In the short term, Hilary’s main strategic innovation was to insist that we focused all our efforts on the three market sectors that were most profitable for us: commercial, financial and public. Other markets - including the various foreign ones that I had been exploring - were, as she saw it, more trouble than they were worth. Perhaps I should have felt threatened or affronted by her forthright expression of these views, but on balance I felt that she was correct. In any case, it was only right that she should lead the company as she saw fit.
I continued to provide advice, guidance and symbolic oversight, but Hilary had little need for such things. She sensed, correctly, that our origins as a female-friendly company (and by implication as my brainchild) were no longer relevant to what we had to offer. As she put it - when urging me to make less of the “woman thing” in my public appearances - we were in danger of being known for who we were rather than what we did.
For similar reasons, she urged us to cut free from our cottage industry roots, which were betrayed both by our constant retelling of the story of our origins and by such amateur habits as our collective use of the term “sales” to refer to what anyone else in the business world would call “orders”, and “revenue” to denote what others would call “sales”. Our amateurism had been a virtue in the early days: we had worked for Freelance Programmers partly because we loved it, we had broken new ground because we didn’t know any better, and we had survived and thrived partly because we adopted the low-cost, no-debt model of an amateur enterprise. Now, however, we were in a new kind of game, and a new mind-set was called for. We needed to think of ourselves as a blue-chip service company, providing top-of-the-range services for blue-chip clients (or “customers”, as Hilary insisted on calling them).
I had always run the company on the basis of minimum cost - spending as little as possible on everything to reduce the danger of our outgoings outstripping our income. Hilary argued (and in retrospect I can see that she was right) that this approach was holding the company back, and that it was better to spend more in order to achieve maximum efficiency. In other words, we needed to think big.
All this was disconcerting, but it was backed up by convincing market research showing that potential clients now saw such ideas as “freelance” and “home-working” as suggesting a lack of professionalism. And so, before long, the background briefings about the company issued by our press officers ceased to make any mention of the company’s origins as a flexible, home-based, female-friendly enterprise started with next to no capital on my dining-room table. Instead, it became simply “a leading computer systems company committed to delivering high quality, managed projects. It offers its clients exceptional flexibility through its use of its nationwide network of industry-experienced IT professionals.”
I cannot pretend that this didn’t hurt. Sometimes I felt as though I was being airbrushed out of history: as though I was an embarrassment to the company. (I felt this much later, as well, when Hilary was being fêted for her spectacular success with the company, and no one seemed interested in the golden legacy she had started out with.) But I also knew that my feelings were irrelevant. I wanted to pass on control, I had identified Hilary as the best person to whom to pass it, and it was up to me to deal with the emotional consequences.
In any case, for all the upheaval, I never really felt that Hilary lost sight of what the company stood for. I was uncomfortable with her personal style: unlike me, she rarely seemed to be troubled by self-doubt, and at times I felt that she was domineering. But she left the essence of the company intact, while her vision for its future had much in common with mine.
And one change that it was impossible to find fault with was the difference she made to the balance sheet. This had been her big selling-point when we appointed her. She had marked her arrival with a public pledge to double turnover within three years, and she achieved this comfortably. Turnover was £7.6m in 1985, £9.1m in 1986, £10.6m in 1987 and £15.5m in 1988. Profits increased even more impressively, from £340,000 in 1985 to £1m in 1988. And that was just the beginning of her ambitions (and, it turned out, of her achievements).
Hilary’s analysis - which seems obvious now but was farsighted at the time - was that we had to expand or die. If the IT industry as a whole was growing at breakneck speed, we would rapidly become an insignificant player unless we grew with it; and an insignificant player would struggle to retain and attract not just top-drawer clients but also the bright, ambitious workforce who were our main asset and selling-point. Comfortable as it might be to carry on as a contented, medium-sized enterprise, that wasn’t an option. The choice was between, on the one hand, breakneck growth as a world leader - and, on the other, rapid decline.
Hilary also saw growth as the key to improving our profit margins, which in 1985 were just 4.4 per cent, compared with an industry average of between 7 and 10 per cent. At Contract Professional Services, the home-working network that she had been running at ICL, the margin was 11 per cent (although that did not include the infrastructure costs of the main company). The bigger the business, she argued, the easier it was to spread and absorb the inevitable costs of training, research and development. So she focused her efforts - with my support - on doing bigger, more profitable jobs for bigger clients. One of her proudest early boasts was that the number of projects we did with a value of £500,000 or more tripled between 1986 and 1988. Another was that, between 1985 and 1988, earnings per share quadrupled, while the value of our net assets tripled in the same period.
