Let IT Go_The Memoirs of Dame Stephanie Shirley

by Dame Stephanie Shirley

  Individually and collectively, everyone was always looking for ways of adding value to their work. We encouraged staff to keep their skills up-to-date - but usually they came to us first, pressing us to give them more training and often paying for courses themselves.

  As a respondent in a workforce survey around that time put it: “We want to be the best. Not necessarily the biggest, but the best.”

  How could such a company fail to thrive?

  Thrive it certainly did. Between 1977 and 1979, our revenues would more than double, to £2.5m. But what struck me now, freed from the daily administrative burden and thinking strategically about where the company could go from here, was not the question of sales and profits but, rather, the question of ownership. Here, surely, there was scope for another transformative innovation?

  F International’s overwhelming strength was the fact that, in contrast to most companies of the time, its employees felt that they “owned” the projects they worked on. Yet in legal and financial terms they didn’t. The only person who owned the company was me.

  This seemed neither fair nor desirable - even from my point of view. The fact that it was “my” company had had little effect on my personal wealth: I paid myself a modest salary, with any profits going back into the company. I had, in any case, little desire to be rich and little prospect, as I saw it, of becoming so. What ownership meant to me was motivation - and responsibility.

  Now, looking back at my collapse and the events surrounding it and asking myself what lessons I could learn, I realised that the issue of ownership had been part of the problem. When the company’s survival had been hanging by a thread, I had had good people all around me, but I had insisted on taking all the burden on myself.

  This was partly because I am a bit of a control freak; and also because, when you build a business up from nothing, it is difficult not to think of the whole enterprise as an extension of yourself. But there had also been a deeper reason: I had been the only person whose whole life - wealth, reputation, home, company, self-image and more - was on the line. I had been the only person who really owned the problem.

  Perhaps that was inevitable. I was, after all, the proprietor. But now that I had seen the benefits of sharing the burden of leadership with Suzette, I was reminded of an idea that John Stevens (the Liberal idealist and programmer mentioned in Chapter Eight) had planted in my head a decade earlier. Maybe ownership was a more flexible concept than was generally assumed.

  I had realised in Freelance Programmers’ earliest days that - in the now-familiar cliché - the people who worked for us were our greatest asset. It could hardly have been otherwise: we had no other assets. But the fact that hardly any of our workers were employees in the formal sense had made me think more actively than I might otherwise have done about how to ensure that they were fairly rewarded for any success that the company might enjoy.

  I had started a profit-sharing scheme in 1966 - which was pretty much the first year that we had any profits. It was a basic scheme. I would decide how much we could afford and then write to all our workers telling them how much their share came to. The letters went out twice a year, in summer and at Christmas, and, for the first few years, it worked pretty well. The payments were seen as a bonus and, since not many other companies operated such schemes, the recipients felt appreciated and appreciative. Then came the recession and the collapse in our profits in the early 1970s. I was forced to write to all our workers explaining that, since we had no profits, we were not in a position to hand out a share of them. Everyone seemed to understand; but then it happened again the next time, and the time after that. By the time I had sent out six such letters - summer, Christmas, summer, Christmas, summer, Christmas - I began to wonder what the point was. Their main effect seemed to be to dampen people’s spirits by drawing their attention to the fact that times were hard and that we - and they - were not doing well. For a programme whose main intended effect was to raise morale, this was unfortunate, and after the sixth apologetic letter I quietly put the scheme out of its misery.

  Perhaps, though, there was another way of doing things. What if our workers had a share not just of the profits - when they returned - but of the company itself? This idea had first entered my head at around the time that the profit-sharing scheme started, when John Stevens was part of the closely packed group that ran the company from Moss Cottage.

  John believed passionately that shared ownership could alleviate many of the day’s social and economic ills, and had drawn my attention to such successful examples as John Lewis (turned into a partnership between 1929 and 1950); Scott Bader (the Northamptonshire chemical company given to its workers by its founder, Ernest Bader, in 1951); Kalamazoo (the Midlands stationery company whose employees had owned a majority stake in it, via a trust, since 1947); the various Spanish co-operatives, set up by José María Arizmendiarrieta, that would eventually form the Mondragon Co-operative Group; Tullis Russell (a paper-making company in Fife, Scotland, which was in the process of being bought out by its employees); and the Geographers’ A-to-Z Map Company (which had been transferred to its employees by its founder’s daughter, Phyllis Pearsall, in the 1960s).

  John Stevens admired such companies for their principles as much as their practical achievements. Shared ownership, he argued, was, simply, fair. But there was also a practical advantage to it. If employees are treated with respect, and are given a stake in their employer’s success, they will usually work better. And if the rewards of ownership are shared, then the responsibilities of ownership will tend to be shared as well. That might have made all the difference when Freelance Programmers - and I - had been struggling to survive.

