperboard can with paperboard (rather than metal or plastic) ends. The difference sounds tiny but it cost approaching £500,000 to develop, and it could pay significant dividends. "It gives the customer a lower price product, and the consumer a totally recyclable product," says the division's general manager Ian Tippen. It should also be a more profitable product, and one which removes some of the seasonalty from the business.
But the clearest evidence of revived enthusiasm for innovation appears, as it should, in the health care sector. Children like wearing sticking plasters: Robinson produces them patterned in bright colours. The company's FastAid brand now includes stick-on pads and discs intended to relieve muscular pains. There is a new veterinary product, a grooming aid with therapeutic properties. True, not all such products were developed in-house - the pads and discs are Japanese. Yet some were home-grown and these are available to be traded for other people's technology.
It is also true that Robinson is not a world-beating company, nor does it claim to be. But the litany of its faults a mere five years ago, and of the remedial actions that have been taken within that period, demonstrates what can be done by a management which has the imagination to see what is wrong - and a determination to put it right.