She also looked to expand, eventually, through acquisitions and mergers, and did not rule out the idea that we should become a publicly quoted company. This was first mooted by our new outside shareholders, and would later be embraced - with rather shocking alacrity - by the very staff members to whom I was in the process of transferring my shares. It was, however, an idea that made me uneasy. If the company’s shares were freely traded, it could easily become controlled by outside shareholders, and then anything might happen to it. Nothing would remain to anchor it to its values, and it could all too easily become just another corporation, committed only to the pursuit of profit at all costs.
Yet there were limits to what I could do to keep back the tide of change. There were other shareholders, including the FI Shareholders’ Trust, who had views on the matter, and they were all keen for the company to be floated as soon as possible. Hilary’s projections for future growth made many people feel that they were sitting on a goldmine; and even I, with my growing commitment to paying for a better life for Giles, was attracted by the idea of increasing the company’s value. So I focused instead on trying to get as much of the company as possible into the hands of the workforce before we floated.
It all seemed to happen surprisingly fast. In August 1985 F International re-registered as a public limited company. This was partly a symbolic change: we did not become publicly quoted (as PLCs usually are). But, just as had happened when we became a limited company in 1964, the effect was to impart a new sense of seriousness and urgency to the enterprise. If we were a proper PLC - like ICI, BA, BT and all our other blue-chip clients - we needed to start thinking big.
The change also made it easier to introduce proper corporate governance. We resolved to conduct ourselves according to the “Blue Book” of company law for public companies (actually called the Butterworths Company Law Handbook), just as if we were publicly quoted. Within two years Harvard Business Review was writing admiringly about our corporate structure, which it described as “a classic but flat pyramid”, with “seven layers of management” separating me - the group managing director - from the ordinary panel members. The different layers reported upwards formally, through board meetings and executive committees, and proper boundaries were observed between strategic responsibilities at board level and the operational issues that were the remit of the lower echelons of management. This was a big adjustment for me: I still found it hard not to think o
f the company as a huge extended family. But, by the same token, it was clearly what the company needed if it was to compete at the top of the global marketplace. It also made it more attractive to potential investors.
But the main point of our new status, as far as I was concerned, was that it allowed us to make share offers directly to the staff. Shares had been transferred to the FI Shareholders’ Trust on an annual basis since 1981, and by 1985 the Trust had a stake of more than 17 per cent of the company; but I think it’s fair to say that only a tiny handful of staff members had any more sense of owning the company then than they had done before the transfers began (even though the Trust balloted them from time to time for instructions on how to vote at general meetings). Now, however, they had the opportunity to own shares directly, purchased with their own money. Perhaps that would make a difference.
Later that year, shares equal to 11.2 per cent of issued plus new share capital were offered to F International’s workforce. Just over half were taken up, as around 24 per cent of the staff bought shares under this offer.
This was a significant development. Derek and I had owned 81.9 per cent of the company at the beginning of 1985. By the end of the year we owned just 66.4 per cent of it. Around 13 per cent was owned by two institutional investors, Baronsmead Venture Capital and New Court Trust (from the distress sale mentioned in Chapter 15), and 16.8 per cent was owned by the FI Shareholders’ Trust (whose holding - 17.9 per cent at the beginning of the year - had been diluted by the new rights issue), leaving nearly three per cent owned directly by individual workforce shareholders. So it was still effectively my company. But the sense of my being a remote proprietor whose interests were quite distinct from those of the workforce was greatly reduced. Those staff who were actively interested in owning part of the company now did so in a much more direct way. And the combined holding of the trust and the individual staff shareholders, equivalent to nearly a fifth of the company, gave them a weight at board level that could not be ignored.
There was, of course, no way for staff to sell their shares on the open market, but we operated a surprisingly successful internal market. Twice a year, two independent valuers would help us to determine the price of the shares, and shareholders declared their intention to buy or sell as they saw fit. (Such decisions were as likely to reflect personal financial circumstances as changing views about the company’s prospects.) If buyers and sellers could not be matched, I would act as purchaser or seller of last resort.
Whatever the limitations of the arrangement, it was a significant improvement on how things had been before. Holders of the staff-owned shares now had more than a theoretical interest in the company’s success. If the company thrived and increased in value, their own personal wealth would grow with it; conversely, a bad year for the company could have direct personal consequences.
Even then, there remained a majority of the workforce to whom the idea of co-ownership appeared to mean nothing (even though they were all beneficiaries, indirectly, of the FI Shareholders’ Trust). Yet it was plain that, little by little, significant numbers of key employees were starting to think of F International as their company, and the idea was sinking in that, for those who wanted to enjoy the fruits of their labours, a rich harvest might be in prospect. I have no doubt that this played a significant role in the company’s continued success and growth over the next few years.