  I had been attracted by the idea of running my company along some such lines from the moment that John first raised the idea, but with all the other challenges the company had faced it had been rather forgotten. Now, with the day-to-day headaches of running the company no longer demanding my urgent attention, I was free to revisit it. And since it was clear that the crises of the previous few years might have been considerably alleviated if I had been able to share the burden of ownership, it seemed worth pursuing energetically.

  Guided by an organisation called the Industrial Participation Association, and advised also by Professor Keith Bradley at the London School of Economics, I visited a number of employee-run companies in the UK and abroad, as well as exploring other examples of proprietorial idealism, such as Bourneville and Port Sunlight. Stanislas Yassukovich (future chairman of Merrill Lynch) initiated me into the financial mysteries of Esops (Employee Share Ownership Plans) in the US. I also spoke to several proprietors who had given away their companies, always concluding my enquiries with the same question: “Would you do it again?” Most said yes, although I was struck by the long, doubtful pause that generally preceded the answer.

  I soon learnt that transferring ownership of a company is more complicated than it sounds. Apart from anything else, there is a major tax problem. From the Inland Revenue’s point of view, if you give away a business, it’s a gift, and that gift has a financial value, of which they want a slice. The difficulty of determining objectively what that value is (especially with a privately owned service company such as F International) does not concern them. Nor does the fact that all the value is tied up in the business - and that to release it to pay tax would wipe the company out. For the would-be donor, however, these are huge obstacles. Unless either donor or recipient has enough ready cash to pay the tax from a separate source, it becomes almost impossible to transfer ownership without destroying the gift in the process.

  There are various elaborate ways of getting round this problem, but money and time are required: money to pay for lawyers and accountants and time to listen to their arcane explanations. I fitted such encounters in when work and cashflow permitted. Inevitably, however, the process became protracted, spreading out over months and, in due course, years.

&nb
sp; The most practical solution seemed to be (to simplify) to transfer shares a little at a time into a trust, which would own them on the staff’s behalf. There would be no direct financial benefit to staff, but they would get a genuine say in how the company was run. But even this was more complicated than it sounds, because most of the relevant legislation applied to employees, and most of F International’s staff were not employees in the legal sense. This was not something that I could sort out single-handedly, and my enthusiasm was not shared by the board of directors - especially Suzette, a very conventional thinker who had twice stood for Parliament (in the two general elections of 1974) as a Conservative. In one early presentation, I made the mistake of using the word “co-operative”. “If that’s what you want,” she responded tartly, “I’m off.”

  I think Suzette was wrong about this, and she did in time become less suspicious of my proposals. I have never considered myself left-wing - I’m more of a floating voter - and I certainly don’t see shared ownership as some form of disguised communism. If it has an ideological component, it is simply the idea of fairness - within the existing economic system. “To build co-operativism is not to do the opposite of capitalism, as if this system did not have any useful features,” wrote José María Arizmendiarrieta, justifying the Mondragon venture. “Co-operativism must surpass it, and for this purpose must assimilate its methods and dynamism.” John Spedham Lewis said much the same: “The present state of affairs is a perversion of the proper working of capitalism. It is all wrong to have millionaires before you have ceased to have slums. Differences of reward must be large enough to induce people to do their best, but the present differences are far too great.”

  But Suzette’s objections were not just political. She also resented the amount of my time - and the company’s money - that was being spent on this project. At one point, 10 of our most highly paid personnel - including me and Suzette - were summoned to spend the best part of a week being cross-examined by the Special Commissioners of the Inland Revenue. This was a remarkable experience, in a special courtroom in Holborn, full of gravitas and elaborate formality, and I was grateful to have had the opportunity of observing for myself this obscure piece of British tradition. But I also resented being made to spend all day being quizzed as if I was a criminal, and several of my colleagues felt strongly that the company simply could not afford to devote so much of its resources to what most of them saw as my own personal crusade.

  It was hard to answer such criticisms, but, at the same time, I couldn’t bear to let the idea drop. Everyone who starts a successful business comes up sooner or later against the question of what happens to it next. Many seek to sell, translating what they have created into hard cash. The trouble with this, from my point of view, was that new ownership was bound to mean an end to the company’s unique way of doing things: its social purpose would be submerged by financial imperatives. Others seek to give their company an assured future by keeping it in the family, grooming a son or daughter to take the helm after them. There are pros and cons to this approach. In my case, it wasn’t an option.

  But, not being immortal, I still needed to do something with the company, and there was little to be gained from hanging on to control for too long, when it was clear to me that my talents were as an innovator and entrepreneur rather than as a manager. I wanted the company to continue, and to thrive, and to carry on providing a uniquely collaborative and creative working environment in which people, regardless of gender, could realise their full potential. Shared ownership offered by far the best hope of achieving this.

  So I kept plugging away at the idea, patiently and intermittently, and eventually the wheels began to move. No one really seemed to notice - least of all our staff - but in 1981, after three years of haggling over the small print, the F International Shareholders’ Trust was established, to hold shares on behalf of the staff and represent their interests. Its first chairman was Wallace Bell, whose 1973 book, Financial Participation, Wages, Profit-sharing and Employee Shareholding, had made a big impression on me. (Wallace’s successors in the role would include David Erdal, who had managed the employee buy-out at the aforementioned Tullis Russell.)