17: Losing My Grip
IN 1987 we celebrated our silver jubilee. Several hundred past and current members of our workforce gathered at the National Exhibition Centre in Birmingham for a big party. It was an emotional day, on which the formal speeches and presentations mattered less than the sheer warmth of the reunion. As the shrieks of recognition gave way to a hum of animated catching-up, I found it hard to keep the tears from my eyes. It felt as though a large part of my life was passing before me, and it was disconcerting to be reminded of how lucky I had been, of just how much time had passed, and of just how many people had given the best of themselves to bring F International to a successful maturity. And it was positively overwhelming to realise that, whatever mistakes I had made over the previous 25 years, most of the people whose lives my company had touched still seemed to feel warmly towards me.
In 1987 we had a big party at the National Exhibition Centre, Birmingham to celebrate the company’s Silver Jubilee.
Few of the party-goers were unscarred by the passage of time, but we had come through it all, and we could look back on what we had achieved with justifiable pride. We all knew how sceptical the world had been about our chances of making the company work. But we had not only survived: we had remained rather fond of one another. Obviously, not everyone saw eye-to-eye about everything, but, on the whole, we rather enjoyed each other’s company, as we were now reminded. And that, of course, had been one of the secrets of our success.
We also paid our first ever dividend that year. I suppose it was remarkable that we had come so far without having done so, but as the main shareholder I had never really seen the company as a mechanism for generating cash. Rather, it had been an end in itself, which needed to make money in order to secure its own future. Now, suddenly, all the shareholders, including the individual workforce shareholders, could see that “profit” was not just an abstract idea.
Nor was it just those who had bought shares who made this discovery. Earlier in the year I had taken the unusual step of giving each member of our workforce a single share in the company as a “jubilee gift”. These were of minimal value in themselves (about 25p each), but giving them meant that, as and when we issued new share capital, every member of the workforce would have the legal right (as an existing shareholder) to buy new shares if they wished to do so. The dividend was too small for most of them to notice, but no one could now be unaware of the fact that they were being actively encouraged to participate in the company’s future success.
To further this process, I now made my biggest transfer so far of my own shares to the FI Shareholders’ Trust, bringing its stake up from 17 per cent (which it had climbed back up to again in 1986) to 24 per cent.
Hilary, whom we had promoted in May 1987 to be group chief executive in my stead, was determined that this should be the ceiling for the Trust’s shareholding; otherwise, she insisted, potential investors would be deterred. So I began to explore instead the possibility of simply selling most of Derek’s and my shareholding (now just 51.4 per cent between us) to whichever staff members were interested in buying it. To this end I began to cast around for additional board members with specialist knowledge of such proceedings.
Meanwhile, we prepared a prospectus for what everyone assumed would be an imminent float. (This took me by surprise. I had naïvely assumed that co-ownership would be seen as a goal in itself - but most people were more interested in converting their shareholdings into cash.) The main thing I remember about this prospectus was that the editor charged with preparing it insisted on using the word “he” in contexts where “he or she” was clearly required. When I challenged this, he explained that this was “merely a convention” and that, furthermore, a tiny footnote at the bottom of one of the inside pages explained that this convention was being used. Very well, I said: let’s change both the footnote and the convention. And so it was that our prospectus went out, notwithstanding Hilary’s reservations, with the word “she” used to stand for both masculine and feminine personal pronouns, and a small footnote somewhere explaining that this convention was being used.
As it happened, the prospectus had to be redone anyway, because in 1988 we changed the company’s name again, at an Extraordinary General Meeting. Research had indicated that the “F” in F International was generating both confusion (did it stand for “Freelance”? “Flexible”? “Female”? Or something else?) and ambivalence (people were as likely to be put off by those f-words as to be enthused by them). Our new name, FI Group, didn’t seem to elicit such negative reactions,
yet remained close enough to previous names to prevent doubts as to who we were.
We certainly didn’t want to jeopardise the goodwill that already existed for us in the corporate world. A study of The Times’ 1987 Top 500 Companies list had found that fully 25 per cent of the companies listed were FI Group clients. More impressively still, 50 of the list’s top 100 were our clients - and eight of its top 10. From Sun Alliance to Allied Breweries, BICC to Fiat Auto UK, corporate big-hitters clearly felt that we had a service worth buying, and it was this, rather than any clever wording in our prospectus, that made us such an appetising prospect for the markets. The 1980s had seen a transformation in the relationship between business and IT: when the decade began, most companies still considered computers a marginal specialism; when it ended, there was scarcely a boardroom in the land that did not see IT-based strategies as the key to future prosperity. FI Group was both a cause and a beneficiary of this shift in attitudes. The main challenge now was to reap the harvest - and Hilary ensured that we did so with energy and enthusiasm.
I was also gratified to note that, in 1987, the quality standard that we had written some time earlier for the Ministry of Defence - based on quality standards created by Freelance Programmers in 1962 - was upgraded to be the NATO standard. It would be hard to imagine a more overwhelming riposte to the sexist machismo that we had fought in our early years. If even the military-industrial complex used us as a benchmark for quality, we really had conquered the world.
Let IT Go_The Memoirs of Dame Stephanie Shirley Page 21