  I gave the Trust four per cent of my shareholding to get it going - the maximum tax-efficient amount - and, over the following years, the slow transfer of ownership continued, with the company making annual grants to the Trust which it would use to purchase shares from a separate mentally handicapped discretionary trust to which I had already been giving shares. (This trust’s beneficiaries included Giles, Suzannah - the colleague’s daughter mentioned previously - and some charities.)

  It was a small and obscure step. But it marked the beginning of a process that I would come to see as one of the greatest achievements of my life.

  14: Slings And Arrows

  By the early 1980s, it seemed as though Freelance Programmers could do no wrong. Whatever we did, we made money. As we did so, the world showered us with praise.

  Our overseas ventures thrived (briefly), at one point accounting for eight per cent of our revenues, which by 1981 had reached £3.4m. We also began to make serious profits - £561,000 in 1981 - as Suzette continued her common-sense work of correcting the historic imbalances in our business model. We had devoted much of the 1960s and 1970s to achieving a “profitless prosperity”, whereby demand for our services kept growing and the scale of our operations grew to match but - because we didn’t charge enough - our profits remained minimal. This turned out to have been an excellent way of building market share, but the company’s story would have been a lot less fraught if we had got our pricing right in the first place.

  We barely noticed the recession of 1980-1982. If it had an effect, it was that demand grew for the efficiency-boosting systems that we sold. By 1983 our revenues had reached £5.5m; by 1984, £7m.

  Meanwhile, it had become clear that the world once again saw us - and me - as a success story. Having been runner-up for the Times/Veuve Clicquot Business Woman of the Year award at the end of 1979, I was appointed OBE at the beginning of 1980. I could not and cannot disguise my delight in this award. It represented the ultimate proof that I was no longer an outsider, no longer here on sufferance, but, on the contrary, a valued member of the British establishment. I was particularly gratified to have received it for “services to industry” rather than “services to IT”. It was not my technical vision or expertise that was being honoured: it was F International’s way of working - the flexible, home-based, female-friendly, job-sharing, trust-the-staff approach that had attracted such scorn from establishment types when we first began.

  I consolidated my newfound respectability with other public duties. In addition to the Computer Systems and Electronics Requirements Board, which I have already mentioned, I stepped up my activities as vice-president of the British Computer Society, helping to restructure it to reflect more accurately the new shape of the industry while continuing to guide it towards chartered status. I also served, from 1981 to 1983, on the Electronics and Avionics Requirements Board; worked on a number of government projects relating to the use of IT to help disabled people (1981 was the International Year of Disability); served on the Advisory Council for Applied Research and Development’s - or ACARD’s - Working Party on Information Technology (1982 was the International Year of IT); worked on the Manpower Services Commission’s Open Tech programme (from 1983 to 1986); served (from 1984) on the Council of the Industrial Society; became the first woman ever to receive an Information Technology Achievement Award (in 1985); advised the Department of Industry on the challenges posed by the rise of Japanese technology (in 1982); became a regular if informal adviser to various ministers and civil servants; and made any number of speeches and media appearances, with which I gradually learnt to feel more comfortable.

  Some of this work was stimulating; much was tiresome. Occasionally it was embarrassing. My work for ACARD took me on one occasion to a
function at 10 Downing Street, where, feeling a bit out of my depth, I introduced myself to an unremarkable-looking man and asked him who he was. “The name’s Thatcher,” he replied.

  But I enjoyed the recognition and the sense of belonging that came with all these activities. And I also felt - correctly, I am sure - that F International’s image as a top-of-the-range consultancy was significantly enhanced by its chairman’s presence in prestigious public positions.

  Despite such recognition, however, these were not easy times. There was still too much to worry about.

  Our overseas ventures, for example, refused to take off. They functioned, more or less, but they never flew. Where F International seemed to have success programmed into it, and shone with collective confidence, our Danish, Dutch and American offshoots always felt like disasters waiting to happen. No sooner had we resolved one problem than another would appear on the horizon. Eventually, we asked ourselves why we bothered - and decided to stop doing so.

  Specifically: we didn’t renew our contract with our US partner, Heights, in 1982; then, in 1983, acquired it as a wholly owned subsidiary; and finally sold it in 1985, having realised that the US market was already too mature, and too flexible, to permit the kind of spectacular growth that F International had experienced in the UK. (There was also the little matter of having assumed, when we bought it, that its self-description as a Computing Services Consulting Company meant that it was a consultancy in computing services. In fact, it was a consultancy to computer services companies, and - for example - the “Boeing” on its client list was actually the Boeing Computing Services subsidiary. So it had never been as good a fit for F International as we’d hoped.) We sold off our Danish subsidiary to local management in 1986; and we offloaded our Dutch company in 1987 by allowing one of its clients to merge with it.